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Executives

Mike Morrissey -- President and CEO

Charles Butler -- VP, IR and Corporate Communications

Analysts

Lee Kalowski -- Credit Suisse

Exelixis, Inc. (EXEL) Company Conference Presentation November 15, 2012 1:30 PM ET

Lee Kalowski -- Credit Suisse

All right. Good morning, everyone. Why don't we get started? Next on the agenda is Exelixis. I'm sure everyone here is familiar with its story. Now we can say numerous products phase 3, one of which is cabozantinib, a product I'm sure many of you are familiar with. Here to talk about the development and the company is Mike Morrissey, the CEO. Preceding that will be Charles Butler to read a few things for us.

Charles Butler

Just quickly the forward-looking statement. During the course of this 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. Specifically, the company's most recent Form 10-Q filed on November 7, 2012.

These documents contain and identify under the heading Risk Factors, important factors that could cause actual results to differ materially from those contained in any forward-looking statements, including risk related to the potential failure of cabozantinib and GDC-0973 that demonstrate safety and efficacy in clinical testing, Exelixis' ability to conduct clinical trials of cabozantinib sufficient to achieve a positive completion, Exelixis' dependence on the relationship with Genentech/Roche with respect to GDC-0973, the sufficiency of Exelixis' capital and other resources, and the uncertainty of the FDA review and approval process.

Mike Morrissey

Okay. Thank you, Lee. Thank you, Charles. It's great to be here today. Thanks for coming out. Happy to be able to tell you about the company, about Exelixis, certainly a very important time for us. Organizationally, we have a lot going on right now with certainly both cabozantinib, our lead compound, as well as our portfolio of partnered assets that are evolving in real-time most recently with the advancement of XL518, GDC-0973 into a phase 3 trial with Roche and Genentech.

So I'll focus on the top line story with the company today. Obviously, we have some important near-term milestones, namely the NDA PDUFA date is two weeks from today for MTC, so that's certainly a very important milestone for us and will certainly provide some additional, I think, momentum and interest as we go forward with cabozantinib.

So, again, the story from a high level is pretty simple. We have focused the company over the last two years on the development of our lead compound called cabozantinib, cabo for short. This is a first-in-class dual inhibitor of two important receptor tyrosine kinases called MET and the VEGF receptor family of (inaudible).

In our view, this is an optimal combination of molecules to inhibit both MET and VEGF. Receptors play an important role in the development and the maintenance of the tumor vasculature, in driving tumor cell growth. MET certainly is an important player in redevelopment of resistance to a variety of chemotherapy, targeted therapy and oral therapies.

In our view certainly in biology that was evolving back into the 2002-2003 timeframe which drove us to combine the [regulatory] effects of both MET and VEGF into our compound like cabo. The biology is very solid in terms of the combined dual simultaneous inhibition providing very robust for a provocative preclinical activity. We've been very satisfied in being able to show in the clinical setting additional activities to-date with that compound. And we're certainly very excited to have the cabo franchise potential in front of us in terms of how we can build that and how we can move that forward.

So, again, key features here. We had our first pivotal trial in medullary thyroid cancer or MTC readout at the end of last year. We filed that NDA in June and our PDUFA is literally two weeks from today. So we're excited about that. I think the true value of cabo can be viewed in terms of it as a franchise having franchise potential across multiple indications outside of the initial potential indication of our thyroid cancer. Certainly the vast majority of our phase 2 work over the last few years has been focused in other tumor indications and really speaks to the broad implication of inhibiting MET and VEGF simultaneously of driving this potent in tumor activities.

So, this broad development program we'll speak about in a few minutes. I think it's important to point out that we solely and wholly own this compound ourselves. We're in a very (inaudible) position to have sole access to cabo and one that we hope to be able to – again, from the standpoint of patients and shareholders build value.

Behind that and as part of our prior business in doing high end, high throughput discovery in early development, we have a pipeline of partnered assets that are evolving as we speak with significant retained economics. We don't have a lot of visibility – there's not a lot of visibility on these compounds. I think we strived a little value from these compounds, but I think with the evolution of this whole pipeline of compounds, again, we've had the opportunity to build more value with them as they move from their current state in phase 2 onto phase 3.

