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Exelixis, Inc. (NASDAQ:EXEL)

Q1 2013 Earnings Call

May 07, 2013 05:00 PM ET

Executives

Charles Butler - VP of IR

Mike Morrissey - President and CEO

Frank Karbe – EVP, CFO

Scott Garland – EVP, CCO

Gisela Schwab – EVP, CMO

Peter Lamb – EVP, Discovery Research and CSO

Analysts

Ted Tenthoff - Piper Jaffray

Lee Kalowski - Credit Suisse

Imran Babar - Cowen and Company

Joel Sendek – Stifel Nicolaus

Operator

Good day, ladies and gentlemen, and welcome to the Quarter One 2013 Exelixis, Inc. Earnings Conference Call. My name is Carolyn and I am your conference operator for today. At this time, all participants are in a listen-only mode. We will be conducting a question-and-answer session towards the end of the conference. (Operator Instructions) As a reminder, today’s event is being recorded for replay purposes.

I would now like to turn the call over to Charles Butler, Vice President of Investor Relations. Please go ahead, Sir.

Charles Butler

Thank you for joining us for the Exelixis’ first quarter 2013 financial results call. Joining me on today’s call are Mike Morrissey, our President and CEO; Frank Karbe, our CFO; Scott Garland, our Chief Commercial Officer; and Gisela Schwab, our Chief Medical Officer, who will together review our corporate, financial and development progress for the quarter ended March 29, 2013.

They also will discuss priority activities for the remainder of the year and provide an update on the COMETRIQ launch and ongoing clinical development activities for cabozantinib.

As a reminder, we’re 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’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, and in particular the company’s annual report on Form 10-Q filed today, May 7, 2013. These documents contain and identify, under heading Risk Factors, important factors that could cause actual results to differ materially from those contained in any forward-looking statements, including the risk that unanticipated developments could adversely impact the launch, commercialization, distribution, and availability of COMETRIQ, the degree of market acceptance of and reimbursement for COMETRIQ, risks and uncertainties related to compliant with applicable regulatory requirements, market competition, the availability of data at the reference times, and risks and uncertainties related to the initiation, conduct, and results of clinical trials.

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

Mike Morrissey

All right, thank you, Charles, and thanks everyone for joining us on the call today. We had a productive first quarter. and I’ll take a few minutes to introduce today’s call before Frank, Gisela and Scott dive into the details of our progress from a financial, clinical and commercial perspective.

I’ll start off by saying that the primary vision for the company remains the same that is to build cabozantinib into a significant oncology franchise by advancing it in multiple high value indications. Three keys topics from the first quarter will continue to be our top priorities as we move into the second quarter and beyond. First, the approval and a recent launch of COMETRIQ for progressive metastatic MTC. It's an important milestone for the company. We launched COMETRIQ for Metastatic MTC in late January.

It’s important to acknowledge that any new drug launch, whether large or small, involves a substantial and concerted effort across the entire organization. And we believe that this is reflected in the results we’ll present today.

Before I move into the top line COMETRIQ revenue number for the quarter, please remember that our Q1 results are based on a little more than two months of scripts.

I’ll risk stating the obvious here, but additional data from future quarters are needed to better understand the evolving sales trends for COMETRIQ.

I’ll also say now that we will not be speaking to any metrics beyond MTC, our labelled indication. With that said, the net COMETRIQ revenue, for nine weeks for the first quarter was $1.9 million. This is the only product revenue related number that we will provide today.

Frank will discuss the COMETRIQ revenue in the context of the full first quarter financials. And Scott will review the MTC market dynamics in more detail in the commercial update.

Second, the clinical development program for cabozantinib is moving forward in multiple pivotal trials for additional potentially larger indications. Pivotal trials for prostate cancer, renal cancer and liver cancer are either on going or on track to start in Q3. We are also looking very closely at the RET fusion positive non-small cell lung cancer indication as an additional opportunity.

The COMET trials continue to progress, and we expect top line data in 2014. Gisela will review our clinical progress along with our plans for the upcoming ASCO meetings.

Third, we believe we are operating from a position of significant financial strength due in large part to the funds we raised in 2012, coupled with the focusing of the company’s activities and operating expenses around the cabozantinib franchise opportunity.

