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Exelixis, Inc. (NASDAQ:EXEL)

Announcement of EMA Acceptance of Marketing Authorization Application for COMETRIQ

November 30, 2012 5:00 PM ET

Executives

Charles Butler - Vice President, Investor Relations and Corporate Communications

Michael Morrissey, PhD – President and Chief Executive Officer

Gisela Schwab - Executive Vice President and Chief Medical Officer

J. Scott Garland – Executive Vice President and Chief Commercial Officer

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

Analysts

Joel Sendek – Stifel Nicolaus & Company

Lee Kalowski – Credit Suisse

Terence Flynn – Goldman Sachs

Biren Amin – Jefferies & Co.

Imran Babar – Cowen and Company

Matt Lowe – JPMorgan Chase

David Miller – Biotech Stock Research

Edward Tenthoff – Piper Jaffray & Co.

Ryan Martins – Lazard Capital Markets

Operator

Good day, ladies and gentlemen, and welcome to the FDA Approval COMETRQ conference call. My name is Deanna, and I'll be the operator for today. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Charles Butler, Vice President-Investor Relations. Please go ahead.

Charles Butler

Okay. Thank you for joining us for today’s call, during which we will discuss the US Food and Drug Administration’s approval of our new drug application for COMETRQ, our trade name for cabozantinib and progressive metastatic medullary thyroid cancer or MTC. Joining me on today’s call are Mike Morrissey, our President and CEO; Gisela Schwab, our Chief Medical Officer; and Scott Garland, our Chief Commercial Officer. Mike will start by reviewing the corporate significance of the approval. Gisela will then review the label and MTC and Scott will discuss our commercial strategy for COMETRQ and then we’ll finish with Q&A.

During the course of this call, we will be making forward-looking statements regarding future events or the future performance of the company, including statements about the launch, commercialization, manufacturing, distribution and availability of COMETRQ and other possible future developments regarding clinical, regulatory, commercial, financial and strategic matters. Actual events or results 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 November 7, 2012.

These documents contain and identify under the heading Risk Factors, important factors that could cause actual event to differ materially from those contained in any forward-looking statements, including the risk that unanticipated developments could delay or prevent the launch, commercialization, distribution and availability of COMETRQ, the degree of market acceptance of COMETRQ, the extent of which coverage and reimbursement for COMETRQ will be available from third party payers, risks and uncertainties related to compliance with the applicable regulatory requirements and market competition.

And with that, I’ll turn the call over to Mike.

Michael Morrissey

All right. Thank you Charles and thanks to everyone joining us on the call. I’d like to start today by sharing some topline thoughts on our news that COMETRQ was approved for patients with progressive metastatic medullary thyroid cancer or MTC. First and foremost, I want to thank everyone who has helped us get here, especially the physicians and patients whose involvement in the clinical trial process made today possible. And I also want to acknowledge the team at the FDA with whom we’ve worked during the MDA review process. Finally and most importantly, I want to thank the entire Exelixis team, past and present which has worked so hard over the past few years to advance COMETRQ and to help us realize our vision of developing new therapies that can improve the outcomes for patients with cancer.

As you would imagine, there’s a lot of excitement today at Exelixis. The COMETRQ approval is important news for MTC patients, their families, physicians and caregivers. The efficacy and manageable tolerability of COMETRQ in MTC were established in a large, international Phase 3 trial. We are thrilled to be able to make COMETRQ available to physicians and patients seeking new options from treatment of progressive metastatic MTC.

This approval is also an important milestone for Exelixis as we begin a new chapter in the company’s history. As you all know, COMETRQ is the first Exelixis to have been discovered and developed through commercialization. Very few companies can claim that achievement and I’m proud to have Exelixis join the ranks of commercial stage biotech companies. COMETRQ is the first approved product designed to target both MET and VEGFR receptors as well as other key tyrosine kinases including RET and is the combination of nearly a decade of research to advance the hypothesis that targeting these key pathways jointly had the potential to have a meaningful impact on the treatment of cancer.

As proud as we are reaching this important goal, I want you to know that we view the approval of COMETRQ and MTC as the first of many critical milestones along the path to building a robust oncology franchise around this drug. We want to be very clear that we view today’s approval as being a transitional, rather than a transformational event. Our focus remains steadfast on building the broader COMETRQ franchise.

As you’ll hear shortly from Scott, the market opportunity for MTC is small and as we said previously, our initial commercial plan for COMETRQ and MTC is scaled to match the size of the MTC population in need of therapy. In regards to establishing our commercial infrastructure and marketing plans, this means only a modest investment is required at this time to support the MTC market. However, this will provide a foundation upon which we can build as we pursue additional oncology indications.