I'll speak about six of these compounds later on in this morning's presentation, the most advanced being again our MEK inhibitor XL518, GDC-0973. This is the first partnered compound to move into a pivotal trial. This was announced by Roche and Genentech at ESMO a few weeks ago when they had their phase 1b dataset presented. It's a very interesting approach, very fitting compounds for expanding the activity of CRAF inhibition in that setting and it's one that we are very excited to have a second compound now moving into pivotal trials, and we'll talk more about that in terms of our economics in that deal in a few minutes.

Behind that, we have five additional compounds moving forward into and through phase 2 that are all likely to be positioned very well from a competitive point of view and we'll speak to those in a second. So, again, so we're focused primarily on cabo as our main driving asset. We have a pipeline of additional compounds that we're not putting money into. Most of those are milestone and royalty deals, the collaboration with Roche and Genentech around GDC-0973. It's a profit share. We'll talk more about that towards the end. But again, we have very strong and significant retained economics across the board.

Those two components in the business coupled with what we think is a very strong position financially, we raised money in August. We ended Q3 -- I mentioned on our call last week that we ended Q3 with $675 million in cash. So we've essentially taken that one variable out of the equation in terms of having a very, I think, decent run rate now cash wise to be able to pursue cabo across multiple indications and certainty try to build value in and for different indications and for different patient populations that we think cabo has potential to be important for.

So key priorities are shown on this slide. Again, I think that's very consistent with our call from last week. First is to discuss and complete the NDA review process for MTC. As with the call last week, we're not going to say much about the review process today or our commercial build-up plans. We'll do that at the appropriate time post approval. And we're excited about where that's going. We think it's essential. Again, MTC is a relatively small population but it's one that would help us enter the commercial realm I think in a meaningful but staged manner and we'll talk more about that at the appropriate time post (inaudible).

Certainly our two pivotal trials for cabozantinib in prostate cancer, the COMET trials; COMET-1 for OS, COMET-2 for pain palliation ongoing. We hope to complete those in 2014. We have a broad development plan around a variety of different tumor type single-agent cabo combinations with a variety of different agents as part of our program with the NCI-CTEP collaboration as well as different ISTs and new indications. So again, to look on clinical trials that does today, there's about 30 different trials either that are finished or are ongoing. That should grow to more than 40 in the relative short term as new CTEP trials get initiated. So a very wide cup of opportunities there across tumor types, across combination partners and it's certainly – our approach and very clear strategy to understand the scope of limitations and really define the next set of priorities for either randomized phase 2 trials or pivotal trials with cabo going forward.

And we certainly have that expressed intent. We're looking at a variety of additional pivotal trial indications to start in 2013, studying very carefully the opportunities in second line renal cell carcinoma as well as second line liver cancer, as really the low hanging fruit for cabo to move into next post MTC, post CRPC that we think we have good insight into biologically still only had some, I think, pretty compelling data at ASCO this year around those two indications in ones that we think we can bring to bear, I think, cabo's potential in the relatively short term.

So I think that's the main focus in terms of what we're doing with cabo is that we have the opportunity to build a franchise around the single assets. I think in today's day and age and focus around the design of single molecules or targets in the oncology space, a single activating mutation and a subset of a different indication with a very narrow scope. Cabo is the opposite of that in terms of its somewhat old school, in terms of trying to target key pathways that are better operational in most tumors across indications from the standpoint of the biology of MET and VEGF, how they work together, how they synergize to help tumors grow and thrive either in the primary state or in the metastatic state.

So our data today, both biologically and clinically highlights a wide variety of opportunities for cabo. Some of those are shown here and we had many updates on these different indications on ASCO this year in June. We're very pleased to see this early encouraging data across tumor types. We're not limited to huge populations, we're not limited to any given specific genetic mutations. We seemed to have activity across our different unit types, across different tumor types. And that built-in clinical emerging commercial differentiation that we hope to be able to [recapitulate] in clinical trials as we go forward and really provide then strong commercial differentiation as we attempt to build this franchise around cabozantinib.

