Exelixis' CEO Presents at Bank of America Merrill Lynch Health Care Conference (Transcript)

May.13.14 | About: Exelixis, Inc. (EXEL)

Exelixis, Inc. (NASDAQ:EXEL)

Bank of America Merrill Lynch Health Care Conference Call

May 13, 2014 11:40 AM ET

Executives

Susan Hubbard – IR

Michael Morrissey – President and CEO

Analysts

Steve Burns – Bank of America Merrill Lynch

Steve Burns – Bank of America Merrill Lynch

My name is Steve Burns. A couple of Biotech stocks are [indiscernible]. My pleasure to introduce Mike Morrissey of Exelixis, and Susan Hubbard of IR is also up here. Before Mike assumed the CEO role of Exelixis, he has roughly 25-year career in drug discovery and development. So he is here to take you through the Exelixis's story. All yours, Mike – Susan has few remarks to make.

Susan Hubbard

I'm just going to kick it up with the forward-looking statements. During the course of this presentation we will 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 Quarterly Report on Form 10-Q filed on May 1, 2014.

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, risk and uncertainties related to the initiation, conduct and results of clinical trials; risks relating to the commercialization of COMETRIQ; risk and uncertainties related to regulatory approval processes and compliance with applicable regulatory requirements, the sufficiency of Exelixis capital and other resources and market competition.

With that, I'll turn over to you Mike.

Michael Morrissey

Fantastic, thank you very much. Good morning, everybody, great to be here. I've got a few slides to go through today and to tell you about the Exelixis's story, and then we'll be happy to take questions and have a dialog.

So, again, we're a company focused in the oncology space. We have two main oncology compounds that we're focused on right now, those are shown on this first slide. The first is called Cabozantinib, the compound that we fully own, it's a multi-targeted tyrosine kinase inhibitor, the one that we discovered and have developed in-house, it targets a variety of important kinases, it is really focused in terms of discovery around inhibiting with great potency invitro and in vivo on the MEK and VEGFR access to important pathways that drive tumor cell growth to viable proliferation, as well as their resistance to a variety of different therapies, so very interesting compound for the provocative Phase II data in a variety of different tumor types.

The other compound is called Cobimetinib. This is a very selective, really specific MEK inhibitor that we discovered in-house and have brought to early Phase I to concept studies, then partnered with Roche-Genentech, this is a very unique arrangement. We have a profit share in the U.S. and have exercised last December our cope [ph] mode option in the U.S. as well. So, this is a compound that is really looking very interesting in some early Phase I data combined with Zelboraf in first line BRAF positive mutant melanoma. We'll talk about that more in a few minutes but I think it's the one that really is coming into focus this year.

With Cabozantinib, again on the left hand side, we have this compound in five unique different pivotal trials, I think which speaks to our view of its potential in a variety of different oncology indications. Overall, if you look at prospect [ph] we're profiling this in terms of company sponsored Phase II's that are been run by the NCI, the CTEP program and ISTs, 50 different trials which I think speaks for the activity profile in Phase I and Phase II, and the depth in activity that we've seen so far. So lot of potential there, as well as we're looking forward with in terms of pivotal trial.

So again, two lead compounds; Cabozantinib and Cobimetinib that we're focused on today. Again, we're developing Cabozantinib, Roche-Genentech is looking and doing all the development work. With Cobimetinib itself, again we get involved when it comes to having commercialize that compound. In total we have six pivotal trials ongoing for these two compounds. That makes us unique in the Biotech oncology space for a company of our size and our stature, certainly it's going to be a very important year for us. I'll go to the next slide.

I'll be talking about 2014 being a pivotal year for us, we expect top line data for pivotal trials this year. Cabozantinib [ph], the two prostate cancer trials, COMET-1, looking at overall survival; COMET-2, looking at pain evaluation or EXAM, which is the label enabling trial we had for metastatic medullary thyroid cancer or MTC, an indication that we were proved on in 2012, and our marketing in the U.S., we recently received approval in Europe as well, we expect to have the survival analysis, the secondary implant readout in 2014 as well.