We ended the first quarter with $567 million in cash which we believe provides us with a strong foundation to execute on our clinical plans for cabozantinib across multiple indications. We made good progress for the quarter across all aspects of the business and continue to focus on executing our clinical development plan to build a potential franchise around cabozantinib across multiple indications.

I’ll pass the call over to Frank now for a review of our Q1 financials.

Frank Karbe

Thanks Mike. As usual I will focus my comments on the highlights of our financial performance in the quarter and refer you to our press release and today’s 10-Q filings for additional details. Net revenue for the quarter was $9.7 million, of which $1.9 million related to the sale of COMETRIQ and $7.8 million to contract and license revenue.

As is typical for first-time drug launches, we are for the initial period of our launch, recognizing revenue based on the sell through method, which means we are recognizing revenue when the specialty pharmacy ships products to patients.

Our gross to net discount in this initial quarter, was less than 5%. It is too early in a launch to determine whether this will level out in the long run. But we do expect this percentage to increase, as sales through program subject to government mandated discounts increase.

During the first quarter we entered in to the customary agreements to ensure access and reimbursement for Medicaid, as well as Medicare patients. We're in the process of finalizing our federal supply schedule with the VA.

We expect these agreements will broaden patient access to COMETRIQ but a government mandated discount and additional expenses to Exelixis to reduce out of pocket costs for certain patients. Cost of goods sold amounted to $280,000 in Q1. These costs include manufacturing and distribution costs as well as the 3% royalty on net sales to GSK. Please note, that for the time being, our cost of goods sold are not a good representation of our true manufacturing costs since the majority of the costs associated with our current inventory on hand have been expensed in prior periods.

R&D expenses for the quarter were 32.7 million which is roughly in line with expense in the same quarter last year. However as compared to Q1 2012 expenses for outside services as well as for clinical trial increased mainly driven by expenses associated with the launch of COMETRIQ as well as the continued ramp up of the COMET studies. These increases were offset predominantly by lower headcount expenses and lower allocations of general corporate costs.

SG&A expenses were $10.5 million for the quarter. The increase of $2.6 million as compared to Q1 last year, was predominantly due to additional expenses in connection with the launch of COMETRIQ. The majority of this increase relates to cost for our sales force as well as advertising and promotional expenses. Lower allocations of general corporate costs for R&D also contributed to the increase in expenses.

Total cost and expenses for the quarter was $43.7 million. The increase of $2.9 million as compared to the first quarter last year mainly reflects the increased SG&A expenses mentioned a moment ago. We expect total cost and expenses for the remaining quarters of the year to be higher than in Q1, mainly driven by the COMET studies as well as activities related to the startup of our pivotal trials in HCC and RCC.

For other income expense, we incurred a net expense of 10.7 million for the quarter. The increase of 6.9 million as compared to Q1 2012 predominantly relates to the interest expenses associated with our 4.25% convertible senior subordinated notes due 2019 issued in August of last year.

Let me wrap up by commenting on our cash position. As you heard from Mike, we ended the quarter with approximately $567 million in cash. It is worth noting that in addition to funding our normal operating activities in Q1, we made our first biannual interest payment on our comfortable notes issued in August, of approximately 6 million. We satisfied the first $10 million mandatory debt repayment under our Deerfield notes and repurchased Afinitor as the comparator drug for our RCC phase 3 studies worth about $6.3 million dollars, which hit our balance sheet, but not yet our P&L since the drug has not yet been received.

With that, I will pass the call onto Scott.

Scott Garland

Thanks Frank. We made progress on the commercialization of COMETRIQ and MTC and are pleased with the execution thus far. With just 9 weeks of product availability in the first quarter, we are obviously still early in the launch process and we look forward to continuing to drive COMETRIQ MTC revenues in the months to come. Our assumptions regarding the size of the MTC market has not changed and we continue to believe that there are 500 to 700 drug eligible first and second line metastatic MTC patients diagnosed each year in the United States.

In the first quarter, sales reps called on approximately 500 of the original 600 MTC targets, around 80% of our target base. Feedback from the field is that MDs are impressed with the overall efficacy of COMETRIQ and MTC. And the address of that profile is similar to other (TKIs) in the oncology space.

