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Exelixis, Inc. (NASDAQ:EXEL)

32nd JPMorgan Healthcare Conference Call

January 15, 2014 5:00 PM ET

Executives

Charles Butler – Vice President, Investor Relations and Corporate Communications

Michael M. Morrissey – President and Chief Executive Officer

Analysts

Cory W. Kasimov – JPMorgan Securities LLC

Cory W. Kasimov – JPMorgan Securities LLC

Good afternoon, everybody. On to our next presentation and it’s – I’m Cory Kasimov, the Senior Biotech Analyst at JPMorgan. It’s my honor to introduce our next company, which is Exelixis. Presenting for Exelixis is the company’s President and CEO, Michael Morrissey, and following Mike’s presentation, there will be a breakout session down the hall to the left in the Olympic Room. But before I turn over to Mike, I’m going to hand it over to Charles to read over some disclosures. Thanks.

Charles Butler

In the course of this presentation, we will be make 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 Form 10-Q filed on October 30, 2013.

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 without limitation: the availability of data at the referenced times, risks and uncertainties related to the initiation, conduct, results of clinical trials, risks relating to the commercialization of COMETRIQ, degree of market acceptance of and reimbursement for COMETRIQ. The risk and uncertainties related to regulatory approval process in compliance to applicable regulatory requirements and market competition.

Michael M. Morrissey

All right. Thank you, Charles. Good afternoon, everybody. Great to be here today. Great to finally be in 2014. As a company, we’ve been talking about this year for the last 18, 24 months as a key year in our history, our evolution as a drug discovery company, drug development company, hopefully some day a real commercial company. We’ve been, I think, doing a lot of the heavy lifting off the radar for the last 12 to 18 months or so and we’re really happy to be here now in 2014. But we expect to have four pivotal trails readout throughout the course of this year as well as lots of catalysts and news flow.

So thanks again for coming. I’ll give you a brief overview of where we’re at, where we’re going, some of the key highlights that we’re looking for – looking towards this year. For those of you that follow the company, you know that we have really two compounds that we’re focused on right now. They’re shown on the slide. The first is called cabozantinib. This is a compound that we discovered in our labs about 10 years ago. We’ve done all the pre-clinical work, all the clinical work really invested a lot of our time and shareholders’ resources and money to understand the depth and breadth of activity for this compound.

It’s a compound that we wholly own and one that we really plan to focus on going forward as hopefully the foundation for building the business as we move through 2014 on. As I mentioned before, we are doing a lot of pivotal trial work here. We have five ongoing pivotal trials for cabozantinib right now; two in prostate cancer, one in renal cancer, one in liver cancer and then the survival follow-up for the MTC indication. So wide cut of late stages activities, which we think is very important in terms of building value.

Before that we have, if you look at clinicaltrials.gov, about 50 different trials ongoing, single agent combination, single arm randomized to really help us understand again what we can do next year. We’ve seen very broad activity to-date in the Phase 2 setting. Obviously, we have to prove that in terms of clinical benefit in Phase 3, but to have this depth of clinical activity ongoing by our work through ISTs, through the NCI-CTEP program, I think is a very important to again help build value as we go forward, building on success from previous years and hopefully in 2014.

The second compound is called cobimetinib on the right hand side of the slide. This is a selective MEK inhibitor that we have again discovered and done early development work in-house for. This is a compound that we have partnered with Roche/Genentech. They are doing all the development work. We have a very, I think, attractive economics in this – with this compound. We have a – we’re sharing the profits in the U.S. for this compound and then have a very healthy royalty rest of the world. This compound is in its first pivotal trial. We’ll talk more about that in a few minutes.

Again, Roche is guiding to have both top line data and filing in 2014 in a melanoma indication in combination with Zelboraf. So again, moving forward at a pretty good clip and they have again five ongoing combination trials with cobimetinib with various compounds in their portfolio. So this is our focus. Again, for those of you following us, over the last few years, we have really focused the company and our investments around cabozantinib. Again, we’ve removed all the degrees of freedom in terms of other compounds, other activities in discovery, so we can focus, so we can make progress with what we think is a very important compound. The cobi story is evolving, but certainly – and a lot as we move into the future.

Our mission here is, I think, very simple, very straightforward. We want to be a global oncology player. We think cabozantinib has the ability, at least based upon on its Phase 2 profile to-date, to be a potential franchise in this space. Again, we’ve seen broad activity across many tumor types. It’s one that we think we need to really invest heavily and to understand how far we can take this, but that’s again our focus. Certainly success in the clinic this year, next year certainly could drive potentially revenues, free cash that we could reinvest in the company, reinvest in the molecule and could take it further and that’s certainly part of the long reach plans and we want to maximize the commercial upside with this molecule. And I think to-date we’ve seen enough activity to feel good about making those investments again going forward, but obviously, we’re focused on the patients and that’s what drives us everyday and that will continue as we get new data throughout the year.