As we finalize the preparations to launch COMETRQ in the initial niche indication of MTC, we continue to focus the majority of our resources on executing the broader COMETRQ development program. I want everyone listening today to appreciate that our focus is unwavering in this regard.

So with that brief intro, I’ll turn the call over to Gisela who will review the COMETRQ label and then Scott will provide the details of our commercial strategy. We’ll be happy to take questions at the end. Gisela?

Gisela Schwab

Thank you, Mike. I’d like to echo Mike’s thanks to everyone who has made today’s approval possible, in particular all the patients who generously gave their time to participate in this study, investigators and side staff who participated in this study and the Exelixis team who focused on the design, execution and analysis of the development program and the generation of all the documents supporting the NDA. This is a very complex task that has been supported by a cross functional team and that I would like to congratulate them on this important milestone.

Let me take the next few minutes to review the label for COMETRQ. This information is also available shortly online at the new COMETRQ website, www. COMETRQ.com. we are pleased with the label and believe that it will allow physicians and MTC patients to consider COMETRQ in the context of other MTC therapies. COMETRQ is an important new agent approved for progressive metastatic MTC and we are pleased that patients and physicians now have a new treatment option.

COMETRQ inhibits the activity of tyrosine kinases including RET MET and VEGFR2. These receptor tyrosine kinases are involved in both normal cellular function and in pathologic processes such as oncogenesis, metastasis, tumor angiogenesis, and maintenance of the tumor microenvironment. COMETRQ is now indicated for the treatment of patients with progressive metastatic MTC. The approval of COMETRQ was based on data from an international multi-center, randomized double blind controlled trial of 330 patients with progressive metastatic MTC.

Patients were randomized in a 2-2-1 fashion to receive COMETRQ or placebo orally once daily until disease progression determined by the treating physician or until intolerable toxicity. As a reminder, the primary endpoint was to compare Progression Free Survival or PFS in patients receiving COMETRQ versus patients receiving placebo.

Secondary endpoints included objective response rate and overall survival. Centralized, independent, blinded review of the imaging data was used in the vestment of PFS and response rate. Based on the clinical trial data, the recommended dose of COMETRQ in MTC is 140mg once daily administered without food and this dose may be reduced stepwise to 100mg or 60mg once daily to appropriately manage individual patients tolerability.

The primary endpoint of PFS was met in this Phase 3 trial. PFS was meaningfully and statistically significantly improved and the COMETRQ arm compared with placebo. The median duration of PFS was 11.2 months for patients in the COMETRQ arm compared with four months for patients in the placebo arm. This corresponds to a hazard ratio of 0.28 in favor of COMETRQ and a highly significant P value of less than 0.0001.

Partial responses were observed only among patients in the COMETRQ arm and the objective response rate was 27% for the COMETRQ arm and 0% for placebo. The difference in response rates between the two arms was statistically significant with a P value of less than 0.0001. the median duration of response in the COMETRQ arm was 14.7 months with a 95% confidence interval of 11.1 to 19.3 months.

With respect to safety and tolerability, the COMETRQ label includes warnings and precautions related to adverse events that were observed more frequently in patients receiving COMETRQ than placebo. These are gastrointestinal and non-gastrointestinal perforations and fistulas and hemorrhage and these categories of events are contained in box warnings.

Other warnings and precautions include thrombotic events, wound complications, hypertension, osteonecrosis of the jaw, Palmar-plantar Erythrodysesthesia syndrome or PPES, Proteinuria, reversible posterior leukoencephalopathy syndrome, caution regarding the potential for drug interactions with strong CYP 3A4 induces or inhibitors, the recommendation against using patients with moderate or severe hepatic impairment and the potential for embryofetal toxicity.

Adverse reactions which occurred in greater or equal to 25% of COMETRQ treated patients and occurred more frequently in the COMETRQ arm was a between arm diference of greater or equal to 5% included in order of decreasing frequency, diarrhea, stomatitis, palmar-plantar erythrodysesthesia syndrome, decreased weight, decreased appetite, nausea, fatigue, oral pain, hair color changes, dysgeusia, hypertension, abdominal pain, and constipation. Fatal adverse reactions occurred at similar rates in the treatment arms i.e. in 6% of patients receiving COMETRQ and in 5% of patients receiving placebo.

Importantly, there is no formal risk evaluation and mitigation strategy or REMS program for COMETRQ. Instead, regular pharmaco vigilance applies for the commercialization of COMETRQ.

There are several post marketing commitments that we will follow up on diligently. They include a commitment to provide the analysis of mature overall survival data when the required 217 events have occurred. We will also conduct a Phase 2 study comparing a lower dose of COMETRQ with the label dose of 140mg and this study will evaluate safety and progression to pre-survival in MTC patients.