We have also received positive feedback regarding the support services provided by our specialty pharmacy diplomat. These services include reimbursement support, nurse appearance call and patient assistance. At launch, we took a conservative approach when sizing our sales organization deploying just five reps across the entire country.

Since then we have noted the MTC market appears to be less concentrated than we had originally anticipated. With fully 50% of the COMETRIQ MTC prescription coming from physicians that were not on our original target list. About half of our MTC scripts came from the community setting where the vast majority wrote for just one script.

We believe this data indicates that with two approved drugs in the MTC space, community physicians are becoming more comfortable treating MTC patients. And treatment is moving away from being consolidated in large academic medical centers.

Based on this new data, we have decided to increase the sales team to 15 reps and two regional managers. The additional 10 sales reps will allow us to more than double our list of MTC targets, going from around 600 to over 1400 MDs. Thereby, broadening our reach to the MTC prescriber base.

The increase will also allow us to optimize the frequency with which we call MTC targets, giving our reps, more opportunities to educate prescribers on their risk benefit profile and proper use of COMETRIQ and MTC.

Finally, increasing the number of sales reps significantly reduces territory size. There by decreasing what we call windshield time and improving sales reps efficiency. Despite the increase, 15 sales reps is still small even by Oncology standards. And we continue to ensure that our resourcing for the MTC launch for remains commensurate with the size of the market opportunity.

In terms of marketing, we have launched several waves as non-personal promotional programs including Direct Mail, Journal Advertising, peer-to-peer programs and online advertising via traditional and mobile platforms.

On the payer side, our payer field team has now called on all of our target payers representing over 95% of covered lives. Well, formal coverage decisions can take 3 to 6 months to be completed. Several pairs have already implemented coverage policies. As expected, these policies cover COMETRIQ for the labeled indication.

Those payers that have not implemented formal coverage decisions continue to approve COMETRIQ to manual review processes. Reaction to COMETRIQ has been favorable and we continue to believe that COMETRIQ will be covered to the labeled indication and consistent with COMETRIQ’s category one NCCN rating.

As anticipated, our payer mix remain skewed towards commercial payers, which we believe it's primarily driven by the, demographics of my MTC markets.

As Frank mentioned, we now have signed contracts in place with medicare and Medicaid and we have begun to see use within these payer groups.

In summary, it's been a busy quarter for Exelixis on the commercial front and I look forward to providing further updates on future calls. And now I turn the call over to Gisela.

Gisela Schwab

Thank you sir. In the next few minutes I will provide an update on the progress of the development program for (inaudible). Specifically I will cover the status of the COMET trial, we start-ups at the RTC and HTC phase 3 studies, and activities in non-small cell lung cancer, particularly and RET fusion gene positive non-small cell lung cancer.

I will also cover at a high level, our planned presentations at this year’s ASCO meeting. But let me start with a brief update on our activities in MTC, both the clinical and regulatory activities and the medical affairs support for COMETRIQ. With the approval of COMETRIQ in the U.S. for progressive, metastatic MTC achieved and submission to the EMA in November 2012, we have made significant progress in bringing COMETRIQ to MTC patients. The FDA approval was based on the primary endpoints of progression free survival or PFS that showed a significant increase in median PFS from four months on placebo to 11.2 months on cabozantinib. We are projecting that mature data for the secondary end point of overall survival will be available in 2014 time frame.

As you recall COMETRIQ has received a category 1 NCCN rating for MTC in January 2013. We have deployed a small six person medical science liaison team as part of our medical affair efforts. And the MSLs are supporting the product in the approved indication and they are also importantly supporting enrollment in ongoing studies for cabozantinib.

The review process of our EU filing is proceeding. The filing was accepted for review in November 2012. We are addressing the EMAs questions as while we are awaiting the final opinion from CHMP, we have set up the infrastructure to make our metric available on the Named Patient Use or NPU program and countries of the EU and another regions.

This activity is a part of our agreement with Swedish Orphan Biovitrum or Sobi. In the Named Patient Use provides access to unapproved drugs for a single patient or a group of patients in a particular country. Products offered from the NPU programs, it can be investigational that is still in clinical trials or approved in one country but not yet approved in the patients home country.