So for Cabozantinib – for Cobimetinib we hear from Roche and they continue to provide consistent guidance as they expect to have a top line dataset and a filing for coBRIM which is their first pivotal trial with Cobimetinib. Again, this is a trial looking at the combination that Cobimetinib with Zelboraf in first line metastatic melanoma patients who have the BRAF mutant activating patients, as well as our BRAF inhibitor naïve. So the data that's involved there over the last few years around showing that the combination of a MEK inhibitor plus a BRAF inhibitor shows better on-target activity in terms of showing tumor shrinkage, showing longer PFS. In the early studies we've seen enough studies in pivotal trials for coBRIM, and they are guiding they don't have top line data there in 2014.

So, very important year for us from the standpoint of having important read outs for these two compounds in these four trials, obviously one that we're looking at very, very closely. In terms of Cabozantinib, again we have five ongoing pivotal trials, again, exempt is the label enabling Phase III trial that read out in 2011 which provided the approval or the data for approval in 2012 but primary end point was progression of its survival. In that Phase III trial we had a hazard ratio of 0.28, more than 2.5 – both increase in PFS compared to the controlled groups of very striking PFS response and that data in spite of the evidence and the momentum for giving full approval in the U.S., as well as conditional approval in Europe. Again, the secondary endpoint overall survival from the relatively interim patient population, so over the last few years we've been counting events and expect to have top line survival data at the secondary endpoint as well.

Now the comments, I'll go into more detail, on the next slide, the METEOR trial is a second line renal cancer trial, now looking at – again, patients with clear cell renal carcinoma, randomizing one to one between a phoenix [ph] work which is the leading second line Cabozantinib, again looking at precaution free survival at the primary endpoint.

The METEOR trial is our most important, highest priority enrollment program for the company this year. As we talked about our on our earnings call, few weeks ago we have the vast majority of [indiscernible] globally in Europe, in U.S., in Asia Pacific regions, this is enrolling well, again we expect to have top line data, and in terms of PFS with this trial in 2015.

CELESTIAL is fifth trial we're looking at against second line liver cancer. Again, there is no approved standard of care for liver cancer second line in the U.S. Once the patient received sorafenib, and we're looking at this at this tumor type, again, in a global study this is a little bit behind and certainly little more challenging to enroll, we expect top line data here in 2016, 2017 timeframe as the Phase II datasets for renal and for liver are very encouraging. A smaller dataset that we have with prostate cancer within the list I think point out some very encouraging signs of activity in terms of tumor shrinkage, PFS in terms of the renal indication, and interim overall survival for the small liver cancer.

So encouraging Phase II data obviously calls for us to look at these indications into Phase III which we're doing right now and I think overall, we lead the program in terms of I think the breadth of activity we've seen in Phase II, trying to confirm that in Phase III. So lots going on here, we're excited about the program and one that we are really looking forward to seeing read out starting this year and moving into 2015, and then the 2016, 2017 timeframe as well.

In terms of prostate cancer, again we've seen I think very provocative activity in Phase II when you look at our different course that we've ran there – I think we've probably studied now close to 350 patients now in Phase II in metastatic prostate cancer. You see the very unique profile of activity in this indication of most – certainly the most well-known is what seems to be the first time has been – that bone scan resolution has been seen and in this heading, as you all know, prostate cancer is a tumor type which metastasizes predominantly to the bone, and that bone disease drives the morbidity that comes up which these patients that ultimately drives mortality. So a very provocative data in terms of seeing bone scans clear or become resolved with Cabozantinib in Phase II.

On top of that we've seen a variety of other pharmacological responses in Phase II looking at reduction in strictly tumor cells, looking at the tumor shrinkage, looking at biomarker resolving in pain decreasing. So, very, very unique profile in Phase II, one that certainly has gotten a lot of attention in the past, and obviously now using Phase III to try and improve clinical benefit from the standpoint of overall survival.

