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Exelixis, Inc. (NASDAQ:EXEL)

Lazard Capital Markets 9th Annual Healthcare Conference Call

November 14, 2012 10:00 am ET

Executives

Frank L. Karbe – Executive Vice President and Chief Financial Officer

Analysts

Joshua E. Schimmer – Lazard Capital Markets LLC

Joshua E. Schimmer – Lazard Capital Markets LLC

All right, I think we’re going to get started. I'm Josh Schimmer from Lazard Capital Markets Biotech team. Pleasure to introduce our next company Exelixis, a leader in the oncology drug development space, to present on behalf of Exelixis is not Charles Butler, as it says on the slide. We have the pleasure of having Frank Karbe, who is the Chief Financial Officer of the company.

Frank L. Karbe

Thanks, Josh for the introduction. It’s a pleasure to be here this morning. Before we get started quick look at our disclaimer. To the extent that I will be making forward-looking statements, keep in mind that these are subject to various risks and uncertainties and for a full discussion of those, I refer you to our quarterly SEC filings.

So, let me begin with a brief overview of where we stand in Exelixis today. So I think many of you know, internally, we are exclusively focused on the development of Cabozantinib, Cabo for short is a small molecule dual inhibitor of MET and VEGFR. The first pivotal study, the EXAM study has readout successfully a few months ago and was the basis for our first NDA submission, which is currently under review and for which we are nearing the PDUFA date of November 29. So it's just a couple of weeks away.

We are obviously very focused at the moment and have been for quite a few months on the cabo MTC NDA review as well as the preparations for potential commercial launch. But I will be silent on both of these topics today, I hope you understand that. We do not want to preempt the review process or get ahead of ourselves and talk about commercial activities before we know whether or not we are approved.

Think what is important to realize though is that the EXAM study, the first pivotal study for cabo in MTC is really just the tip of a fairly large pyramid, which constitutes a broad development program for cabozantinib with many trials across all different stages of clinical development and which hold the promise for cabo to grow into one of the leading oncology franchises.

Also important I think is the fact that Exelixis wholly-owns cabozantinib. And that I think put us in a little bit of a unique position because it’s atypical, I think, for a biotech company to get to this stage and still have 100% of the rights to its main assets.

Also important I think is the fact that beyond what we’re doing internally with cabo, we have a fairly broad pipeline of partnered assets in which we have retained significant economics and that pipeline is a result of many years of active PDA discussions and a lot of deal making. And many of these compounds are now advancing in the hands of capable partners at no cost to Exelixis.

And the first one of those, I am happy to report, has just initiated a pivotal study that's our compound XL518 now know as GDC-0973, it’s in a collaboration with Roche Genentech and I will talk a little bit – more about this here in a few moments, but this was quite significant in our mind because Exelixis now has two compounds in pivotal studies, one we own outright, the other one we have retained a significant economic stake in the form of a profit share in the U.S. and royalties in the Exelixis territories. Beyond this one compound, we have five additional compounds that are in multitude of Phase II studies. I will give you brief overview of those later in my presentation as well.

And lastly, and also I think very important, Exelixis is in a strong financial position. We ended the third quarter with about $675 million in cash and that gives us the financial strength to really aggressively pursue all of the studies that we currently have ongoing and most importantly of course our various pivotal studies for Cabo.

I will keep priorities, I think quite straight-forward and logic, number one of course to successfully complete the NDA process for medullary thyroid cancer, equally important and a high focus for the entire company is to complete the enrollment in the COMET trials for metastatic castration-resistant prostate cancer that’s COMET-1 and COMET-2.

We are also very keen on advancing our various trials that are happening under our CTEP and IST programs. And then we are looking carefully into initiating additional pivotal trials outside of prostate cancer, and I will talk about what our plans are here in a moment as well.

Now the MET and VEGF pathways are implicated in a broad number of tumor indications. In fact we’ve seen activity with cabo in 12 different tumor indications to-date and that of course extents beyond just niche indications like MTC and include some of the major indication such as breast melanoma, non-small cell lung, RCC, HCC or prostate.

I mentioned a moment ago that the EXAM studies, the typical fairly large pyramid, which constitutes the broad development program for cabo and you see this depicted here in this graph. The top three studies that you see here are the three pivotal studies that are ongoing. Again EXAM that’s for MTC has readout successively, COMET-1 and COMET-2 are the pivotal studies in CRPC, which – both are up and running and we expect to see top line data in 2014.

All three of those studies are conducted by Exelixis. Now beyond that there is a host of other studies, some of them are phase 2 trials, some of them are single search trials or the phase 1b type studies, and some of them are also conducted by Exelixis, and a large portion of them are actually conducted under our CTEP NIC our programs. And let me spend a moment in talking about those in a bit more detail.

So the CTEP NIC programs they provide us the ability to greatly expand the cabo development efforts in a very cost-efficient manner. And that has resulted in a broad global development program for cabo, which we think will help maximize the clinical and commercial potential of the cabo franchise.