Regulations governing NPU programs vary by country but company’s offering products through NPU can sometimes charge the product being administered.

I'm happy to say that we have completed the start-up activity and have now begun shipping drug to Sobi for NPU and the EU and other (ex-U.S.) regions.

With those efforts underway the clinical and regulatory effort is intensely focused on expanding the cabozantinib opportunity. As we have expressed previously, we have a robust strategy for evaluating the compound in a variety of indications given internal resources for support of phase 3 trails and working in partnerships with a wide array of individual physicians as well as corporative groups through our collaboration with the National Cancer Institutes Cancer Therapy Evaluation Program or CTEP as well as through an Investigator-Sponsored trial program.

Now let me turn to the ongoing COMET trials which our two phase 3 pivotal trials and metastatic castration resistant prostate cancer. As you know COMET-1 is focused on improving overall survival and COMET-2 is focused on pain reduction. We now have activated the majority of clinical trial sites and our patient recruitment and enrollment trajectory in line with our expectations as we continue to expect the top line data from both COMET trials will be available in 2014.

If both trials are successful, the combined data package would demonstrate a survival benefit and improvement of pain associated with bone metastasis. We believe that this would differentiate cabozantinib from other agents used in the treatment of CRPC and support the product activity profile in this indication.

We are also advancing our plants to evaluate cabozantinib in the earlier line of treatment of CRPC patients prior to chemotherapy. We are working on the details of the design of two phase 1, 2 studies; one evaluating the combination of cabozantinib with enzalutamide and one evaluating the combination of cabozantinib with abiraterone. We are hoping to start these trials in the second half of 2013.

Importantly at the recent AACR conference, interim data was presented from a phase 1 investigative sponsored clinical trial of cabozantinib combined with abiraterone and then with CRPC. The data showed no dose limiting toxicities, in cabozantinib at 20, 40 or 60 mg daily was combined with full dose of abiraterone of 1000 mg daily. This is important phase 1 information for our plant combination study with abiraterone.

Beyond enrolling the COMET trials we are working very actively on the initiation of our two new phase 3 pivotal trials in metastatic renal cell cancer and hepatocellular cancer or RCC and HCC respectively. We have completed three phase 3 meetings with regulatory authorities and are working very actively and starting these trials in Q3 of 2013.

Just as a reminder the phase 3 trial in RCCs will be a 650 patient randomized open label study that will compare cabozantinib with everolimus in patients who have received and progressed on at least one prior VEGFR Tyrosine kinase inhibitor.

The primary end point will be progression free survival or PFS, and the secondary end point, overall survival. No cross over between treatment arms will be allowed. Patient reported outcomes, biomarkers, safety and pharmacokinetics will be evaluated as exploratory endpoints.

We are in the midst of steady site selection and are planning a global execution of this study with balanced accrual weightage towards the Western Europe, North America and Australia.

The HCC trial is a 760 patient study and will compare overall survival between patients treated with cabozantinib and those receiving placebo. Overall survival is the accepted endpoint in this indication and was the endpoint used to support approval of sorafenib as first-line therapy for HCC.

There is tremendous amount of enthusiasm for these trials in the community based on the early stage data and the planned phase 3 trial designs. The Exelixis’ team is in place and working hard to ensure that we initiate these trials later this year. And we hope that these studies will support the next wave of indications for cabozantinib after metastatic prostate cancer.

In addition to these activities, we are actively considering a study in non-small cell lung cancer patients carrying the RET fusion gene. This genetic alteration is seemed in about 1% to 2% of non-small cell lung cancer patients and only seen in patients with tumors and negative for EGFR, KRAS or else mutations. Cabozantinib potently inhibit threat with (inaudible) IC50 values.

We have initial clinical data in a small group of such patients who received cabozantinib. This data has recently been published in Cancer Discovery by the group led by Naiyer Rizvi from Memorial Sloan-Kettering Cancer Center. Amongst three heavily pre-treated patients carrying the RET fusion gene, two patients achieved a durable partial response and one long-lasting stable disease.

Additionally, we have seen a response in the non-small cell lung cancer patient with the RET fusion in our ongoing phase 1 study in Japanese patients. This data has been presented at the European Society of Medical Oncology Conference last fall. So, three out of four patients with this specific mutation have shown durable response on cabozantinib.

