Exelixis Inc (EXEL) 2015 Q2 法說會逐字稿

Good, day ladies and gentlemen, and welcome to the Exelixis second-quarter 2015 financial results conference call. My name is Tyrone, and I'll be your operator today.

As a reminder, this conference 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, Tyrone. And thank you all for joining us for the Exelixis second-quarter 2015 financial results conference call.

Joining me on today's call are Mike Morrissey, our President and CEO; Chris Senner, our newly appointed Chief Financial Officer; and Gisela Schwab, our Chief Medical Officer, who will together review our corporate, financial and development progress for the quarter ended June 30, 2015, as well as recent key development and corporate events. PJ Haley, our VP 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 results can be accessed through our website at 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. This includes statements about possible developments regarding clinical, regulatory, commercial, financial, and strategic matters. Actual events or results could of course differ materially.

We refer you to the documents Exelixis files from time to time with the Securities and Exchange Commission, which, under the heading Risk Factors, identifies important factors that could cause actual results to differ materially from those expressed by the Company verbally and in writing today, including, without limitation, risks and uncertainties related to the timing of data presentations, and the regulatory approval pathways for cobimetinib and cabozantinib; clinical trial risks; risks connected with appliance with applicable regulatory requirements; the uncertainty of Exelixis' ability to maintain its rights under existing collaborations and enter into new collaborations; risks regarding Exelixis' financial outlook and the sufficiency of the Company's capital and other resources over time; and the risks of product commercial success and market competition.

With that, I'll turn the call over to Mike.

Thank you, Susan. And thanks to everyone for joining us on the call today.

Exelixis had a productive second-quarter, and significantly extended our momentum in July on several fronts, including by: first with the release of positive top line results for METEOR, our phase 3 pivotal trial for cabozantinib in second line RCC. And second, by a successful financing where we raised approximately $146 million net to help us implement our plans to commercialize cabozantinib for RCC in the US, pending approval.

With positive top line results for METEOR in hand, the top priority now for Exelixis is to expedite the submission of regulatory applications for cabozantinib in advanced RCC, in both the US and EU, which we expect to file in early 2016. We are very excited about the METEOR top line results, which Gisela will review momentarily, and look forward to being able to provide this new treatment option to RCC patients if approval is granted.

Over the last several years, the RCC indication has been impacted by the entry of a number of new therapies that offer only modest benefit. The evolving treatment landscape continues to be very dynamic. In fact, in the last month, we saw both our positive top line results from METEOR and the announcement from BMS for nivolumab in second line RCC patients. Assuming that these therapies succeed in securing regulatory approval, we believe that the future RCC opportunity is large enough to support multiple new potentially improved therapies, which could each play a meaningful role in providing greater benefit to RCC patients.

As a reminder, the current market for second and later-line RCC includes about 17,000 patients in the US, and approximately 37,000 patients worldwide, with global revenues for current second line RCC agents of approximately $1 billion in 2014.

We're excited about additional opportunities in this indication and are preparing for a future potential late stage development in RCC, both by exploring cabozantinib alone as a first-line therapy, and by evaluating rational combination approaches, including the recently announced cabozantinib immunotherapy combinations under investigation at the NCI.

Following the announcement of positive top line results for METEOR, we executed a successful financing that raised approximately $146 million net of expenses. Chris will provide additional details of the offering in our financial update.

We're obviously very pleased with the response to our financing and to have brought in these additional funds to help expedite our regulatory submissions, and the commercial build out necessary to support a potential US launch of cabozantinib for advanced RCC. I want to assure everyone that we will continue to be highly disciplined with respect to cash utilization moving forward, and that future spending will be tightly gated to key upcoming regulatory milestones.

As discussed previously, Exelixis is seeking a partner for ex-US territories to help us maximize the global commercial opportunity for cabozantinib without making the significant investment required to build an ex-US commercial infrastructure ourselves. We believe that both the strength of the METEOR data and the additional cash from our recent financing puts us in a strong negotiating position, as potential partnering discussions continue to advance.