So again, I mentioned this before. This is the key slide. This is a slide that we made last year and again it’s great to be in 2014 to be able to again put it in some context again, we expect four pivotal trials to readout this year, the two COMET trials for prostate cancer, the overall survival trial for the MTC EXAM trial and then looking forward to having data from the Roche study with cobimetinib in melanoma. So keep track of that till we talk about this again at the end.

So for those of you new to the story, again cabozantinib is a, I think, a pretty interesting compound. Certainly one of the most important and attractive compounds that we made during our drug discovery days back in the 2000s. In that time, we made about – well, we had 25 development candidates come out during the heavy intensive drug discovery era of the company. We filed 20 INDs. Certainly in the preclinical setting, cabozantinib was amongst the most active and certainly caught our eye from the first time we put this molecule into xenograft models in terms of any tumor activity.

Well, we’ve taken this a lot farther over that time. We’ve seen, I think, again very broad activity in 14 plus different tumor types to-date in the clinic. We’ve spend a lot of time optimizing the dose in Phase 2, and as you know finding a good dose, finding an active dose in oncology is often fairly straightforward; finding an optimal dose can be a challenge and we’ve used, I think, some pretty unique biomarker work in the prostate cancer setting to be able to really find what we think is the best dose to use this compound chronically in the clinic and have – optimize the Phase 3 trials to reflect that. Again, we’ve got a broad range of activity in the clinic right now, studied a lot of patients to-date. So we feel like we know and have a pretty good feeling of what’s going on with the compound based upon this past data.

Again, our vision here is to, again, build a, again, a global franchise for the molecule. If you look at this slide, just kind of shows the patrol view of the constellation of, let’s say, near-term opportunities for cabozantinib obviously. We have received full approval in progressive metastatic medullary thyroid cancer, MTC. That approval came in 2012. We began marketing the drug in early 2013 as a small patient population, small indication. I think we’ve been pretty transparent with the Street about this not being a real commercial driver, but certainly important to put a stake in the ground about our ability to do a pivotal trial successfully, do a successful filing and then launch in market a drug. That’s ongoing.

Again, we have other opportunities in the short-term prostate cancer, renal cancer, liver cancer, all of which are important markets on a global setting and certainly other indications in Phase 2 that we’re looking at very carefully. So I think this pictorial view kind of orients where we are today, where we’re going over the next year or so, but certainly it’s one that we hope to build upon in the coming visits to the JPMorgan Conference.

So let’s talk about how we’re commercializing the drug. Again, COMETRIQ was approved in November of 2012, a very clear indication around progressive metastatic medullary thyroid cancer. Our data from the EXAM trial showed about a twofold enhancement in progression free survival. So a very clear win from the standpoint of that readout in that trial. Again, small population. By our estimates, is about – MTC is about 1% to 2% of the overall thyroid populations, so truly a rare subtype thyroid cancer.

Again, this is a combined first and second line component of this. We have marketed the drug we think in a appropriate fashion. We’ve right sized our investment, our sales force to be able to spend the right amount of money to get the drug in the hands of patients that need it based upon its labeled indication. We’ve seen about $11 million in sales through the end of Q3 and we will certainly update our Q4 and full year numbers on the call in February.

Again, in terms of how we look at this, this is an important first start. We’ve learned a lot from doing this effort as we have with really all aspects of the MTC program. So I think the efforts and the investments that we’ve made here certainly will help us evolve how we operate upon, potential for approval when that comes, if that comes for prostate cancer or other indications, so having this work under our belt is very important to make sure that if we have the luxury of moving into other indications, we’re ready to really be sprinting at the start line having learned how to do all these different aspects of the commercial business with MTC.

I won’t go through these line by line. Again, we’ve got a small commercial team mainly from Genentech. Scott Garland used to run the Avastin franchise. He is our commercial head and brings a lot of expertise obviously across the sales and marketing function. We’ve learned a lot than a lot around reimbursement, compliance, manufacturing and we have partnered with Sobi in Europe for the named patient use component of the European marketing effort as well as when MTC gets approved, if it gets approved.

Again, as you might have seen, we have positive CHMP opinion in December for this indication. So we’re looking forward to getting that wrapped up and moving forward then with Sobi. Again, the Sobi deal is really focused to the end of 2015, only around the NPU program, only around the MTC program, everything else in terms of other indications; we retain rights to and will continue to focus on as we go forward.