Here's a snapshot of our current development program in terms of at the top the pivotal trials that we have ongoing. Again, EXAM was for MTC. That was completed and readout in terms of its primary endpoint with PSS last year. We've had the two COMET trials going, COMET-1 and COMET-2. We have a broad cut of phase 2 opportunities looking across tumor types that again have shown to be sensitive to cabo to-date and then we have a broad single search activity at the bottom looking for a variety of different tumor types to either reinforce early phase 1 data or again search for new activity in different tumor types, either as a single agent or in combinations with different tumor types.

As we continue to expand this in terms of what's happening in phase 3, what's happening in phase 2 and what's happening in that early broad signal search for additional indications and additional combination partners as we go forward. But certainly prostate cancer has been one of our main areas of focus over the last several years, that is due predominately to the somewhat provocative activity we've seen in these patients in terms of their metastatic bone disease and the ability of cabo to not only regress metastatic bone lesions by bone scan but also reduce the very severe pain these patients feel in late-stage disease and reduce their narcotic as well.

So we've had several publications and presentations last year in this setting. We had a very broad presentation at ASCO by Dr. Matthew Smith. Dr. Johann de Bono had an update at the 40 milligram level with cabo at ESMO in October really reinforcing the broad activity and the very attractive clinical profile for cabo in this disease setting really [narrating] the idea that cabo can attack the tumor in the peripheral, we see a reduction in visceral disease, in reduction in liver disease, a dramatic reduction in circulating tumor cells or CTCs, again a broad improvement in bone scan.

Dr. de Bono had a very good example of using MRI techniques at ESMO to show that we're actually attacking the tumor in the bone as well, so I think a very good evidence for direct on target, direct any tumor activity in the bone of these patients on top of the pain palliation and looking like good signs of impacting clinical outcomes in terms of expanding PSS. So we have two ongoing pivotal trials that are designed to really prove this now in a randomized blinded pivotal trial setting that would provide both clinical and potentially commercial differentiation around cabozantinib in this space.

These trials are shown here at a high level. I won't go through all the details. Again COMET-1 will enroll approximately 1,000 patients looking for overall survival. COMET-2 is focused primarily on pain palliation, narcotic reduction where the accumulation of that pain data for literally every patient at every compound is really important from a regulatory point of view. So we divide that out into two trials, spending a little bit more money, a little bit more time, being a bit more rigorous here with the goal of having – if things look up, having a label that has a survival benefit, potentially have a pain palliation benefit and having a narcotic reduction benefit and being able to really validate the utility of the bone scan and helping us predict when patients actually will see benefits on this drug.

So a lot going on here. We expect to have top line data for both trials in 2014 but it's a very clear focus for the company and certainly our highest priority as we go forward to how to get these trials to enroll quickly and then to readout in the 2014 timeframe. Beyond that, again ASCO, we had a very deep dive into the data for cabo across different tumor types. I've got waterfalls here for four different tumor indications; for liver cancer in the top left, renal cell carcinoma, breast cancer, differentiated thyroid cancer, these are waterfall plots tracking the best tumor response for each patient in those trials. (Inaudible) going down means the tumor shrinks. You can see that for most patients in these different tumor types. We see dramatic tumor shrinkage in the DTC example in the bottom right. Every patient has a best response, had tumor shrinkage.

In the renal cell carcinoma waterfall (inaudible) in a population that was actually fairly late stage, some of these patients had two or more prior therapies, so a very refractory part of to population had good tumor shrinkage, 28% of those patients had a recessed confirmed response. Some of those patients had a bone met that was off as well, so very clear signs of a different view or different (inaudible) clinically that's been seen previously for individual compounds in much less, one across the board here in terms of its wide breadth of activities. So we're very excited about this in terms of tumor shrinkage.

We saw that play out and given endpoint readouts around PSS, interim looked at PSS, overall survival, again (inaudible) these are small trials and not randomized and not blinded. So, we get to look at this data somewhat cautiously, but I think it certainly helps us understand where some of the low hanging fruit is relative to indications that we want to be able to pursue again in a more rigorous, more randomized setting in pivotal trials. And certainly the liver cancer opportunity and the renal cancer opportunity are the ones that we think are the most attractive right now and certainly looking at great (inaudible) in terms of launching our pivotal trials in the second line setting for both indications.

