Exelixis Inc (EXEL) 2015 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Exelixis first-quarter 2015 financial results conference call. My name is William and I will be your operator for today. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to your host for today, Ms. Susan Hubbard, Investor Relations. Please proceed.

Thank you, William, and thank you all for joining us for the Exelixis first-quarter 2015 financial results conference call. Joining me on today's call are Mike Morrissey, our President and CEO; Debbie Burke, our Chief Financial Officer; and Gisela Schwab, our Chief Medical Officer, who will together review our corporate, financial, commercial, and development progress for the quarter ended March 31, 2015. P.J. Haley, our Vice President of Commercial, and Peter Lamb, our Chief Scientific Officer, are also here with us and will participate in the question-and-answer session of the call.

As a reminder, we are reporting our financial results on a GAAP basis only and as usual the complete press release with our result can be accessed through our website at the Exelixis.com.

During the course of this presentation, we will be making forward-looking statements regarding future events and 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 Exelixis files from time to time with the SEC. 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 without limitation the availability of data at referenced time; risks and uncertainties related to the initiation, conduct, and results of clinical trials; risks and uncertainties related to regulatory approval processes and compliance with applicable regulatory requirements; Exelixis's ability to maintain its rights under existing collaborations and enter into new collaborations; Exelixis's financial outlook and the sufficiency of Exelixis's capital and other resources over time; and product acceptance in the market as well as market competition.

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

Thank you, Susan, and thanks to everyone for joining us today. Our call this afternoon will be relatively short, as we focus on our key milestones that lie ahead over the next few months including, first, the METEOR top-line results for cabozantinib in second-line RCC. Second, the potential approval and launch of cobimetinib for metastatic melanoma, and third, the ASCO annual meeting where we expect to have numerous presentations for both cabozantinib and cobimetinib.

We are obviously extremely busy right now and working hard to complete the activities necessary to achieve these important milestones for cabozantinib and cobimetinib. If successful, we will have achieved a notable goal for any biotech company by having two approved products that were discovered in our labs and successfully advanced through pivotal trials in large, underserved, and commercially meaningful indications.

I'll give a brief and high-level status update on the key milestones for cabozantinib and cobimetinib before turning the call over to Debbie and Gisela for a review of our financial and development highlights.

First let's start with cabozantinib. Reporting top-line results for METEOR, our Phase 3 pivotal trial in metastatic second-line RCC remains our top priority. METEOR is a head-to-head trial against everolimus, the current market leader in second-line RCC. The primary endpoint for METEOR is progression-free survival or PFS, determined for the first 375 patients enrolled. While we have noted that the event rate has slowed over the last few months, we are very close to having achieved the required 259 PFS events and are in the final steps of data collection, data cleaning, and source data verification before running the final analysis. We now expect to report top-line results in late Q2 with the possibility it might extend, if necessary, into early Q3.

Partnering discussions continue and are obviously dependent on the outcome of the METEOR trial. There is significant commercial potential for cabozantinib and in second-line RCC should METEOR be positive. The current second and later line RCC market includes about 17,000 patients in the US and about 37,000 patients globally and appears to be growing. The treatment options for this population are relatively mature and include the an mTOR inhibitor and a VEGFR-targeting TKI that provide a similar and relatively modest duration of PFS benefit of approximately 4.5 to 5 months in second-line patients after progressing on a first line VEGFR-targeting TKI.

Despite the relatively short duration of treatment that this modest PFS provides, global revenues for these agents in 2014 were still approximately $1 billion. In METEOR, we hope that cabozantinib will demonstrate a meaningfully superior PFS compared to everolimus and, therefore, provide an attractive new option for clinicians. Under such a scenario, the revenue opportunity for cabozantinib in RCC would be further enhanced by any extended duration of treatment beyond the current 4.5 to 5 months seen with other second-line agents. This analysis supports our conviction that there is a meaningful commercial opportunity for cabozantinib in RCC if METEOR is positive.

On the cobimetinib front, we continue to make steady progress in our commercial readiness for a potential approval and launch of cobimetinib with our partner, Genentech, including our involvement in the co-promotion of this potentially important new medicine in the treatment of patients with BRAF mutant positive melanoma. As a reminder, Genentech and Roche completed its submissions for cobimetinib for use in combination with vemurafenib with the MAA and the EU and the NDA in the US in the third and fourth quarters of 2014, respectively. In the US, cobimetinib has received priority review from the FDA with a PDUFA date of August 11, 2015. We are certainly pleased with the progress, and we'll be well prepared to support Genentech's launch of the product, if and when approval occurs.