Additionally, we will conduct two clinical pharmacology studies , further assisting the pharmacokinetics of COMETRQ. One will address the effect of administering COMETRQ in conjunction with agents that increase gastric PH such as proton pump inhibitors and the other study already ongoing will assess the pharmacokinetics of COMETRQ in patients with hepatic impairments. We will also conduct non-clinical studies to further assess the carcinogenicty, mutagenecity and teratogenecity of COMETRQ.

Let me now take a moment to touch on our medical affairs efforts to support COMETRQ in the marketplace. We have a robust medical affairs effort in place to provide proper guidance on the use of COMETRQ in MTC. This effort includes a group of medical science liaisons or MSLs to assist physicians with the approved indication for COMETRQ as well as with the wider development program. All medical affairs effort also includes medical information programs as well as our programs supporting investigative sponsored studies and the collaboration under our cooperative research and development agreement with the NIH. Between those efforts, there are currently 13 clinical trials ongoing and then additional 10 trials in preparation.

Lastly, before handing the call over to Scott, I would also like to provide an update on our ex-US filing for MTC. We have recently submitted the Marketing Authorization Application or MAA to the European Medicines Agency. The application has undergone validation and has been accepted for review. European Union Repertoire agencies have been assigned and we are looking forward to the review of our applications.

I’ll now turn the call over to Scott who will discuss our commercial strategy for COMETRQ and MTC.

J. Scott Garland

Thank you, Gisela. As Mike mentioned, this is a great day for Exelixis We’re very excited to be launching COMETRQ in the US and making this important new therapy available to appropriate patients with progressive MTC. Today I’ll be covering several aspects of our commercial plan, but before I get into the details I wanted to cover some of the guiding principles that we’ve adhered to as we’ve built our commercial infrastructure.

First, we’ve scaled our commercial organization so that it’s commensurate with the size of the market opportunity. Second, we’ve built everything to ensure we maintain the maximum amount of flexibility and can quickly scale up if additional indications are approved in the future. And third, we believe we’ve created an extremely efficient commercial organization, taken advantage of outsourcing options and new technologies where prudent to maximize the effectiveness of our commercial spend.

So let me start with the market opportunity. We’ve conducted extensive epidemiology research to size the MTC market. Before I get into the numbers, let me provide a few caveats upfront. First, given the small size of the market, data are difficult to come by in MTC so despite our work, there remains some uncertainty in our estimates. Second, our estimates are derived in part from the NCI SEER database.

Our methodology included identifying appropriate diagnosis codes for MTC and then actually counting the number of patients in this SEER database who had those diagnosis. We then built a model to simulate patient flow, including growth trends, overall survival rates and relapse rates in order to derive our final estimate. And then finally we focused on incidents rather than prevalence numbers because a large number of thyroid cancer patients are cured through surgical intervention and are therefore not likely to receive systemic therapy. Incident patients are more likely to be seen and treated by a physician within a given year.

So with that as backdrop, let me get into the numbers. We estimate there are between 500 and 700 drug eligible first and second line metastatic MTC patients diagnosed each year. We calculate that number by first starting with the annual incidence of thyroid cancer in the US which we estimate to be about 50,000 cases each year. We then multiply that number by the incidents rate of MTC which our data suggests is about 1% to 2% of all thyroid cancer. I should point out that some public sources state that MTC represents about 4% to 5% of all of thyroid cancer.

The reason our estimate is lower is that the growth rate of MTC has increased more slowly than other types of thyroid cancer, meaning MTC’s percentage contribution to all thyroid cancers has declined over time. The 4% to 5% number is derived from an older dataset and based on careful review of the latest SEER data, we believe the number is now closer to 1% to 2%.

The novel metastatic patients make up between 40% and 50% of all stages of MTC. To get an estimate of the available first line metastatic patients, we then add in those patients that recur from an earlier stage of MTC, which represents about 10% of early or localized population. Finally, we estimate that due to the relatively long overall survival of MTC patients, the vast majority of first line patients will go on to second line therapy, about 80% to 90%. When you put it all together, we get an estimate of between 500 and 700 drug eligible first and second line metastatic MTC patients in the US. We believe there’s a similar number of MTC patients in Europe.

So based on the market size, we’ll be fielding a small, outsourced sales team of five individuals. We’ve chosen Inventiv Health as our contract sales organization as they have extensive experience fielding high quality sales teams for niche oncology indications. Going with the contract sales organization allows us to take advantage of their extensive back office infrastructure such as sales training, sales operation and recruiting functions that we’d have to build internally if we had our own sales team. The outsource approach also allows us to quickly increase the size of the team if we deem that necessary in the future. Finally, at some point we decide to have an internal team, we can bring the contract sales reps in house.