On the cobimetinib front, Exelixis and our partner Genentech have completed our commercial readiness activities for the potential approval and launch of cobimetinib in combination with vemurafenib, which includes our involvement in the co-promotion of this potentially important new medicine in the treatment of patients with mutant BRAF positive melanoma. As a reminder, Genentech and Roche completed the submissions for cobimetinib in 2014. In the US, cobimetinib has received priority review from the FDA, and now has a PDUFA date of November 11, 2015.

An additional update for the coBRIM trial is planned for the Society of Melanoma Research meeting, which will take place in San Francisco in November. We will be prepared to support Genentech's launch of the product if and when approval occurs.

Finally, the read out of METEOR was clearly a pivotal event for the Company. And the exciting top line results for RCC enables us to plan for the future with a high degree of confidence. With additional financing resources on hand, we remain highly focused on advancing cabozantinib and cobimetinib through their important near-term regulatory milestones.

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

Thank you, Mike.

I'd first like to say I'm thrilled to have joined Exelixis at this exciting time in the Company's history. I'm eager to work with Mike and the team to build an organization that can maximize the opportunities that are before us.

I will begin with a review of our second-quarter 2015 financial results, and then provide an update on 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 for the quarter ended June 30, 2015, were $8 million, compared to $6.6 million for the comparable period in 2014. Net revenues consisted entirely of product revenues related to the sales of COMETRIQ. As a reminder, first-quarter 2015 net revenues of $9.4 million were positively impacted by a one-time adjustment of $2.6 million due to the conversion from the sell through to the sell in method of revenue recognition for our domestic revenue.

Research and development expenses for the quarter ended June 30, 2015, were $24.5 million, compared to $51 million for the comparable period in 2014. The decrease was primarily related to net decrease in clinical trial costs, predominantly due to the continued wind-down and cost related to COMET studies in metastatic castration-resistant prostate cancer, and decreases in personnel related expenses, resulting from an overall reduction in headcount.

Selling, general and administrative expenses for the quarter ended June 30, 2015, were $12.8 million, compared to $16.5 million for the comparable period in 2014. The decrease was primarily related to a decrease in personnel and stock-based compensation expenses, resulting from an overall reduction in headcount, consulting and outside services, and legal and patent costs. Those decreases were partially offset by higher marketing expenses, including expenses for cobimetinib under the Company's collaboration agreement with Genentech.

Restructuring charges for the quarter ended June 30, 2015, were $1.3 million. The restructuring charge was primarily related to the exit of certain facilities, the early termination of one of our building leases, and subleasing activities during the period.

Total cost and expenses for the second quarter were $39.3, million versus $68.3 million for the same period last year. The total cost and expenses for the first half of 2015 were $71.4 million, versus $138.1 million for the same period last year. These year-over-year decreases are primarily due to the reductions in clinical trial and personnel related costs I discussed previously.

Other income and expense net for the quarter ended June 30, 2015, was a net expense of $12.1 million, compared to a net expense of $11.7 million for the comparable period in 2014. The net expense is comprised primarily of interest expense, which includes $7.2 million of non-cash expense related to the accretion of the discounts on both the 4.25% convertible senior subordinated notes due in 2019, and the Company's indebtedness under the Deerfield notes of the quarter ended June 30, 2015, as compared to $7.3 million for the comparable period in 2014.

Net loss for the quarter ended June 30, 2015, was $43.4 million, or $0.22 per share, compared to a net loss of $73.4 million or $0.38 per share for the comparable period in 2014. The decreased net loss for the quarter was primarily due to decreases in research and development expenses, and selling, general and administrative expenses and an increase in product revenues.

Cash and cash equivalents, short and long term investments, and short and long-term restricted cash and investments totaled $167 million at June 30, 2015, compared with $242.8 million at December 31, 2014. The June 30, 2015, cash position was prior to the public offering of stock in July 2015, which netted the Company approximately $146 million. We are pleased with the caliber of institutional investors that participated in this offering, and fully appreciate their continued commitment to Exelixis.

Turning to our financial guidance for the second half of 2015. With the positive METEOR data in hand, we will make the investments necessary in our regulatory efforts to fully support our US and EU filing in early 2016, as well as building the incremental infrastructure necessary to prepare for the potential US launch of cabozantinib in advanced RCC. We are now providing guidance that our operating expenses will be in the range of $80 million to $90 million for the second half of 2015. This range includes approximately $10 million of incremental non-cash stock-based compensation expense related to the vesting of performance stock options tied to the readout of positive top line METEOR results.