Finally, turning to ASCO, we are looking forward to the upcoming meeting in Chicago at the end of May. This meeting traditionally has been an important setting for us to share new data and this year will be no exception. There will be a number of important updates for both cabozantinib and cobimetinib at this year's meeting and Gisela will provide additional details in her development update later in the call.

So with that brief overview, I'd like to close by reiterating that we are very focused on advancing cabozantinib and cobimetinib to their important near-term milestones, and that positive clinical and regulatory outcomes have potential to advance us to the next level as a commercial organization.

So with that, I will turn the call over to Debbie to review our financial performance for the first quarter of 2015.

Thank you, Mike. I will begin with a review of our first-quarter 2015 financial results and then provide an update of our 2015 financial outlook. My comments will be focused on the highlights of our financial performance, and I refer you to our press release and Form 10-Q filed earlier today for additional details.

Net revenue was $9.4 million for the first quarter of 2015 compared to $4.9 million for the same period last year. Net revenue for both periods consisted entirely of product revenue from the sale of COMETRIQ. In 2015 net revenue includes the positive impact of a one-time adjustment of $2.6 million from the conversion of the sell-through to the sell-in method of revenue recognition for our domestic sales. By comparison, our foreign sales have historically presented net revenue on the sell-in method. With this adjustment, all sales from COMETRIQ moving forward will be reported on the sell-in method of revenue recognition.

R&D expenses for the first quarter of 2015 were $22.3 million compared to $54.8 million for the same period last year. The 59% decrease in expense is due to lower clinical costs, predominantly due to decreases in the COMET trials and the impact of a $7.5 million comparator drug purchase that took place last year at this time as well as lower personnel-related expenses.

SG&A expenses for the first quarter of 2015 were $9.5 million versus $14.7 million for the same period last year. The 35% decrease year over year is primarily due to lower personnel-related expenses as well as consulting and outside services, legal, and patent expenses. These decreases were offset by an increase in marketing expenses, which included our share of cobimetinib expenses.

Restructuring charges for the first quarter of 2015 reflects a credit of approximately $400,000, primarily due to gains recognized from the sale of unused fixed assets during the quarter.

Total costs and expenses for the first quarter of 2015 were $32.1 million versus $69.9 million for the same period last year. The 54% decrease year-over-year is due to the reductions I mentioned a moment ago, and reflects the cost-saving measures we implemented in Q3 of 2014.

For other costs or expenses, we incurred a net expense of $12.4 million for the quarter versus $9.8 million for the same period last year. This category is largely made up of interest expense for the period and includes $7.7 million in non-cash expense related to the accretion of discounts on both the 4.25% convertible senior subordinated notes due in 2019 and our debt under the Deerfield notes.

Net loss for the quarter of 2015 was $35.2 million or your dollars $0.18 per share versus $74.6 million or $0.39 a share for the same period last year. The 53% decrease year over year is primarily due to higher product revenue and lower operating expenses.

With regard to cash, we ended the quarter with $197.6 million.

Turning to our financial outlook for 2015, as we presented in February we anticipate key milestones for the Company midyear, which will have a significant impact on the Company's expenses for the remainder of 2015. As a result, we are maintaining our position of providing guidance for only the first half of 2015, which is that operating expense will be in the range of $70 million to $80 million. This includes approximately $2 million in restructuring expenses during the period for building exit costs.

With regard to cash, during the quarter we provided Deerfield with notice that we are exercising our option to extend the maturity of $100 million of Deerfield notes from July 1, 2015, to July 1, 2018. According to the terms of the amended note purchase agreement, we expect that the transaction will close on July 1, 2015. As a further update to our cash position, the Company anticipates that cash, cash equivalents, and short and long-term investments will be sufficient to fund our operation through the first quarter of 2016. This guidance assumes no receipt of additional funds from either business development or financing activity.

So with that, I will turn the call over to Gisela.

Thank you, Debbie. In the next few minutes I will provide a status update on our development program for cabozantinib in renal cell cancer, a brief update on the IST and CTEP program, and then focus on a preview of presentations for both cabozantinib and cobimetinib at the upcoming ASCO conference at the beginning of June.

I will start with providing a steady update on our highest priority, the renal cell cancer program. As you know, we completed enrollment in our Phase 3 trial METEOR in November 2014. The availability of top-line data for the primary endpoint of progression-free survival or PFS is expected in the next few months, as mentioned earlier in the call by Mike. I'd like to briefly review the trial design and assumptions for you.

The study is evaluating cabozantinib versus everolimus in a randomized open-label fashion. The patient population is second or later line metastatic clear cell renal cell carcinoma. Patients must have received and failed at least one prior VEGFR-targeting kinase inhibitor. Enrollment is stratified by the number of prior VEGFR inhibitors, one prior therapy versus more than one prior therapy, and risk factors according to the MSKCC classification.