The last one up here I think is very simple, it's very sound and it makes a lot of sense. Again, we have what we believed to be a differentiating phase 2 data across the board here certainly in those two indications, but beyond that for breast cancer, lung cancer and melanoma to a certain degree. So we're excited about that. We want to be able to broaden the value of the cabozantinib and franchise while we're doing prostate cancer, while we're doing thyroid cancer and I think this is the best way to do that is to move forward other indications in parallel with both indications that will help us to potentially (inaudible) future revenues and really spread the risk across the entire franchise of opportunities.

So again, we have the opportunity here with cabo. It's a unique compound. There are very few compounds today that have this kind of broad activity. It really has that same feel of what Avastin did early in its development of Taxotere. So that's our goal to really push the limits here, understand the value proposition, really define the boundary conditions for where we can move forward and we'll do that with very well done and well studied randomized phase 2 and randomized phase 3 trials and then be able to use that data in real time to further refine our plans and really build the franchise that we can then differentiate clinically, potentially as well as commercially.

So that's our main focus in terms of how we're spending our time, how we're spending our money. I think the other option that I mentioned in my intro today is that we have a maturing pipeline of additional assets that we have worked on previously, we partner and are now maturing and moving forward in the hands of some great partners. And I think the perfect example, the top example here is again the MET inhibitor XL518 GDC-0973 again there was data at ESMO showing good tolerability and good combined activity with Zelforaf in first line metastatic melanoma patients with (inaudible) in patients. That pivotal trial is up and recruiting for some trials [that does], we have two inhibitors of PI3 kinase with sanofi that are in a broad phase 2 program. Cabo's cousin XL880 is partnered with GSK with a compound called Foretinib that's in a wide variety of phase 2 programs as well. And then our hedge-hog antagonist with the BMS, our MR antagonist with (inaudible) oral compounds that are in phase 2.

So we've got this almost stealth program of compounds that are evolving that are certainly being studied by very well enabled, well financed and experts or developers of these different companies. And as those move forward, they'll become more visible and I think they add additional value and additional upside for the Exelixis story as we go forward.

I'll elaborate a little bit more on the economics with our MEK inhibitor in the Roche and Genentech collaboration. Again, this is profit share arrangement on the earnings call last week. We highlighted that in some more detail, so we share on the profits and losses on US actual sales in a multi-tiered basis. The top end is for the first $200 million and that's a 50-50 profit share. The lower bound is 30% above $400 million. So very – I think a very great, a very good profit share in the US. We're entitled to low double digit royalties ex-US net sales and we have the ability to co-promote up to 25% of the US sales force which is then triggered – the option period is triggered for 12 months with the first patient dose in the phase 3 trial.

So that's all going forward. And we stand here today, we have two compounds now late stage developments covering, if you will, what we're planning to do in '13 with new indications potentially six different pivotal trials. So we're really maturing into this late stage development organization and with the PDUFA coming up in the short term, the potential then to move into the commercial realm as well.

So our next milestones are shown here. I think this is just kind of a rehash what I said before. Again, the PDUFA coming up in a few weeks; COMETs are our high priority. They're certainly very important for us in prostate cancer specifically but a variety of other tumor types just to look at early lines of therapy in cabo with standard of care. So in the CRPC stage to do combination trials with abiraterone along with enzalutamide with docetaxel. Some of those are already going and we'll certainly be able to expand upon that going forward with additional trials in the phase 2 setting as well as additional pivotal trials and the appropriate indications.

So with that, I will stop and thank you. It's a very exciting time for us. We're at it now for almost 18 years and it's very rewarding to be able to club some of these key milestone for us as a company knowing that the real focus is really developing cabo to its broadest extent to build value for patients and shareholders. So I'll stop there and look forward to having a dialogue in the breakup. Thank you.

Question-and-Answer Session

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Source: Exelixis' CEO Presents at Credit Suisse Group AG Healthcare Conference (Transcript)
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