With the recent extension of the maturity of the $100 million Deerfield notes to July 1, 2018, and the receipt of approximately $146 million in cash from our public offering of stock, we are now on solid footing from a cash perspective. As Mike highlighted, we are in continued discussions with potential partners for ex-US territories, which, if successful, ultimately could bring additional financial resources to the Company in the form of upfront and other milestone payments.

So with that, I'll now turn the call over to Gisela.

Thank you, Chris.

A couple of weeks ago, we announced positive results from METEOR, our phase 3 trial comparing cabozantinib and everolimus in advanced RCC patients who have experienced disease progression, following treatment with at least one VEGFR TKI. We were very excited to see the trial succeed in meeting its primary endpoint of improving PFS for cabozantinib as compared to everolimus and to also observe a strong trend in overall survival at the planned interim analysis. In addition, cabozantinib was generally well-tolerated with a low rate of discontinuations for adverse events not associated with disease progression.

Just a reminder, I will quickly run through the top line data. The primary endpoint of the study was progression free survival. The analysis of progression-free survival per the independent radiology committee showed a highly statistically significant benefit for cabozantinib, with a hazard ratio of 0.58, and 95% confidence interval of 0.45 to 0.75, and a P value of less than 0.0001. Cabozantinib treatment reduced the risk of disease progression or death by 42%. In METEOR, we have now seen a clinically meaningful and statistically significant improvement in the primary endpoint of progression-free survival compared with everolimus.

Data pertaining to overall survival in the entire study population of 658 patients, a secondary endpoint of the trial, were immature at the data cutoff as would be expected. But an interim analysis triggered to occur at the time of the primary analysis for PFS showed a strong trend favoring cabozantinib with a hazard ratio of 0.67, an unadjusted 95% confidence interval of 0.51 to 0.89 and a P value of 0.005.

At the time of the interim analysis, the pre-specified P value of 0.0019 to achieve statistical significance was not reached. Needless to say, that we were very pleased to see the strong trend in overall survival at this early time, with a minimum follow up of only six months for this endpoint. The trial will continue to the final analysis of overall survival that we anticipate in 2016.

The overall survival interim analysis provides a first early look at this data, and we are encouraged by the observed strong trend favoring cabozantinib. This is of interest as to date, the majority of phase 3 studies in advanced renal cell cancer, and in particular in the second line setting, the RECORD1 study and the AXIS study failed to show a survival benefit for the respective compounds under evaluation, although they succeeded in improving progression-free survival.

The rates of serious adverse events, regardless of causality, were similar between treatment arms and discontinuations for adverse events were low at about 10% in both treatment arms, and consistent with those previously reported for everolimus.

Further detailed analyses are ongoing, but we believe that the low discontinuation rate may in part be due to the optimized dose of cabozantinib at 60 milligrams per day, and a high level of familiarity of the renal cell cancer treatment community with the use of both everolimus and the VEGFR targeting TKIs. We hope to present the data at an upcoming medical conference, and will keep you informed when we have confirmation of the date and venue for the presentation.

We are now intensely focused on our next steps towards filing for regulatory approval in the United States and in the European Union in early 2016. These regulatory submissions are now the highest priority for the Company over the coming months, and we've mobilized all appropriate resources to expedite these filings as soon as possible. We will update you on progress for these activities as appropriate.

Beyond our focus and effort to complete our regulatory filings based on METEOR, additional clinical development in renal cell cancer continues in the form of trials sponsored by our collaborators at the National Cancer Institute's Cancer Therapy Evaluation Program, as well as through our investigator sponsored trial program.

Most notably, an important study in first-line advanced RCC is currently ongoing in the cooperative group known as The Alliance under the CTEP IND. The CABOSUN trial 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 progression-free survival, and the study achieved its target enrollment of 150 patients in March of this year.

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 providing you with the results when available.