We’re in the process of recruiting a sales team and expect them to be out in the field in January. So far I’ve been impressed with the quality of the candidates in the pool and I’m confident we’ll be able to attract a talented and experienced group of sales professionals.

Moving to pricing. We’ve assessed the wholesale acquisition cost or WAC of COMETRQ at $9,900 for a 28 day supply. In addition, we have chosen the flat price COMETRQ meaning each dosage strength will be priced the same. Flat pricing has become more common with oral oncolytics. A.I. market research indicates that payers find this approach makes their budgeting process more predictable.

We’ve conducted extensive market research with payers and providers to inform our pricing strategy and believe the price we set is appropriate and reflects the clinical value of COMETRQ. In addition, this price point is consistent with other TKIs in the oncology space. To help ensure patients have appropriate access to COMETRQ, we will be implementing a comprehensive reimbursement and support program called Exelixis Access Services.

Exelixis Access Services will have several key components. First we’ll provide Co-Pay assistance to qualified, commercially insured patients to help minimize out of pocket costs. Second, we’ll be providing free drug to uninsured patients that meet certain financial criteria. Third, we’ll be making contributions to independent Co-Pay assistance charities to help patients that don’t qualify for our Co-Pay assistance program. And finally, we’ll be providing comprehensive reimbursement support services such as prior authorization support benefits investigation and if needed, appeal support. Information about Exelixis Access Services will be available shortly on our website at www.COMETRQ.com.

COMETRQ is manufactured by our drug supply services partner, Catalent at its Kansas City, Missouri facility. We’re in the process of finalizing the packaging for COMETRQ and we are targeting late January for product availability. We package COMETRQ in convenient wallets containing a seven day supply for each dosage strength of 140mg, 100mg, and 60mg. there are four wallets in a carton and each carton represents a 28 days supply.

We chose Diplomat as our exclusive specialty pharmacy to dispense COMETRQ. Diplomat is the largest independent specialty pharmacy in the US and has a great reputation for providing high quality patient oriented services. Exclusive distribution networks are common for niche oncology products and partnering with an exclusive SP provides us a number of important advantages. First and foremost, we’ll be able to ensure the patients experience a consistent level of high quality service when prescribed COMETRQ. Second, we’ll have excellent visibility into how our drug is being used in MTC. Third, we’re better able to control our dispensing costs and manage inventory levels. And finally, we have the flexibility to expand the distribution network in the future if needed.

Finally, as Gisela mentioned, we’ve submitted our filing in Europe. We’ve been hard at work on our commercial plans there and we’ll provide further details at the appropriate time. So in summary, we’re very excited to bring COMETRQ to market for MTC patients and believe we’ve built a flexible, efficient and highly effective commercial organization that will serve as a foundation for potential future indications to come.

I’ll now turn the call back over to Mike.

Michael Morrissey

All right. Thanks Scott. Before we close the call today, let me reiterate our belief that the approval of COMETRQ in MTC is an important advance for physicians, patients and their families. Today we turn a page in our corporate history and while we’re taking a few moments to celebrate, we remain focused on and committed to writing the next chapters in the COMETRQ story.

As Scott described, we have a clear plan to move forward as a commercial organization. I have every confidence that we have the right staff and the right resources in place to market COMETRQ successfully and to realize its full potential in the MTC indication. For the time being, we will not provide any revenue guidance for MTC, but instead focus on the number of drug eligible patients.

Beyond MTC, we remain singularly focused on maximizing COMETRQ’s potential as a novel and differentiated oncology compound. We have unwavering commitment to building a COMETRQ franchise that includes multiple indications in lines of therapy. With Phase 3 trials up and running in prostate cancer, potential pivot trials in planning for additional indications, and multiple trials ongoing in our NCI, CRADA and IST program, we have already made important progress towards that goal. We intend to use that progress as a foundation to support the work that remains to be done.

So with that, I will close here by saying thanks again to everyone who has made today possible. We’re now happy to take questions. I will act as the MC to streamline the process and direct your questions to the appropriate Exelixis team member. Operator?

Question-and-Answer Session

Operator

(Operator instructions). The first person to ask a question is Joel Sendek, Stifel Nicolaus.

Joel Sendek – Stifel Nicolaus & Company

Thanks a lot. Congrats, and I really appreciate all the details that you gave about the launch. It's incredibly helpful. So, just a couple of questions from me. I'm just curious as to why the FDA didn't give you a REMS. Did they come away thinking that the side effect profile was a little bit -- not bad enough for that to be part of the approval? It seems like that's a huge victory for you. But then on the post-marketing commitment, I'm wondering the requirement for a lower dose. Can you give us more detail behind that, and can you give us any thoughts as to what dose you will use? Thanks.