On the basis of this stake, as we are currently evaluating the initiation of a study in RET fusion gene expression patients with a primary end point of overall response rate. And such a limited and selected population we believe a robust response rate could potentially lead to regulatory approval in the U.S.

Now turning to our IST and CTEP programs; the IST program and our collaboration with CTEP are also making good progress. The focus of both programs is to evaluate cabozantinib in different too much heights and to generate data that allows us prioritize the next potential indications to enter into late stage development. There are now over 25 ongoing or planned investigative sponsored studies and 13 studies under the R&D helped by CTEP. The first randomized phase 2 study under the CTEP IND have been initiated and moreover followed in the next couple of months.

Now regarding those randomized Phase II studies now, a trial comparing cabozantinib versus weekly Paclitaxel and the treatment of platinum-resistant ovarian cancer that has already started. Two phase 2 randomized studies conducted by the Cooperative Group Alliance are expected to start in early quarter two.

These are a first line study in RCC comparing cabozantinib versus sunitinib and a study in ocular melanoma comparing cabozantinib versus temozolomide. Also a randomized trial in EGFR wild type, non-small lung cell cancers patients who’ve failed prior chemotherapy that compares cabozantinib versus alotonib versus the combination of cabozantinib and alotonib conducted by ECOG has started patient enrollment recently.

So to summarize, we’ve made very good progress on multiple fronts. The COMET trials are actively enrolling. The new phase 3 studies in HTC and RCC are expected to initiate in quarter three of 2013. And we are working on the initial steps for a potential start of a study in non-small cell lung cancer patients with RET fusion genes. And the IST and CTEP programs are advancing well.

Now, to conclude the development overview I will provide a brief preview of planned presentations at this year’s ASCO conference. With this year’s ASCO meeting, non-abstracts has been accepted for presentation. Among these are a details analysis of overall survival and potentially predictor factors in our non-randomized expansion study in 144 CRPC patients treated with cabozantinib, which will be presented in a post-discussion session.

Separately, imaging data from that study will also be presented. A details translational analysis of our exam medullary thyroid cancer phase 3 study accessing he population by RAS or RET mutations status will be presented as an oral presentation. And long term treatment data from the phase 1 study in patients with medullary thyroid cancer will be presented as a poster.

Phase 2 experience of in-house IST and CTEP studies will also be presented and include cost of presentation on a uveal melanoma cohort from our RDT study. Preclinical data on cabozantinib activity in urothelial cancer and separately the clinical study design in initial data for phase 2 study in bladder cancer conducted at CTEP.

A phase 1 B CRPC study evaluating the combination of docetaxel and cabozantinib will also be presented and related to presentations will be part of the trials in progression.

And lastly, data from an investigative sponsored trial and chemotherapy (inaudible) patients will also be presented. So we are looking forward to a comprehensive data update at ASCO in a few weeks.

And with that I will turn the call back over to Mike.

Mike Morrissey

I will keep my closing remarks short so we can move on to your questions. I would like to thank all of our great employees for their hard work and dedication in having Exelixis attain its key goals including the commercialization of the first indication for COMETRIQ, the continued advancement of the COMET trials, the expansion of the broad development program for cabozantinib and the aggressive management cash and expenses.

Our commitment to patients and investors is to stay focused on these goals to advanced cabozantinib and multiple indications and to continue to build company value.

So we will stop here and thank you for your time and interest and we’d be happy to take the questions. Operator?

Question-and-Answer Session

Operator

(Operator Instructions). Please stand by for your first question which comes from the line of Lee Kalowski from Credit Suisse. Please go ahead.

Lee Kalowski - Credit Suisse

Great, thank you. I appreciate the opportunity to ask a few questions. First one for you Frank, on guidance you had previously given us some OpEx guidance in cash year-end guidance. I didn’t see anything in the press release or in your commentary. Has anything changed on that front?

Frank Karbe

No. Nothing has changed; I’m happy to reiterate those numbers so that full year revenue guidance we provided on the last earnings call was 16.3 million, contract and license revenue, no, we did not provide and will not for the time being provide any revenue guidance related to the product sales of COMETRIQ. On operating expense, on total cost and expenses the guidance was 200 million to 230 million and on cash we expect to end the year at about 400 million and all of those numbers still hold.