So COMET-1 and COMET-2 are obviously important files to us. COMET-1 fully enrolls and we're waiting for a final data that would take place later in the year. COMET-2 is still enrolling and again, we accept the final data for that as well in 2014. So again, very important binary outcomes for the company, one's that we think we have pretty good data in Phase II and obviously, we are now looking forward to these early trials in Phase III later this year.

Let’s turn to Cobimetinib for a minute, we again, have – I think some pretty interesting data emerging here from Phase I [ph] that Roche has done, they had an update at their meeting with [indiscernible] last week where they gave the final dataset from the BRIM7 study which was again the Phase I D2 study looking at the combination of Zelboraf with Cobimetinib, again trying to fully – and as much as popular for blocking that kinase pathway, to be able to again drive the tumor shrinkage by pathway inhibition blocking resistance mechanisms, as well as prolonging PFS etcetera. So, in the past they've talked about this work, mainly focusing on in terms of the activity profile around response rates, last year they've talked about having an 85% response rate, the updated data is 87%, so that's relatively similar but as you can see under waterfall here [ph], nearly all patients had tumor shrinkage as the best response but a vast majority of then have confirmed objective or PR or cautious response or about 10% of patients haven't confirmed quick response which I think is pretty interesting.

The moment shared data now with longer follow-up of about 13 months has provided a chance to look at the estimates for introduction free survival as well as the one year survival data and that's shown here based upon the data they had last week. So the median PFS is 13.7 months, so about 14 months in this single arm non-randomized study for the one year survival estimate by the [ph] was about 83%. So, both are very encouraging signs of prolonged activity in this mutant population, but again has to be confirmed in a pivotal trial and that's the real goal for program with looking at two groups; one, randomized to Zelboraf alone, the other randomized with a combination of Zelboraf with Cobimetinib.

And again, the expectation from them is that we'll have top line data and a filing in 2014. So this is moving very quickly, this is an important part of our story. For a company of our size is – to have two compounds and lift this development, one that we can look forward to hopefully as being involved in a quick mode [ph]. I think it's very exciting and one that we're focused on very, very heavily right now as we look forward.

So that covers the science that I wanted to really talk about today and the developments on the commercial side that are on the pivotal side and in terms of our Q1 financials, again, just a group highlight, here we had an earnings call few weeks ago. We entered the quarter with about $408 million in cash, so we're pretty well funded. Our guidance for 2014 remains unchanged, expenses between $250 million and $280 million, and we intend to end the year with about more than $200 million in cash. So I will stop and open the – open up for questions, and by just reiterating our top priorities for 2014 and I'm just showing here. First is, they have top line data for the COMET studies for certainly very important driver for us in standpoint that how we want to resolve the company if as are successful we are moving very quickly to make sure we can file COMET-1 and COMET-2 as quickly as possible, we'll be able to file some more clarity upon that once we have the positive data.

Certainly METEOR is very important highest priority enrollment goal for us for the year. Second, oncology indication, you can imagine the situation where we have positive data in both prostate cancer and renal cancer having a single GU focused oncology sales force calling on practices and doctors, and would be a very effective way to build up our revenue and to build a company around these first two GU indications. And then in that context confirming the plan, we have our planning complete for build out in terms of the commercial build out for prostate in the U.S. and Europe. So lot of bolt in the ear right now, we're excited about 2014, team is really focused and working very hard to help us achieve all these priorities for the year and we're looking forward to a very interesting back half of 2014.

So with that I'll be happy to take questions and have a dialog. Thank you.

Question-and-Answer Session

Unidentified Analyst

Hey Mike, just a quick question on COMET-1. What are your statisticians telling you right now that if the true haz ratio is 0.75, what is the probability of success for COMET-1, now given it did not stop at the interim?

Michael Morrissey

So the powering hasn't changed, but the trowel is sized to show – have 90% power, show haz ratio of 0.75. And there is always play in those damps in terms of rains that you can see to show significant benefit but we haven't given up that information.

Unidentified Analyst

That's just a mad question that I thought.

Michael Morrissey

Yes, it is, exactly.