Michael Morrissey

Go ahead Gisela.

Gisela Schwab

Sure. So with respect to your question, REMS has never been under discussion in the review process and I think the label specifies very clearly the appropriate guidance and warnings and precautions. So that’s regarding the REMS. In regards to the lower dose, our plan is to take forward dose of 60mg which was evaluated proudly in a different indication and have experience with in the MTC population as many patients have dose reduced on the Phase 3 study and have as a final dose or ongoing dose 60mg is the daily dose and we have experience with that in patients who’ve received that dose for many months and years. So that’s our plan. As these patients have continued to benefit in their maintenance of response of stable disease. And in terms of the trial itself, it is a comparison of a lower dose versus now label dose and the evaluation will address safety as well as progression-free survival.

Joel Sendek – Stifel Nicolaus & Company

Great, thanks a lot. And then just real quick, when do you think -- is there any guidance on when you might get the survival data?

Gisela Schwab

We plan to obviously follow up diligently and the final survival analysis requires 217 events. We anticipate that to occur in the late 2013 or ’14 timeframe at which point in time we’ll obviously communicate the analysis.

Joel Sendek – Stifel Nicolaus & Company

Thank you very much.

Operator

Your next question comes from the line of Lee Kalowski, Credit Suisse.

Lee Kalowski – Credit Suisse

Great. Thanks for taking my question. My first question is, in MTC, the duration of therapy, do you expect it to be roughly analogous to the active arm PFS?

Michael Morrissey

Gisela will answer. Go ahead and answer that question.

Gisela Schwab

Absolutely. So the duration in the trial with respect to what is contained in the label, the duration of therapy was 204 days. Now that was the data cut that supported the clinical study report and the filing. Meanwhile further follow up has occurred because obviously many patients are still unsteady and the median duration of exposure is around 10 months at this point in time.

Michael Morrissey

Scott, you want to follow up a little bit?

J. Scott Garland

Yeah. Obviously things can be a little bit different in the world than in the clinical trial. Several things affect that, but to point out Gisela’s 10 month number, patients in that 10 months included both first and second line patients in the exam trial. I think that would be a good average for looking at the broader population and I think it’s a good estimate for thinking about what might happen in the marketplace.

Lee Kalowski – Credit Suisse

Okay. And then obviously -- so, you've given us the price of $9,900 for a 28-day supply and flat pricing. I guess, I realize you may not want to comment on this too much, but is it safe to say, then, it would be your expectation that for the prostate cancer indication it would be priced at this level as well?

Michael Morrissey

Scott, you want to take a stab at that one?

J. Scott Garland

Yeah. Good question. So as I mentioned in the call, we did a lot of research looking at what the right price for COMETRQ should be. We talked to providers and to payers. When you do your pricing work you have to think both short term and long term and not just CRPC by the way, but also HCC, RCC and any other indication that COMETRQ might be approved in the future. And then you obviously have to look at the relevant competitors that are in each one of those space. So when we set our price, we set it based on both looking at the short term and the long term and we believe the price we’ve set is appropriate both today and in the future.

Lee Kalowski – Credit Suisse

Okay, that's helpful. And I guess one last question and then I'll jump back into the queue. What's your expectation for the approval timeline in Europe?

Gisela Schwab

The filed MAA has been accepted for review and that obviously triggers then the clock. It is round about 12 months but it depends on clock stops as the review is proceeding and the clock always stops when questions are being asked to the company. So then that period of time while questions are answered don’t count towards that.

Lee Kalowski – Credit Suisse

Okay, great. Thank you very much.

Operator

Your next question comes from the line of Terence Flynn, Goldman Sachs.

Terence Flynn – Goldman Sachs

Hi. Thanks for taking the question. My congrats as well. I was just wondering, Scott, if maybe you'd walk us through kind of the concentration of patients at some of the big centers and how your 500 to 700 patient estimate is spread out among the various key centers. And then was wondering also, just on latest thoughts on potential for a partnership and kind of how you guys are thinking about that, both US and ex-US, now that you have the first approval in hand?

J. Scott Garland

Yes. So on your first question about market concentration. So we do believe that the patient population is concentrated in larger academic centers and larger physician practices which typically would be urban areas. Our estimate is that the targets that we use to define our five sales rep number represents about 80% of the business. The remaining 20% we’re going to hit with non-personal promotion as opposed to sending the sale rep in there. And then Mike you want to take over?