Lee Kalowski - Credit Suisse

And as far as gross margins I just wanted to better understand your commentary. So it looks like we are about 15% COGS or 85% gross margins. Were you saying that you expect margins to actually deteriorate from here?

Frank Karbe

No, we certainly don’t expect it to deteriorate. So the short answer to your question is that we expect gross margin to increase and that is mainly due to the fact that going forward not all components of our cost of goods sold will scale proportionately with product sales. And so gross margin I expect it to go up.

Lee Kalowski - Credit Suisse

You have talked about in Europe a named patient program. And product is being shipped to Sobi. So should we expect international revenues to start flowing through next quarter or this current quarter?

Frank Karbe

Yes, we have in fact already made the first shipment to Sobi and so in Q2 you can expect to see some revenue coming from those sales.

Operator

Next question we have comes from the line of Ted Tenthoff from Piper Jaffray. Please go ahead, Ted.

Ted Tenthoff - Piper Jaffray

Looking forward to an exciting ASCO, and a lot of clinical trials getting started and ongoing. I have two quick questions if I may. I guess the first one has to do with sort of the kidney cancer space and some recent competitive updates that may be changed the landscape or may be not so much changed the landscape with respect to how you guys have been looking at it. Does the panel outcomes for Tivozanib change sort of the way you guys are prioritizing the liver cancer and or kidney cancer studies that you have been considering for cabo and then have a quick follow-up on new NSCLC study.

Gisela Schwab

So the plans for our renal cell cancer study have not changed in view of the outcome of the ODAC committee meeting. We have designed the study such that the primary endpoint is progression free survival which is an endpoint that has supported approval of multiple agents and kidney cancer before and in our regulatory interactions prior to the start up activities on the study has been positively received by regulatory authorities. We have sized the study such that we can assess overall survival as a key secondary endpoint. We are not planning any crossover and so in that regard the trial design has not changed at all. I think the issues at ODAC were really attributable to the fact that there is PFS benefit and there was obviously not an OS benefit but there seems to be a decrement. So no change really.

Ted Tenthoff - Piper Jaffray

And then the question, Gisela for you as well on that NSCLC study. So you said that you are going to go specifically after RET mutations in lung cancer. Is that correct?

Gisela Schwab

That is correct. That’s under discussion right now.

Ted Tenthoff - Piper Jaffray

Now remind me because I recall that this is both a RET and VEGF inhibitor and I think if I recall correctly some of the phase 2 data that you did in thyroid cancer showed that it was less of the RET, the activity was less RET-driven than it was VEGF-driven. So just maybe you can expand on that a little bit more with respect to how you see cabo hitting RET and maybe a little bit more on that rationale with respect to what you’ve seen in terms of potency against RET and some of the prior human experience.

Gisela Schwab

Just to speak for a minute about the MTC data the medullary thyroid cancer data, RET mutations are very frequent in this population. And we have seen as you know very good activity that ultimately got the product approved on the basis of large progression-free survival benefit. We have seen activity both in patients who had activating RET mutations and those who didn’t. And we're certainly evaluating other populations or continue to evaluate other populations and the data that is to be presented at ASCO we’ll drill a little bit deeper into the genetic make-up of the patients. But as you’ve said we've seen activity regardless of the genetic option. And I'll ask Peter Lamb to speak a little more about the RET population in lung cancer.

Peter Lamb

The RET fusion positive population in non-small cell lung cancer averages about 1% to 2% of all non-small cell. It looks like an interesting population to specifically target to us, we have pretty robust pre-clinical data that says that cabozantinib is a potent inhibitor of wild type RET both in-vitro and in-cells and in pre-clinical pharmacodynamic studies.

In addition of course the data that was just published that Gisela referred to in Cancer Discovery from Rizvi group showed very early experience with two confirmed partial responses and a third patient with prolong stable disease. And then there is a fourth patient that was part of a Japanese phase 1 study, who also had a partial response on cabozantinib. So taken in combination that’s what’s really leading us towards a focused trial in the RET fusion positive population. That’s not to say as you alluded Ted that we won’t have benefit in other non-small cell lung cancer population that don’t have the RET fusion.