Now let me talk about CTEP first. We entered into a cancer research and development agreement with CTEP late last year. This agreement covers us up to 20 active clinical trials per year over a five year period. Those studies are executed under an IND held by CTEP and they are supported with funds by the NCI. In fact all cost burdens for these trails is marginal, it’s about $20,000 per study.

Now, we’ve made a lot of progress since we’ve initiated this program last year, we’ve completed the review of the first 10 protocols and the first two studies are now active under the CTEP IND, it’s a Phase 1B study evaluating the combination of docetaxel and cabozantinib in CRPC and the second one is the Phase 2 study in advanced bladder cancer.

The other eight studies are undergoing IRB and scientific review at the moment and we expect to initiate those in the not too distant future and those includes various randomized Phase 2 studies in non-small cell lung first line RCC, melanoma and ovarian, it also includes Phase 2 signal search studies on other tumor types including endometrial and sarcoma and then other Phase 1B studies evaluating cabozantinib in combination with other agents.

And our Investigator-Sponsored trial program, we have the ability to evaluate Cabo and a variety of different indications quickly and that may open the door to new indications and potentially new combinations with Cabo and we have made lot of progress under the IST program as well. There are 11 studies currently active and CRPC specifically for sample this includes the low dose Cabo trial that Dr. Matthew Smith reported on at ASCO earlier this year includes Phase 2 trial in chemotherapy naïve patient's, combination studies with docetaxel abiraterone and enzalutamide planned here as well, and there is other indications under review some of which you will see on the slide here. So, it's a very broad effort that clearly extends significantly beyond MTC and extends beyond CRPC.

Now let’s spend a moment on the CRPC landscape because beyond MTC that's sort of the next big focus for the company. As I think most of you know the CRPC landscape is a very dynamic one, a lot of great progress has been made in the last couple of years with a number of new agents being approved and that has a number of implications for Cabo and what we are doing here with our development plans. There are multiple agents now that has shown an overall survival benefit, but none of these patients really get cured. Eventually most of these patients will progress and will potentially become eligible to receive Cabo albeit in one of our clinical trials that are ongoing or longer-term for treatment with Cabo post the potential approval.

Some of those therapies that have recently been approved, I think has the ability to move up into earlier lines of therapy albeit and enzalutamide for example, but may potentially move up to pre-chemo which opens up second line for Cabo and other agents. And I think maybe most importantly based on the activity we’ve seen with Cabo and our various clinical trials in CRPC specifically to date, I think we have the ability to position Cabo with a differentiated profile in this increasingly crowded landscape and that is based on its clear antitumor activity, the consistent and dramatic bone scan responses, the rapid pain improvement has been observed and the reduction or entire discontinuation of narcotic use. And so with the COMET trials, we’re really trying to lay the foundation to define the differentiated profile for cabo, which we hope will allow us to compete in this increasingly crowded space.

Before I talk in more detail about COMET trials, I want to remind you again that our efforts in prostate cancer go beyond just the COMET. There is a whole host of other studies ongoing, some of them I mentioned include combination studies with our agents, and just recently, I think we’ve seen an update at ESMO from a non-randomized extension cohort of the RDT trial for patients that have received the 40 milligram dose. Want to spend a few moments talking about this because I think it’s relevant in the context of what we’re doing with the COMET trials.

So this study enrolled previously treated patients that failed docetaxel and could have received other prior treatments. In fact 67% of these patients have received prior abi or enzalutamide and 25% had received cabazitaxel and 71% of these patients received at least two prior lines of therapy for CRPC, 53% had a pain score greater than four BPI and of those 45% received chronic narcotic medication.

There is a couple of takeaways from the data that was presented by Dr. Johann de Bono at ESMO few weeks ago. Number one, this interim data is consistent with respect to anti-tumor activity to data that was presented for a 100mg cohort by Dr. Matthew Smith at ASCO earlier this year. PFS was 4.2 months regardless of prior therapy, 79% of patients have tumor regression and measurable lesions, 69% have the pain response, and 54% had a reduction in narcotic medications.

Secondly with respect to tolerability there were some remarkably an important differences to the 100mg dose. Adverse events were generally less frequent, there were no great 5 A’s and only 25% of patients experienced the dose reduction.

And thirdly, Dr. de Bono also showed initial data documenting the direct impact of Cabo on tumor lesions in the bone of prostrate cancer patients. And that data suggests that Cabo’s effects on bone scan are linked to the induction of tumor necrosis on bone metasis. And I think all three of those points are relevant in the context of what we do with COMET trials. I mean the bottom line of this data is that there is a lower and better tolerated dose of Cabo that is active in previously treated patients with a prostrate cancer.

And if you look at what we are doing in our COMET trials is that in COMET-1 we have an overall survival end point, we’re treating a patient population that is post-docetaxel and post-abiraterone or enzalutamide in either order. And so this is a very similar patient population to the one that we have seen some updates on from both Dr. de Bono and Dr. Smith.

The COMET-1 study is a fairly large study, we'll enroll up to 960 subjects across 280 sites and we are actively enrolling patients at the moment across three different continents. The COMET-2 study has a pain palliation endpoint, significantly smaller study. We envision to enroll up to 246 patients in about 50 centers, all of which will be in English speaking geographies.