So let’s talk about what’s next. Again, we’ve been, I think, pretty open and transparent about our interest in prostate cancer, renal cancer, liver cancer. This is nothing new here today. Certainly what’s happening in prostate cancer has been remarkable over the last several years. It’s a very dynamic marketplace right now. Five newly approved drugs over the last few years. The sales, if you look at what’s happening with Zytiga, Xtandi, Alpharadin, certainly lot’s of progress there, lot’s of – lot’s of, I would say, upward movement in terms of sales, so very – a very important indication for patients obviously as well as for – from the commercial point of view.

I would frame it, I think, in to a certain degree similar to what’s happened with renal cancer and multiple myeloma. As more and more drugs get approved, standard of care would get resolved and I think patients will begin cycling through available drugs based upon what their disease calls for. I think that’s all the good news. I think the challenge is very clear, is that there still is a major unmet medical need in this indication.

The American Cancer Society every year puts out kind of a prospective view on disease, incidence, prevalence; those kinds of things. For prostate cancer, they estimate that 30,000 men will die from prostate cancer in 2014 and that’s a staggering number when you think about all these new drugs and yet we still have a very important set of issues around survival with this disease.

So lots of questions around how you sequence new therapies, what is the appropriate standard of care going from first line to second line to third line, and we clearly have, we think with the profile that we have a role to play pending obviously positive data in our pivotal trials. So we are doing a lot here and we have for the last several years. We found our first set of data in the space in the middle of 10 – middle of 2010 and we since then profiled about 350 patients in the Phase 2 setting for prostate cancer single agent, combination [indiscernible] is ongoing and we’re very excited now to be really at the cusp in 2014 of starting to talk about that pivotal trial data from COMET-1 and COMET-2 when it comes out.

Some of the data is shown here at a high level. I think it’s safe to say we’ve seen very provocative data in the prostate cancer space. In some ways data that hasn’t been seen before. Cabozantinib was the first compound in the Phase 2 setting to show the reduction in the resolution of metastatic bone lesions by bone skin and that bone targeting effect, if you will, while [indiscernible] certainly needs to be further validated in these pivotal trials. So certainly it’s very interesting data, has caused – certainly been the – been the cause of lot’s of debates in the epidemic community, in the clinical community, amongst investors, and I’m personally happy right now to be at the stage now in 2014, where the pivotal trials. We hope to read out, we expect to – them to readout and give us the definitive answer on what kind of clinical benefit we bring with this drug in this patient population.

We’ve seen bone scan resolution. We’ve seen that and, if you will, some are supported by other imaging modalities; PET data, different kinds of MRI data; with label, without label, to help understand. We certainly see very strong impact on bone biomarkers on both the osteoclast side and osteoblast side. So it’s a very – a very striking novel response that we see with this drug in Phase 2. On top of that, we’ve seen in Phase 2, again, with all the caveats are mostly single arm, non-randomized studies we’ve seen dramatic reductions in pain as well as in the narcotics. We’ve seen clear reduction in circulating tumor cells, we’ve seen soft tissue disease shrink, we’ve seen extensions of progression free survival, so overall, we have been able to see a very unique profile, we’ve learned about how to manage some of the adverse events that we’ve seen early on at the higher doses with lower doses as well, and again, we’ve used a lower dose in the two-third of the trails.

And those are outlined here. Again, COMET-1, we have a dual approach here. COMET-1 is focused on overall survival that fully enrolled at the end of Q3 last year. Again, this is looking at about a 1,000 patients comparing cabozantinib to prednisone, the stats and the powering are shown below here. COMET-2 was focused on pain palliation. Again, the very striking early results in Phase 2 around pain reduction, narcotic reduction is something that we want to follow-up on. Optimally we’d hope to have, again pending positive results with COMET-1 and COMET-2, focusing on moving forward ahead with a potential label if we get approved that had survival enhancement, pain reduction et cetera. We do a lot of work here, but the potential, I think, is very important in terms of how we can differentiate cabozantinib from other compounds in this space. So these are ongoing and we’re guiding that we’ll have top line data for both in 2014 and obviously looking-forward to having that data and moving the company forward with that.

Again, we had update on survival and other parameters at ASCO in 2013. The most I would say relevant surrogate for a COMET cohort was seen in our non-randomized extension cohort that we had in the Phase 2 setting, 144 patients. 75% of these patients had two or more prior therapies, so not exactly the same as what we’re seeing in the COMETs, but again, as the dynamic nature of this market is evolving, probably the closest surrogate we had at the time. Overall survival in this cohort was about 10.8 months with again good impact, good modulation of various parameters around CTCs, around pain, around narcotic decrease et cetera. So again I would say striking overall profile in Phase 2. It’s a good place to start. Obviously we have to prove that in Phase 3 and again we’re excited about having these trials moving forward in the 2014 timeframe.