The primary endpoint is PFS and secondary endpoints include response rate and overall survival. PFS is assessed by an independent radiology committee that is blinded to the treatment assignment of the patients. 650 patients were planned to be enrolled in the study with the primary analysis based on PFS, which is defined as disease progression [on care] observed among the first 375 patients enrolled. This will ensure sufficient follow-up and a PFS profile that is not weighted predominantly towards early PFS events, which could happen if the whole study population of 650 patients that is required for the assessment of overall survival served as the denominator for the PFS analysis.

The 375th patient was enrolled in June 2014, and the median patient in this group was enrolled in April 2014, so the approximate median follow-up at this point in time is about 12 months. Given the rapid progress on the trial, the team is highly focused on collecting the data in preparing for an analysis of the primary endpoint.

On other trials, our hepatocellular cancer Phase 3 study CELESTIAL is making progress in its targeted enrollment of 760 patients, and we continue to expect top-line data in the 2017 timeframe.

The CTEP and IST programs are also making progress. These studies together with our internal study studies in totality make up more than 45 planned or ongoing studies of cabozantinib in a variety of tumor types. There will be presentations of results from a few key studies at the upcoming ASCO meeting taking place in late May/early June in Chicago that I will speak to in a moment. But let me provide a brief update on the progress in the CTEP IST program before speaking about ASCO.

First, an important study in the first-line treatment of patients with advanced renal cell cancer called CABOSUN is currently ongoing in the cooperative group known as the alliance under the CTEP IND. This is a randomized Phase 2 study comparing cabozantinib versus sunitinib in first-line therapy of intermediate or poor risk patients per the standard risk classification.

The primary endpoint is PFS with a targeted enrollment of 150 patients which has recently been achieved. Given the historical PFS duration in patients with intermediate or poor risk RCC in the first-line setting, we are expecting data sometime in 2016. We look forward to updating you on results at the appropriate time.

Second, I would like to briefly update on top-line data from an exploratory randomized Phase 2 study in 111 patients with persistent or recurrent ovarian cancer who have received prior therapy with a platinum-containing regimen. The study has been conducted by the Gynecologic Oncology Group or GOG under the CTEP IND. This was a randomized Phase 2 study comparing cabozantinib with an active comparator, weekly paclitaxel. The primary endpoint was PFS. GOG notified us that the study has not met its primary endpoint of significantly improving PFS. Further detailed analysis is ongoing and data will be presented at a future scientific conference.

This is one of multiple randomized Phase 2 studies conducted under the CTEP IND that will help us prioritize the next indications for late stage development of cabozantinib. Top-line data on another such trial in EGFR wild-type non-small-cell lung cancer patients that has met its primary endpoint with high success statistical significance were announced late last year. The results of this study will be presented at the upcoming ASCO meeting.

And third, in the next few weeks we are expecting the initiation of an important Phase 1b study combining cabozantinib with nivolumab, or nivolumab and ipilimumab in patients with genitourinary cancers including bladder cancer. This is an important study led by Andrea Apolo at the NCI that is building on prior experience showing single-agent activity of cabozantinib in bladder cancer and studies showing single-agent activity in this disease with checkpoint inhibitors including PD1 and PDL1 antibodies.

With that I will move to the ASCO preview. Two important trials evaluating cabozantinib in non-small-cell lung cancer will be presented as oral presentations. The first is the ECOG-ACRIN randomized Phase 2 study, E1512, in EGFR wild-type non-small-cell lung cancer patients that I just mentioned. And the second presentation covers the evaluation of cabozantinib in non-small-cell lung cancer patients whose tumors carry RET fusion genes.

Late last year we had announced top-line results for the first randomized Phase 2 study, the ECOG-ACRIN study E1512, reporting that the study had met its primary endpoint of the PFS with high statistical significance. E1512 is a three-arm randomized Phase 2 trial in second- or third-line EGFR wild-type non-small-cell lung cancer who have failed at least one prior chemotherapy. In this three-arm study, 125 patients were randomized, one to one to one receive a erlotinib at 150 milligrams daily or cabozantinib at 60 milligrams daily or erlotinib plus cabozantinib at 150 milligrams and 40 milligrams daily, respectively.

The primary objective of the trial was to determine whether single-agent cabozantinib or combination therapy including cabozantinib extends progression-free survival when compared to single-agent erlotinib in this population. Secondary objectives include estimation of overall survival, best objective response, and toxicity.