In addition, our CTEP collaborators have initiated a phase I study evaluating the combination of cabozantinib plus nivolumab with or without ipilimumab in patients with genitourinary cancers, including RCC. There is a strong rationale for combining cabozantinib with these types of immuno-oncology agents, including evidence of the compound's ability to create a more immune permissive environment, as well as pre-clinical data suggesting that cabozantinib can increase T-cell infiltration into tumors. Data on the tolerability and anti tumor activity of the combinations studied in this early stage trial could set the stage for later stage evaluation not only in the genitourinary setting, but in other areas as well, like non-small-cell lung cancer, and histologies that appear sensitive to both agents.

Now turning to other indications. I'll provide a brief update on our phase III study in advanced hepatocellular cancer that is called CELESTIAL.

The study continues to enroll patients globally. In this study, patients with advanced HCC who have received prior treatment with sorafenib are randomized to receive either cabozantinib at 60 milligrams per day or a matching placebo. The primary endpoint for this trial is overall survival, and we are expecting data in the 2017 timeframe. There's currently no standard of care available in the second or later line population who have received prior sorafenib, highlighting the unmet medical need in this indication.

Lastly, I would like to briefly speak about our non-small-cell lung cancer data presentations at the ASCO meeting a couple of months ago that highlight a potential for cabozantinib in this indication. Oral presentations showed positive results from two trials of cabozantinib in molecularly defined sub types of non-small cell lung cancer. An investigative sponsored phase II trial of cabozantinib in RET-rearranged non-small cell lung cancer, met its primary endpoint, exceeding the predefined number of objective responses.

And a second trial conducted by the ECOG-ACRIN Cancer Research Group, under our cooperative research and development agreement with NCI-CTEP, extended both PFS and overall survival in a statistically significant fashion for cabozantinib, and the combination of cabozantinib and erlotinib versus erlotinib alone in EGFR wild-type non-small cell lung cancer patients.

Exelixis is committed to working with its collaborators at the NCI and ECOG-ACRIN to explore further development of cabozantinib in lung cancer, including the evaluation of combination approaches within immuno-oncology compound, and the potential for late stage development in the later line population evaluated in the randomized phase II study.

And with that, I will hand the call back to Mike

All right, Gisela. Thank you. I'll add 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 is completely focused on the next significant drivers for the business, including first, the US and EU regulatory filings for cabozantinib in advanced RCC. And, second, the potential approval and launch of cobimetinib in combination with vemurafenib in patients with mutant BRAF positive melanoma.

We're entering a new and very exciting phase in the Company's history, with the near-term possibility of having two approved products that address commercially significant patient populations. We look forward to keeping you up to date on our continued progress.

I will 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.

Thank you all for your time today, and your interest in Exelixis. And we're happy now to open the call for questions.

(Operator Instructions)

Eric Schmidt, Cowen and Company.

Good afternoon and thanks for taking my questions.

Mike, do you now have a targeted medical meeting for presentation of the METEOR results? Or is that still up in the air?

I'll let Gisela answer that question.

Yes, we have submitted at this point an abstract for the ECC meeting that is taking place in Vienna at the end of September. Obviously, it's not up to us to decide upon acceptance. So we will just have to stay put and wait for a response. And we'll be sure to update you when we have it.

Okay. And then maybe also for Gisela, what is rate limiting on your ability to file the SNDA in the US?

Obviously, it's the highest priority, as I said a little earlier. We're working on the regulatory filings, both for the United States and the European Union. And we're mobilizing all resources to move things along as quickly as possible. We've guided towards a submission timeline in early 2016.

But are certainly working towards beating that submission timeline, and the usual things that need to occur to achieve that. Obviously, the generation of the regulatory documents and finalization of the study report and so on. So that takes a little bit of time.

So not waiting for any more cuts to the data or any manufacturing checks and balances or anything like that? Just processing the filing itself?

That is correct. And also just to clarify, it's not an SNDA; it's an NDA from the COMETRIQ capsule use tablets.

Sorry about that, yes. Thank you.

Last question. In terms of the European MAA filing and your ex-US partnership discussions, are those independently tracked? Or do you think a partner might want to have some say in the MMA, and therefore might the timing of one be dependent on the other?

Eric, it's Mike.

We view those two work streams as being at this point in time separate. Obviously, if we had a partner in place by the time we had the MAA ready to file, that would make future discussions with agencies in the EU probably easier. But we're not going to wait for that. If we can file sooner, we will do that.

And again, the goal there is to find literally the best partner from a broad perspective. And our focus is to get the MAA and the NDA filed as quickly as possible.