So that’s prostate cancer. Again, it’s our main focus for the last few years. We had additional Phase 2 data in renal cancer and liver cancer. Those indications have moved forward now into the pivotal trial setting. In my mind, renal cancer is the next big priority for the company and certainly is our number one priority in terms of enrollments in 2014. I really like the idea of potential positive readouts for prostrate in 2014 and renal in 2015. Having those two kind of back to back would be a very important enhancement in any potential revenue ramp that we could see in early years, both are GU oncologic indications, both have well defined markets and are really, I think, the standpoint of how we’d like to optimally move the company forward, would be great way to go. So renal is very important.

We’re looking at a second line population against the Afinitor head to head in a global study and we have about a 100 sites up to date, enrollment is going well, lots of enthusiasm with investigators. So this is, I think, an important part of the story evolving beyond even 2014. The NCI-CTEP program is looking at a first line randomized study against [indiscernible] as well to help us understand how the compound to play in that first line setting, but again, it’s a very mature market and it’s one that we like to be able to operate in based upon pending positive data and regulatory review and approval. So lot’s to do here, but one that we’re really focused on right now as a company.

And then liver cancer, again, another large underserved population, obviously, a very important problem globally, we are looking at, again, a second line trial here against the best supportive care. There’s no approved agents in this setting, Again, sorafenib is approved first line. Again, there’s been a lot of attempts in the second line setting to-date. None of those have worked; mTOR inhibitors, VEGF targeting, TKIs et cetera, we think, again, we have a novel profile here. Our Phase 2 data looks pretty interesting. So this trial started at the end of 2013. It will take a little bit longer to enroll due to the complexities of operating in terms of site activation and those kinds of things in Asia, but it’s a one that we think is a very important part of the account and nearly mid-term play for this molecule as we take it forward.

So I think this is a key slide and one that I will about – I am about to wrap up here and in terms of what to expect and kind of how things are framing out, again, four read outs in 2014, three for cabozantinib, EXAM potentially as well as the two COMETs for prostate cancer. Again, the interplay between prostate cancer and renal cancer as a business from a commercial point of view, we think is very important in really driving our priority, overall making sure we can enroll the renal study as quickly as possible and then the CELESTIAL study in HCC we expect to come out sometime in the 2017 timeframe, but the 2014-2015 window is the one that we’re really working on very closely from the standpoint of moving our GU efforts in terms of GU oncology forward with – at a very good clip.

Other efforts here, I think I’ve touched on these to a certain degree. Some of you might have seen, we have activity against a subset of patients with not small cell lung cancer that have RET fusions that are the driving, if you will, protein in the tumors. We had a paper come out last year in Cancer Discovery that outlined the activity in the clinic of cabozantinib against this RET fusion driving tumors, so that looks interesting. We’re planning to do a – again single arm Phase 2 potentially registration study starting sometime this year. The collaboration with the NCI-CTEP group has been fantastic. They’ve made a lot of progress over the last year in terms of getting sites and studies up, enrolling patients across 13, 14 different trials, looking forward to getting that information out when they have data in 2014-2015 timeframe and then certainly, our IST program is growing. Interestingly, the compound is growing and seeing these trials start and move forward is certainly very gratifying.

So I’ll wrap up, briefly a few words about cobimetinib, again, it is our MEK inhibitor that we partnered with Roche/Genentech. Again, I think I gave a pretty good intro at the beginning. The coBRIM study is looking again at the combination of cobimetinib with Zelboraf against single agent Zelboraf in first line BRAF mutation positive metastatic melanoma. Again, the guidance from Roche is that they expect to have top line data in 2014 and filed in 2014. So again, with what’s doing and melanoma stays with other combinations around the mutinous pathway certainly with other immuno-oncology agents, this is a very timely trial and one that we hope to see both read out and be successful over the 2014.

And then last, but not least, just a reiteration of what I’ve said three or four times today, so the key message is again top line data is expected for four pivotal trials in this year and certainly lots of news flow and catalyst that go with that, but we’re certainly excited to be here in terms of both the JPMorgan Conference as well as having the opportunity in 2014 to potentially move the company forward in very dramatic ways. And I thank you for your attention and I’ll be happy to take questions at the breakout.

Question-and-Answer Session

[No Q&A session for this event]

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