Michael Morrissey

Yeah. So Terrence, it’s Mike. On the partnership side, can’t say much more than what we’ve said in the past. Certainly a lot of interest in the compound. I think today’s announcement would only reinforce that, but again I think the focus is on building long term sustainable value within the COMETRQ franchise and the offering we did in August gives us a lot more runway and a lot more strength behind the balance for expanding our development and potentially the value of the compound. So it’s full steam ahead and we’ll move forward as we are.

Operator

Your next question comes from the line of Biren Amin, Jefferies.

Biren Amin – Jefferies & Co.

Yes, hi, guys. Congratulations on this news. I've got a couple questions. How would COMETRIQ be sequenced with Caprelsa?

Michael Morrissey

Scott, you want to take a stab at that one?

J. Scott Garland

Yeah. It’s important to point out that our label doesn’t require prior usage. So it’s in essence the first line label. We see there are some real competitive advantages for COMETRIQ. I think the lack of a REMS is clearly one. No need for QTC monitoring is another. So based on the label I feel really good about our ability to be able to compete in MTC. Gisela?

Gisela Schwab

Yeah. So just to refer you back to the data generated in the exam trial, 21% of patients had prior TKI therapy prior to entering the study. The rest of the patients did not. We have tried to apply for prior TKI use. We did not see any difference in terms of activity in the groups of patients who have received prior TKIs and those who didn’t. So the activity was very similar between those groups.

Biren Amin – Jefferies & Co.

And I guess of the 500 to 700 MTC patients in the US, have you pre-identified any MTC patients that would be eligible for COMETRIQ?

J. Scott Garland

No. we haven’t pre identified any patients. Obviously we’re not allowed to go out and talk to patients or promote product in any way till the drug is approved.

Biren Amin – Jefferies & Co.

Okay. And then I guess the question on prostate cancer. With the recent publication of the RDT study, will that be used for submission for NCCN application?

Gisela Schwab

Well, obviously we are very, very happy about the publication of the data and we are very focused also on publishing the quite considerable amount of data that we have presented over the last few years, not only in prostate cancer but also in other indications and we would plan to pursue compendia listing submissions as appropriate when peer reviewed manuscripts are available. Obviously the decision ultimately is the decision of the review boards at the compendia.

Biren Amin – Jefferies & Co.

Okay, great. Thank you.

Operator

Your next question comes from the line of Imran Babar of Cowen.

Imran Babar – Cowen and Company

Yes, thanks for taking my question, and once again congratulations. I'm just wondering if you can give a little bit more color on your strategy for the launch, just sort of what kind of educational programs you guys have done and maybe perhaps a little bit background on the five individuals you're choosing? And then also the general awareness for the drug among doctors and then how you expect the penetration to be in this market.

Michael Morrissey

Go ahead, Scott.

J. Scott Garland

I’m sorry. You may have to repeat some of the elements, but in essence we have done appropriate disease state education awareness in advance. We had as many of you know metinhibition.com website that was up that was not focused on product promotion because clearly we can’t do that. Awareness we’ve actually been testing. Today we just filled market research. I don’t remember the exact number, but it was in excess of 50%. My guess is that in a very short time that number is going to go up substantially and I can’t remember if there was another element to your question. Was there something else that you had asked?

Imran Babar – Cowen and Company

I think that pretty much covers it. But also I was just wondering in terms of the overall survival and then also some of the post-marketing requirements. Kind of curious how important you think this is for doctors who would potentially – who are going to be prescribing the drug as well as surgeons following up with the FDA. What are your expectations for this extra data that you will be obtaining?

Gisela Schwab

Well, I think the overall survival data obviously is a secondary endpoint in the trial and is an important endpoint that we’re following up on. That was obviously planned and that is just reinforced by this post-marketing commitment. I think it is an important variable that certainly is of interest to physicians and patients.

Imran Babar – Cowen and Company

Okay, thanks a lot. Once again, congratulations.

Operator

The next question comes from the line of Cory Kasimov, JPMorgan.

Matt Lowe – JPMorgan Chase

Hi there. It's actually Matt Lowe in for Cory today. Congratulations on the approval. Just a couple of questions. Firstly, I guess, given the concentration of the market, how quickly do you think it will take you to reach peak sales opportunity? And then, secondly, I guess, do you expect any physicians to try to use the drug for prostate cancer patients once the drug is available? Thank you.

Michael Morrissey

Go ahead, Scott.

J. Scott Garland

So I really can’t get into details around the rate of uptake. What I will tell you is that based on the number of targets and the number of sales reps, we expect the reps will be able to reach those targets in about three to four months is what we’re thinking of terms of actually them getting out to talk to the customers. But I really can’t comment on the ramp up from a revenue perspective. And then in terms of usage outside of MTC. So obviously payers have a process in place to determine off label coverage. We don’t influence that process. We’re going to have to let payers and providers decide how they want to use the drug outside of MTC and our focus commercially remains on MTC.