Thank you.

Stephen Willey, Stifel.

Thanks for taking the questions.

Just with respect on the European partnership side, can you maybe just remind us what the flexibility is with the current arrangement with Sobi with respect to termination? And is there any kind of breakup fee there associated with the ending of that agreement?

Yes, Steve, it's Mike.

Again, as we've talked about previously, we currently work with Sobi as our European distributor for COMETRIQ in the EU. As well as supporting the Named Patient Use program globally outside of the US. We have a great relationship with them. They are doing, we think, a great job in supporting, again, what is a very small, tiny, orphan oncology indication. And we enjoy that collaboration, and we think it's gotten off to a great start.

That being said, we have the opportunity to move that compound to a future partner if we choose so, as part of that ex-US collaboration -- or potential collaboration that we're certainly talking about right now. There's a small fee that we would pay to Sobi, but it's a rather small amount. And is certainly not in the way of somebody who would like to be able to market COMETRIQ for MTC to move that forward with another partner.

Again, we're very happy with Sobi, we think it's going really well. And we will see where this goes relative to the broader RCC discussion in terms of the ex-US deal.

Okay. And then with respect to the partnership side, would you be looking for a partner that could concomitantly commercialize Japan? Or do you view that as being a separate deal in and of itself?

That's a good question. We're looking at all those different scenarios very carefully. It's really a math problem more than anything else in terms of the global economics, and in terms of both commercialization as well as future development.

So if one partner can do that, that is fine. If we need to go to two to cover Asia, Japan, as well as the rest of the world, that's okay too. So we're flexible there. Again, we're looking to maximize our optionality and the economics that we receive. As well as the really strong support, from a development point of view, to really build cabozantinib into the franchise that we think it could become.

Okay. And then maybe just a housekeeping question.

I appreciate the second half OpEx guidance. But just want to make sure that doesn't include any potential co-promotion costs under the cobi agreement.

Yes, this is Chris Senner.

It does include the co-promotion costs for the second half. So both the first and second half include the co-promotion costs. So they're in what you've seen in the run rate, but also in the guidance.

Okay, I appreciate it. Thanks.

(Operator Instructions)

Stefan Quenneville, Morningstar.

Hello, thanks for taking my question.

I was curious about incremental sales force requirements, given the RCC indications that are starting next year. How are you thinking about adding people? And to what degree do you think that's going to be necessary?

Thanks for your question. P.J. Haley is here. He leads our Commercial group. It's a great chance for him to say a few words about that.

P.J.?

Yes, thanks for the question.

I think it's probably best to take a step back and think about our commercial capability that we've developed over the past few years leading up to our approval of COMETRIQ in medullary thyroid cancer.

We've had a sales force on board promoting that for over two years now. So we've developed that capability internally. We've expanded the team, and expanded it again recently, to be ready for the potential cobimetinib approval and partnership with Genentech. Who we're working very well and closely with as we continue to prepare for the pending cobi approval.

With regards to that, we have 12 representatives who will be going from promoting currently COMETRIQ to supporting cobi with that approval. And we have six reps who will remain supporting COMETRIQ. With regards to COMETRIQ in MTC, it's a very niche and small population with a small amount of oncologists who are treating that niche indication. We know these physicians very well, these customers. And we believe we can continue to support patients over the time there.

When we think about RCC going forward, it's obviously an opportunity we're very excited about. It's too early to comment on the details of that. But what I can say is that with the data, we've had a lot of unsolicited interest in folks reaching out with interest to join the Commercial organization at Exelixis. We think that's going to give us great momentum as we continue to move forward with our recruiting efforts.

When I think about other capabilities to commercially that we've built. We've built in-house marketing capability. We've built in-house distribution capability. We have a third-party logistics provider on board. We have a specialty pharmacy we're currently distributing the drug through. So at a high level, strategically, what we'll do is look to continue to leverage these capabilities as we prepare for a potential launch in RCC.

Great, thanks.

There are no further questions at this time. I'd like to turn the call over to today's host, Susan Hubbard.

Miss Hubbard?

Great.

Thank you all for joining us today. We appreciate your attention and support. And we look forward to answering any follow-up questions you might have following the call.

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