As mentioned, it was found at a pre-planned interim analysis that the trial met its primary endpoint of improving PFS with cabozantinib alone, and also with the combination of cabozantinib plus erlotinib as compared to erlotinib alone, and the results were highly statistically significant. Safety data was consistent with those observed in other trials of cabozantinib. At time of analysis, the median follow-up was 5.9 months and overall survival data were immature.

Other ASCO presentations will include the overall survival analysis of the EXAM trial in patients with progressive metastatic medullary thyroid cancer. Overall survival was a secondary endpoint in this study, and we had announced top-line data on this endpoint late last year. The primary endpoint was PFS, and results for this endpoint had supported the regulatory approval of cabozantinib for this indication in the United States and in Europe.

Additionally, there will be a number of poster presentations showing results from investigator-sponsored or CTEP trials in triple negative breast cancer, EGFR mutant non-small-cell lung cancer, in patients who have failed prior erlotinib treatment and a study evaluating the combination of cabozantinib and abiraterone in CRPC patients.

For cobimetinib, the following patient presentations are planned. There will be an oral presentation providing an update on the pivotal phase 3 coBRIM study that evaluated the combination of cobimetinib and vemurafenib compared with vemurafenib alone in advanced metastatic or metastatic BRAF V600 mutated melanoma. The primary results of the study were reported at ESMO 2014 and showed a significant improvement in PFS for the combination arm versus vemurafenib alone, with immediate PFS of 9.9 months versus 6.2 months, respectively.

The median follow-up at the time was only 7.4 and 7.2 months for the combination and single-agent arm, respectively. This data formed the basis for the regulatory submissions in the United States and in Europe in 2014. The planned presentation will provide an update on the PFS that reflect longer follow-up of the study.

Additionally, an update on the long-term follow-up in the BRIM-7 study will be presented. BRIM-7 is the Phase 1/2 trial that first evaluated the combination of vemurafenib and cobimetinib in patients with BRAF V600 mutated melanoma.

We look forward to the presentations of all these data sets at ASCO beginning at the end of next month.

With that, I will have the call over to Mike for his closing comments.

Thanks, Gisela, and a couple of closing remarks before we can get to your questions. We are rapidly moving towards two key milestones for Exelixis in the months ahead. Our team and network of collaborators are completely focused on the next significant drivers for the business, including the top-line data for METEOR as well as potential approval for cobimetinib in combination with Zelboraf in metastatic BRAF mutant positive melanoma. We are all excited about the possibilities that lie ahead and we'll keep you updated up to date on our continued progress.

I'll close now by thanking our entire team here at Exelixis for their unwavering dedication and great efforts over the last quarter on behalf of patients with cancer everywhere. Thank you for your time today and your interest in Exelixis. And we are now happy to open the call for questions.

(Operator Instructions)

Brian Klein, Stifel.

Thank you very much for that detailed update. Just a few questions, first on cobimetinib. Just wondering who sets the price once it is approved? How do you distinguish in terms of commercialization costs in the US between promotional activities for cobi, separate and distinct from Zelboraf?

Brian, it's Mike. Thank you for the question or questions. Again, as we talked about previously, the price will be set by Genentech so that's their sole right. And certainly as time goes on and if approval happens, we would -- I would be able expect to be able to announce that price at some point in time in the future. In terms of the financial questions, Debbie, do you want to take that?

Sure. Our expectation is that those costs will be split as the co-promote agreement calls for. That's how I understand the budget was set and how we layered it into our numbers.

Okay. So just to be clear, are you considering that, because it has to be given in combination, the co-promotion of the two products occurs simultaneously and then you just split the cost, so you are effectively subsidizing the commercialization of Zelboraf? I'm still not exactly clear how that works.

Our expectation is we will only pay half of the cost associated with cobi directly. We should have no costs associated with Zelboraf.

Okay, got it. And given your current cash position, I know it's tough to give any guidance. But just thinking specifically about cobi, are your current financial resources sufficient to launch that product irrespective of what you are doing with cabo?

The guidance we gave with our cash runway through Q1 2016 includes our share of those costs -- the cobi costs based on the budget Genentech gave us.

Great. Thank you for taking my questions.

Cristina Ghenoiu, Cowen and Company.

Thank you for taking my questions and congratulations on the progress. This is a question on RCC. I was wondering in the doctor's office how is the decision made which patient goes on to the mTOR inhibitor versus the TKI that is right now on the market? And I have a follow-up. Thank you.

In the trial patients in the doctor's office of the participating sites are being evaluated for their eligibility for the trial, and then if eligibility has been confirmed patients are being randomized. And there is no involvement, as such, in the choice on the part of the study personnel at the site. They receive assignment and the treatment for that patient.