Ted Tenthoff - Piper Jaffray

Or that you would not get the added benefit of the VEGF activity in those patients.

Peter Lamb

Yes, exactly.

Operator

The next question we have comes from the line of Imran Babar from Cowen.

Imran Babar – Cowen and Company

Couple of questions. One if you could comment on, just COMET-1 and how compliance is looking, persistence for that trial, and also if you could comment on the percent of patients that are being dose reduced.

Gisela Schwab

So COMET-1 is ongoing as you know and as I described actively accruing patient, as you would expect for a large global study there is a lot of activity ongoing and monitoring the study and making sure that physicians adhere to the protocol and the trial is conducted in a compliant fashion. So that’s all I can say at this point about the compliance aspect. And in terms of dose reductions that’s too early to say at this point.

Imran Babar - Cowen and Company

Any comments on enrollment timelines any updates on that.

Gisela Schwab

As I said earlier the trial is actively enrolling and our guidance towards data availability in 2014 has not changed.

Imran Babar – Cowen and Company

Going back to the lung cancer, I was wondering if you can give some potentially any color you would have on just the trial I guess the clinical development that you would have going forward for that, if there is any more color you can give on that.

Gisela Schwab

Yes I think it’s the encouraging early clinical data which you hold out and we have a high response rate in this population I think and at such circumstances single-arm study showing a higher rate of store responses can support regulatory approval in the United States. And so that is an avenue that we are actively exploring right now.

Imran Badar - Cowen and Company

And do you have any thoughts in the number of patients that might be needed for that?

Gisela Schwab

Sure other examples that is in the order of 100 or so patients.

Operator

The next question we have comes from the line of Joel Sendek from Stifel, please go ahead.

Joel Sendek - Stifel Nicolaus

I have a follow-up to that question I guess regarding the lung study. When you go right for 90 patients or do you vary that I guess. Then I will follow up on the marketing energy statements.

Gisela Schwab

That is a very interesting question and certainly one that we will be discussing in detail both with key opinion leaders and I have already discussed and then also with regulatory affiliates. I think it’s a very robust response rate that emerges and one can make the case that line of therapy really should not be of much relevance. So one could potentially make an argument to grow up front.

Joel Sendek - Stifel Nicolaus

And firstly, as far as the marketing and the increase in the sales force. I'm trying to figure out how to interpret that because the on one hand you came in with decent numbers and things look good. I'm wondering if you need to increase that in order to get more coverage which would be maybe Barrish or it is that the market is even bigger than you thought and therefore you need more sales people to exploit it. I'm wondering if you can help me with that.

Mike Morrissey

I think it's a really good question. The data is obviously very early. We have a single data point Joe. Arguably, two thirds of the data point from the stand points of the Q1 numbers. But I think it's really a mix of both from the standpoints of being able to reach out and you know cover a wider target area at the same time being able to really connect with all the MDs that are prescribing or could prescribe the drug or MTC relative to the label, the AE profile et cetera.

So I think it's a very important component of what were are doing. We got data over the last quarter or so and I think, based upon that data we are moving forward in this direction. Scott do you want to?

Scott Garland

Yeah you know they said on the call, we haven’t changed our assumptions around the size of the area the MTC market opportunity. We did go out of the gate at launch with what I would call a conservative number of sales reps. We did that just because this was, some uncertainty in the MTCs market opportunity and it was easy to go out small and expand if you have to.

But this is really more about market concentration than anything else. We had made an assumption going into it that we would see these patients concentrated in large academic medical centers, and we are seeing more use in the community.

That's not surprising. I had actually seen that a lot. I saw a lot of other companies. You see this with the real (inaudible) market where more drugs become available. Physicians in the community become more comfortable using them and they tend to refer at a later stage. To me this is more about market concentration than anything else.

Operator

We have no questions at this time. (Operator Instructions)

Mike Morrissey

Okay well there are no further questions now. Thanks again for your time and interest. We look forward to seeing you at ASCO in a few weeks. As a heads up, we’ll have our Investor Briefing on Sunday night, and we’ll give the details out to you shortly. So thanks again. And we will see you in Chicago. Bye.

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