Unidentified Analyst

This is no longer 90% because some of the power bully [ph] was used out in the interim…

Michael Morrissey

Yes, so there was a little bit of – we hadn't given the actual expense at the interim, I mean it's nothing out of the ordinary – we talked about this on our earnings call but we haven't given the specific details around the upper spend at the interim which would then impact the final, but it's a relatively small impact on the overall final.

Unidentified Analyst

Okay, thank you.

Michael Morrissey

Thanks.

Unidentified Analyst

Could you address your debt structure and discuss – I think you have some secured debt coming due next year?

Michael Morrissey

Yes.

Unidentified Analyst

What are your plans, are you planning to extend that? And also…

Michael Morrissey

Sure. So we have approximately $450 million in debt in three different vehicles if you will. We've got $100 million with [ph] that was due – is due in 2015 – middle of 2015. At the beginning of this year we worked out the details to be able to extend that – have an option on extending that debt to 2018. So that's in place and we have an option to the end of Q1 2015. We have a debt facility which looks into other bank for about $80 million, that cash collatorized [ph]. And then we have to convert that at the – in August of 2012 for about $275 million strike price – the conserved price is $531 million, that's being about 4%. So the most recent debt or the debt that will be due in the most recent timeframe is the near field [ph] debt and we have the ability to extend that for few more years.

Unidentified Analyst

[Indiscernible].

Michael Morrissey

Yes, I don't know the current standing right now. Well, we have the option, we haven't really spoken to what our concrete plans are there now but certainly it was an important part of the – I would say, the financing story in Q1, in between raising some money and then doing the option deal with efforts are – so we could be able to extend that with – I think a big part of the story. Lastly, the cost of capital goods down, we – the initial debt was done in 2010 when we had a very different story in terms of the state of Cabozantinib, it was in its beginning of its first pivotal trial. We now have a compound approved, both in the U.S. and Europe, we're selling – so our risk structure has changed but they are not to be able to reduce the company capital.

Susan Hubbard

Please forgive me, we are webcasting this. (Operator Instructions)

Unidentified Analyst

Maybe just following up on Alex's [ph] question on the COMET-1 statistics. So the 90% power has a ratio of 0.75, that's the design of that final analysis?

Michael Morrissey

That's correct.

Unidentified Analyst

So at the interim, in order for the data monitoring committee to have terminated it for efficacy with the haz ratio had needed to have been – meaningfully less than that or it was upper confidence interval but it had to meet – what specifically would have enabled them to terminate at that point?

Michael Morrissey

Well, again, by a pure staff view they would have had a large enough – small enough haz ratio that would have allowed for the staff to reject the note, the standpoint of the P value and the after that spend on interim analysis. We've used – I would say fairly standard tools to be able to get to that lower limit on the P value for the interim but we haven't talked about the details there from a standpoint what that looks like, alright. Again, it's just math, and people can do that based upon some of the standard assumptions that we haven't given them, that information publicly because it's an ongoing stock.

Unidentified Analyst

Okay. They also did not recommend increase in the size of the study?

Michael Morrissey

So that was inter charter, was – is simply, it's was – again, any idea MC [ph] can start a study for number of different reasons for safety which they didn't do, they called us to keep going, that was in their charter. So there is not – in the protocol, it's not envisioned to be able to upsize the study size – we have closed enrollment now since last November. So that's not an option.

Unidentified Analyst

We have another third of the events that you expect to achieve by the end of the year?

Michael Morrissey

The interim was driven at 378 million but the final is at quite 3.87, the final have 5.70, certain limit – and approximate third, more events that need to take place, so we're tracking that closely and certainly once you get that event number that was the sweep that we have to do to verify all the key dates and then go forward from that.

Unidentified Analyst

Just switching over to your other program, Cobi, can you comment on how you would compare of that combo versus the GSK, L&K combo with respect to efficacy and tolerability.