This is not about the trial. This is just about in the market in general.

I see.

So that's a little bit different question then. P.J., do you want to take that question?

Yes. So generally when patients are typically in the commercial setting receiving second treatment when they have progressed on typically a VEGFR-TKI in the first setting and then physicians -- like many oncology indications or tumor types -- are making compensated complicated clinical decisions based on a number of factors including the data from all the other agents which could be the progression-free survival response rate, safety and toxicity profiles as well as the mechanism of action, so it's a complicated decision process where they are weighing a lot of different factors into that therapeutic choice.

I see. So basically when -- if COMETRIQ were to come on the market for RCC then it would be looking to take market share only from Afinitor. Is that correct?

Actually, we believe that we'd be able to be eligible, obviously, depending on what the label would be for any patient who has progressed on a prior therapy or certainly a VEGFR-TKI and, while our trial would have head-to-head data with Afinitor -- that would certainly be the low hanging fruit -- but I believe it would certainly be possible for us to take share from other agents.

Okay. Great. Thank you.

(Operator Instructions)

Thanks for taking my question. I just had a bigger picture question, Michael. How do you see the market opportunities for targeted agents such as cabo or cobi change now with PD-1 inhibitors being recommended in earlier lines of therapy? For instance, in melanoma we've now seen new NCCN guidelines recommending PD-1 inhibitors, first line. What's your view bigger picture on that topic, also in kidney cancer? Thanks.

Michael, thanks for your question. Certainly, the entire oncology landscape is evolving very quickly as new data comes out with the checkpoint inhibitors. I think the most recent examples with the melanoma data that you mentioned and certainly some of the lung data that's coming out now is very encouraging and great for patients and provides, I think, an opportunity for, I think, two important nuances going forward and those really revolve around the standard of care for sequencing. What's the optimal sequential approach? There's a lot of excitement around the small number of patients in these different tumor types who are functionally cured. But that's still a relatively small number and there's lots of patients that progress in some shape, manner, or form, and need additional therapies. The question is: what's best then to follow with those patients after they have gone through their progression events?

The other important story here is novel combinations, and that's one that we are certainly very excited about with both cabozantinib and cobimetinib. You heard Gisela mention the work with CTEP and the NCI with Dr. Apolo looking at the first combinations of potentially cabozantinib plus nivolumab plus/minus ipilimumab. That's, I think, the first step in defining the dose tolerability early activity. You could imagine a situation where we see good data from that trial, then being able to explore potential Phase II trials in renal and bladder and lung. So, I think the opportunities there are very broad.

And the same thing goes with cobimetinib in melanoma, as we talked about previously. Genentech is looking at various combinations with cobimetinib with their PDL1 antibody as well in melanoma and other tumor types.

So, yes. It's an exciting time in the oncology world, and we have a lot of work to do and we are very excited to be part of that with our two lead compounds.

All right, great. Thanks so much, Michael.

Cristina Ghenoiu, Cowen and Company.

Thank you for taking my follow-up. I was just wondering from your talks with physicians, do you have an idea how much benefit the PFS for cabo needs to be to capture a significant market share from, let's say, Afinitor?

Yes, Christina. It's a good question. I think it's a bit premature for us to speak about the data until we see it and have the opportunity to fully understand what that impact would be in the marketplace.

Gisela, do you want to say a few words there too?

Sure. The trial is designed with the assumption that's the median PFS for everolimus would be 5 months, which is what it had been in prior studies in this patient population, and we are assuming that the cabozantinib arm with have a median PFS of 7.5 months or better. So these are the underlying assumptions for the trial, and that certainly has been welcomed and endorsed by the physicians participating in this study.

Great. And for the sunitinib trial do you know what the underlying assumption for PFS there is? Is it like the 11 months that sunitinib showed or?

So for the sunitinib study -- I presume you are referring to the CABOSUN Phase II randomized study. Is that correct?

Yes.

Sure. So that is a study in the first-line setting for advanced renal cell cancer. The patient population chosen here is one with intermediate or porous renal cell cancer, and they have a little bit less -- a shorter PFS, if you will, compared to the overall population and that varies, depending on presentations and publications, between 5.6 months and 8 months for sunitinib.

Sorry -- did you say -- I understood 8 months. What was the first number?

There are various different publications for this. And the outcome varied between 5.6 months and 8 months.

Okay. Thank you so much.

Sure.

Thank you. And at this time there are no further questions, and so I will turn the call back over to today's host, Susan Hubbard. Ms. Hubbard?

Thank you, William, and thank you all for joining us today. We would be happy to take any follow-up calls that you have with additional questions once we conclude.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Everyone, have a great day.