The patient population is very similar, also patients that are post-docetaxel and have seen abiraterone or enzalutamide in other order. And they have also demonstrated bone pain greater than four on the brief pain inventory or BPI. I think we said previously, we expect top line data on both of these studies in 2014.

You see here, it’s just a snapshot of some of the clinical data observed in other tumor types outside of the CRPC. I am not going to too much detail here. I think these waterfall plots speak for themselves. This has some snapshot for some of the data that was presented at ASCO earlier this year. I think what may be even more intriguing and interesting to look at is some of the overall survival and progression free survival, data across these different tumor types in HCC for example, 15.1 month medium overall survival, 5.2 months medium progression-free survival and sorafenib pre-treated patients and 4.2 months in sorafenib naïve patients, renal cell carcinoma the medium or as this might get achieved, 14.7 months of medium PFS and you see the data here for melanoma and non-small cell lung cancer.

Now, those are intriguing results and on the basis of this, we have started to look very carefully into what other pivotal trials outside of prostate cancer and MTC, we may want to initiate. And as a pretty straight-forward rationale to this, foremost of course we want to capitalize on this interesting and promising Phase 2 data, but we also think it really provides an opportunity to further increase the value of the Cabo franchise.

Question for us is, should we wait until we are done with CRPC and then initiate the studies or do we do this as quickly as possible and we have opted to do this as quickly as possible. Impart because it provides the potential to accelerate access to revenues and of course it spreads the risk across multiple pivotal studies.

And so we’ve spend a good amount of time in evaluating which studies we want to go after and while we are not completed with this analysis yet I think it’s fair to say, HCC and RCC are at the top of the list and I expect that we will be able to provide more detailed update, what exactly we are doing, what the protocols look like, what the timelines look like and so forth at the beginning of next year.

I mentioned in my introductory remarks that outside of Cabo, we have this fairly broad pipeline of partnered assets. You see a snapshot of it here. At the top of it you see XL518 or GDC-0973, which we have licensed to Genentech in 2006. Beyond that there is our two PI3K inhibitors XL147 and XL765, which are in collaboration with Sanofi. XL880 similar compound to Cabo actually, also VEGF and MET inhibitor which is partnered with GSK.

XL139 partnered with BMS and XL550, which is our MR program for which we actually just received the $5.5 million milestone in the third quarter linked to the enrollment of the first patient in the phase 2 trial.

Now you can see that based on the number of trials that are ongoing for each of these compounds, these are pretty broad development programs, and the fact that we’ve retained significant economics in the form of profit share for XL518 and for the other compounds in the form of double-digit royalties in most cases and pretty nice milestone packages. I think, looking at this potentially some real value embedded in this pipeline as well, which hopefully will come to fruition here in the next few years.

Again, the most advanced is XL518, so I want to spend just a moment talking about this. As I mentioned, we have out licensed the compound to Genentech in 2006 and we have an interesting economic participation here and that comes in the form of profit share. We participate 50-50 on the first 200 million of actual U.S. sales then sort of declines to 30% profit share for actual sales about 400 million. Outside of the U.S., we are eligible to receive low double-digit royalties. And so overall I think the economic stake that we have here is quite attractive.

Beyond that we also have a co-promotion option, which allows us to potentially fill up to 25% of total sales force for GC-0973. This option must be exercised within 12 months of receiving notification of the first patient being dosed in the pivotal study. Now if you look at ClinicalTrials.gov, you will see that the pivotal study is up and running. It is a multicenter, randomized, double-blinded, placebo-controlled phase 3 that evaluates the combination of vemurafenib plus GDC-0973 versus vemurafenib alone in treatment naïve patients carrying a BRAFV600 mutation. And so we will update you as this study progresses as on what happens here.

So as we look forward, what are the next milestones, you can look out to – the first near-term milestone of course is the fruition of the NDA process, again the PDUFA date is just a couple of the week away. And secondly, of course, the completion of the enrollment in our two COMET trials, as I mentioned, it’s one of the top priorities for the company.

We are, as I talked about, exploring the potential of cabo in early lines of therapy for CRPC in combination with other agents such as abi and enzalutamide and docetaxel. So we can expect to see data from those studies going forward. We hope to have more clarity on how we intend to expand the pivotal program in HCC and RCC. And generally, I think, given the breadth of this development program for cabo, you can expect a pretty constant flow of data at various scientific meetings throughout next year.

So with that I will conclude. I think it’s an exciting time. After 15 years or so we are couple of weeks away from our first decision on the NDA. That is exciting. We’re looking forward to that. We are equally excited about the developments in our partnered pipeline and with GDC-0973 we have a second compound that was discovered by Exelixis, which is mechanistically distinct from Cabo that is now in pivotal trails and so we are quite excited about what lies ahead for Exelixis.

Question-and-Answer Session

Joshua E. Schimmer – Lazard Capital Markets LLC

Great. Well, thanks very much. I think we have time for one or maybe two questions if anyone has.

[Ends Abruptly]

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