Michael Morrissey

Yes. It's hard to compare – I would say want to see two different combinations – looked at in different trials, different populations, different settings to a certain degree. So I would be careful to compare that the published data from GSK looks interesting, they have two singly approved agents, the MEK inhibitor and their BRAF inhibitor, and both have full approval in the U.S. and they were granted approval for the combination back in January. There the first confirmatory pivotal trial data came out in January, they haven't – they're going to publish the data formally, they've put data out on their website as they do combined for their PFS from that first study called a Combi-B [ph] study, the PFS for the combination was about 10 months, the response rate was in the 60% to 70% range. So interesting activity profile, I think it's difficult to compare the single arm non-randomized data from seven with that data, so I'll avoid doing that but the data is out there you guys can take a look at that for yourself and ask what that means. But I think it's certainly encouraging to the concept data if you will, from the standpoint of what they've done and we'll see how Combi [ph] looks literally?

Unidentified Analyst

And any comments on tolerability comparisons?

Michael Morrissey

Yes, I would say they have different tolerability profiles, if you look at it holistically. I would say both combinations are reasonably well tolerated. It was interesting at least kind of our view is that the combination of MEK inhibitor oppose to BRAF inhibitor actually appears to show a different tolerability profile of single agents by themselves which is I think unique from a standpoint of…

Again, I think the combination of them with COMET is evolving here. We talked about the aging [ph] profile – on this slide we've seen rash, diarrhea, fatigue – GSK combination is, some pretty – that is being seen both in the Phase I combination for Phase III, how that compares to the combined [ph].

Unidentified Analyst

When we look back at the Phase II data for cover then, is there any mechanistic comments you can make about failures? Any patients that you think could have benefited from another mechanism or was that more of an immune response that prevented efficacy in those patients that didn't show the response that you are looking for?

Michael Morrissey

Yes, it's a tough question to answer. I think there is two issues here, there is primary refractory activity if you will, the patients don't respond at all. They depend on therapy [ph] and there is patients that do respond and then become refractory overtime. Those are often very different issues and people important and nothing which can seem with a variety – it's often seen with different oncology agency cost different classes of molecules for communication etcetera. So it's really – it's a challenging – the challenging questions being insight into – I would say even more challenging in the context of a compound like Cabozantinib that has brought a multi-targeted activity across a variety of different kinds of goods but to put finger on one and ask the question, is Kinase X being mutated in the pathway operating, it's really hard to say because you've got so much going on in the context of how that compound works.

Well the different story was say on the Cobi-side, where it's a very specific molecule, I think it has made it easier to ask questions around what's happening with pathway acquisition around that kinase and then that was able to then drive the whole idea of blocking both rapid mix in same pathway to get better repair activity. So, important questions, I think what we're trying to do is really look at different combination approaches across tumor types that will allow us – now we move earlier in the [indiscernible] but really address how tumors are evolving during the process. It's nothing early by going after multiple pathways with the times the compound that match the compound – you might, and that's the condition you might [ph].

Unidentified Analyst

You got a change with the CFO level or you want to talk a little bit about what led to that and your outlook for it?

Michael Morrissey

Sure. As we announced last week, we'll be parting company with Frank Karbe, our CFO. Frank did a great job for us at the company over the last decade, in a real important part of the story, helped us raise a lot of money, and helped us evolve the company from the infrastructure point of view, and certainly help this build – what we think is a very exciting pipeline of two late stage compounds – and one commercialized and two that are in product development now. I think our view is that as we move forward with our ambitions would be a global commercial organization, we have global rights for Cabozantinib and we certainly have the ambition to market that in the U.S. and Europe. We are building a management team that has at the skinner type a global commercial kind of focus. And if you look at what we've done in the last two years, we hired Scott Garland who has a very strong commercial background at Roche-Genentech, that the Avastin franchise, we hired Jeff [ph] who had 10 plus years at Gilled [ph], again, a global commercial organization. We're really trying to reinforce but it seems. So we're able to be sprinting from day one and I think that's an important message for the company and for investors. Our ambitions are very high and we are again looking for the right team of people to help us look forward. So, Frank did a great job, we wish him all the best and I have a lot of respect for him and he has certainly helped us evolve, and that would continue [ph].

Steve Burns – Bank of America Merrill Lynch

Okay. I think we're out of time. Thank you, Mike. Thank you, Susan.

Michael Morrissey

Thank you.

Susan Hubbard

Thank you.

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