Matt Lowe – JPMorgan Chase

Okay, thank you.

Operator

The next question comes from the line of David Miller, Biotech Stock Research.

David Miller – Biotech Stock Research

Thanks for taking my questions and I'll add my congratulations to everybody else on this achievement. First question is, I noticed in the vandetanib press release the FDA said it was too early to tell if that drug would have a survival benefit, but in yours they said there is no survival benefit. Can you talk about, or do you have any idea about why they would make that different distinction?

Gisela Schwab

So I think that the words in the label actually are that at the interim analysis there was no difference in terms of overall survival between the treatment arms and at the interim analysis recall we had only 44% of the events that are required for the final analysis. So clearly the interim analysis was too early for making ultimate conclusions. In terms of the different words used in the two labels, I think that is obviously the FDA’s call as to how they want to word it and different teams review different drugs. So they may end up with different verbage.

David Miller – Biotech Stock Research

Okay. Can you talk about the incidents of the side effects that are in the black box for exam, and how that might compare to what you're seeing at the lower doses, those side effects in lower doses than the other indications?

Gisela Schwab

So in the black box see, the key events are gastrointestinal perforations, fistula formation and hemorrhage. These are low incidents and the numbers quoted are 3% for GI perforations, 1% for fistula formation and 3% for hemorrhage. As we’re evaluating lower doses we will obviously pay close attention to the incidence of such events as you always word. So I don’t want to speculate at this time, but the expectation for lower doses is that the tolerability and the need for dose reduction may be reduced.

David Miller – Biotech Stock Research

Okay. I just want to make sure that I understand your pricing comment. So under flat rate pricing, it doesn't matter if the patient is getting a 60 milligram dose or 100 milligram dose, or 120 milligram dose, it will still be $9,900 for a 28-day supply, correct?

J. Scott Garland

That will be correct and just to clarify, it’s 140mg, 100mg and 60 mg and they would be the same price no matter what.

David Miller – Biotech Stock Research

Okay. And then final question is, can you tell us when you might provide us some revenue guidance?

Michael Morrissey

Dave, it’s Mike. It’s an important topic. With this market, it’s size, it’s relatively as I think Scott went into pretty well, early stage of really understand the market. Can’t really give you any kind of guidance on when that would be. We’re going to certainly give you numbers on a quarterly basis for the short term and when we’re more secure in how those numbers are either trending or evolving, then we’ll be more comfortable about guidance.

David Miller – Biotech Stock Research

Okay, great. Thanks and congratulations.

Operator

The next question comes from the line of Edward Tenthoff, Piper Jaffray.

Edward Tenthoff – Piper Jaffray & Co.

Great, and let me add my congratulations. I know it's been a long path to get here and a lot of time to get to this. It's a really great achievement for the Company. I have a little question on Inventiv Health and sort of how this is going to work. So, firstly, you mentioned some of the discounts that you would be giving. Would that actually eat into the overall price or would that be kind of taken out at a different line? And when it comes to the revenues, will you recognize all the revenues and then kind of take out the price for -- that Inventiv Health will be recognizing kind of from the SG&A line, or how will we be looking at this processing through the P&L?

Michael Morrissey

Why don’t we have Frank who’s here address the P&L question and then maybe Scott can provide some color commentary.

Frank L. Karbe

With regards to revenue recognition, we will be recognizing the revenue for the sale of the drug and there will be sort of typical discount from gross to net. I can’t give you any guidance yet what exactly that margin will look like, but it will contain all the typical elements of which there are several. It will include the fees to our specialty pharmacy, the rebates and charge backs the government payers, our share of the donut hole for Medicare Part D patients, the Co-Pay assist groups to eligible commercially insured patients, any product returns and then specifically for Exelixis it will also include a 3% discount which is the royalty we owe to GSK.

J. Scott Garland

And then regarding the relationship with Inventiv Health, I just want to be clear. This is not some sort of partnership. This is a fee-for-service arrangement with them. There’s no discount involved or any percentage of revenue shared or anything like that. It’s a flat-out fee-for-service that we pay them for services rendered and that is and will be included in the expense that we’ll be reporting ongoing.

Edward Tenthoff – Piper Jaffray & Co.

And the expense in the SG&A line, correct?

Frank L. Karbe

That’s correct. That will be an SG&A.

Edward Tenthoff – Piper Jaffray & Co.

Excellent. Thank you very much, guys.

Operator

(Operator instructions). The next question comes from the line of Ryan Martins, Lazard Capital.

Ryan Martins – Lazard Capital Markets

Hi. Thanks for taking the questions. Congrats again on the approval. First question on the expanded access program. I looked at clinicaltrials.gov. It seems like there isn't an expanded access program. I just want to confirm that you do have one and if so, if you can talk about how many patients may be in that expanded access program.

Gisela Schwab

We haven’t expanded access protocol. That has been up for a little while and obviously the drug will become available to these patients who transition to commercial drug. We have a number of patients, a few patients on at this point in time as the expanded access protocol has only been available for a few months.

Ryan Martins – Lazard Capital Markets

Okay. And in terms of the box warning for perforations, fistulas, hemorrhage, understanding that it's obviously a lower dose that’s being studied in prostate cancer, can you maybe talk about the broader experience in relation to the boxed warnings for prostate cancer?

Gisela Schwab

I’m sorry. I didn’t catch the latter part of your question.

Michael Morrissey

Yeah Ryan, you were kind of fading out there at the end. Could you repeat that for us?

Ryan Martins – Lazard Capital Markets

Oh, just trying to get an idea relative to the three boxed warnings, what has been your experience in prostate cancer, understanding obviously it's a lower dose that's being studied?.

Gisela Schwab

So in terms of – if I understand you correctly you’re asking about the incidence as we know it right now in prostate cancer of such events and in fact we have a very, very low incidence of such events in prostate cancer and this event numbers have been reported in the presentations at ASCO and other presentation. So these are less than 1%.

Ryan Martins – Lazard Capital Markets

Okay. And then finally, just on the commercial infrastructure build, obviously there’s the option to opt into the corporate moat for the Merck (inaudible) partner with Roche. Does this level of commercial infrastructure now satisfy that requirement for the opt-in?

Michael Morrissey

Ryan, it’s Mike. It’s probably best at this time that we don’t go into those details. At the appropriate time when it makes sense in terms of that collaboration we’ll be much more transparent about how that will work.

Ryan Martins – Lazard Capital Markets

Okay, thank you.

Operator

Your next question is a follow up from the line of Joel Sendek, Stifel Nicolaus.

Joel Sendek – Stifel Nicolaus & Company

Hey, thanks a lot for taking the follow-up. Just on the contract sales force, I was wondering if you can give us a little bit more detail on how that will work? Will this be the only drug they're detailing? Is this part of a bunch of other drugs? How exclusive is that? And then I wondered if you could comment a little bit on the other indications for COMETRIQ beyond prostate, if you've made a decision as to what the next step there is in RCC or HCC or other indications?

J. Scott Garland

I’ll take the first part of your question. The relationship with Inventiv is that these are fully dedicated to COMETRIQ. In fact the sales reps carry Exelixis business cards. So for all intents and purposes the customers use them as extension of Exelixis and outselling COMETRIQ solely. And then I’ll turn it to…

Michael Morrissey

Over to Gisela for the discussion, other question. Would you repeat that Joel for us?

Joel Sendek – Stifel Nicolaus & Company

Yes, I'm just wondering, you have the money in hand now, you can go forward in HCC and RCC with further trials, and I'm wondering what -- if you've made any kind of internal decisions on what the priorities will be beyond prostate cancer?

Michael Morrissey

So we talked about this on our earnings call earlier in the month. Again we’re looking very carefully at the details around the opportunities for those two potential pivotal trials in RCC and HCC. It’s a little early to provide any additional information in that regard with except to say that we certainly see an opportunity to move COMETRIQ into that space per pivotal trials. We think our data that we had at ASCO in June is certainly encouraging from the standpoint of where COMETRIQ could play relative to other compounds in that space. We have some more work to do behind the scenes to dot the I’s and cross the T’s on the protocols and those kinds of things. So once all that’s done and we’ve got a clear – I think a very clear protocol and a clear set of plans, then we’ll be again transparent with timing and the details around on how that is going to work. But again, just to reiterate, we see the value proposition here very clearly as being building a franchise around COMETRIQ. Ongoing activities with prostate cancer is the priority, but certainly interested in going beyond that with renal, with liver. Breast looks interesting, lung looks interesting so there’s lots of – we have lots of optionality here I think to move forward and we’ll do so in a very I think careful and thoughtful manner.

Joel Sendek – Stifel Nicolaus & Company

Thanks.

Operator

And that concludes the question and answer portion we have for today. I would now like to turn the call back to Michael Morrissey for closing remarks.

Michael Morrissey

All right everybody, thanks again for your time and your support. This is again a very exciting day for us. I want to just thank again all the employees for their efforts over the short term and the long term to help us get here and we’ll look forward to keeping connected with you guys as we go forward. So thank again and have a good evening. Bye now.

Operator

Thank you again ladies and gentlemen. Have a great evening. You may now disconnect.

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