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Michael Morrissey - President, Chief Executive Officer


Marshall Urist - Morgan Stanley

Exelixis, Inc. (EXEL) Morgan Stanley Global Healthcare Conference September 11, 2012 8:35 AM ET

Marshall Urist - Morgan Stanley

So, good morning, everyone. Thanks for joining us. I am Marshall Urist, one of the biotech analysts here at Morgan Stanley and just one piece of business before we get started. Any and all of our research disclosures can be found on any piece of our research or on our website and with that, why don’t we jump in.

We are very happy to be here this morning, with Mike Morrissey, CEO of Exelixis, who I am sure many of you know and before we jump in, this is actually supposed to be open Q&A. So if there any question, please raise your hands and there is microphone circulating.

So with that, Mike, thanks for being here this morning, and maybe to start off, I think it might be useful, you guys just obviously completed a successful and large fundraising. So maybe talk about, give a quick overview for people, where things stand and then we will kind of jump in.

Michael Morrissey

Sounds good. So, again, I will be making forward looking statements this morning. So, please see our SEC filings for a description of the risks that we face in our business. So that’s, right. So we have had a very busy summer and certainly going into a very busy fall.

I think the company is still focused exclusively around the development and potential commercialization of our lead compound called Cabozantinib or cabo for short. It’s a very interesting dual inhibitor of the MET and VEGF pathways. We have seen profound anti- tumor activity, pre-clinically and clinically. I think the activity of cabo represents somewhat of an old school compound in today being the age of single compounds targeting either single populations or sub-populations within a given tumor type.

Cabo has shown very broad anti-tumor activity across a variety of different tumor indications and also showing activity in the key compartments where primary tumors either start of metastases too. So, a very broadly active compound. One that we are very excited about.

Our first real active indication is now under review at the FDA regarding the MTC NDA filing. So that’s obviously moving forward and we have a broad program in prostrate cancer with two pivotal trials COMET-1 and COMET-2 ongoing and part of the fund raising in the summer about a month ago. We have talked about now expanding the pivotal trial program to include other indications as well based upon some of the data we had at ASCO in June.

Question-and-Answer Session

Marshall Urist - Morgan Stanley

Okay, perfect. So, maybe you can start off by talking about the fundraising. You guys took a little bit of a different strategy than doing things piecemeal. So can you talk about how you thought through that and how you think this sets up the company now around cabo?

Michael Morrissey

So we have raised $415 million in the August time frame. That, coupled with the $295 million that we ended Q2 with, we are in a very solid position right now. We have enough money in the bank to be able to complete the COMET trials comfortably as well as initiate additional pivotal trials. So, really, it’s the momentum that we had hoped to gain by having a broadly active compound across multiple indications.

Obviously the NDA filing is being reviewed right now. It is in a (inaudible) process but I think we have got a very strong position now to be able to expand and really elaborate the really interesting activity we have seen to-date with cabo across different tumor infections.

Marshall Urist - Morgan Stanley

Sure, so maybe let's touch on the COMET program to start off with and first of all, can you talk about enrollment? How you guys are approaching that for the pain study and how challenging and how restrictive are you being about enrollment and what kind of patients do you think ultimately you going to end up in this study?

Michael Morrissey

So in both, COMET-1, which is a survival trial and COMET-2 which is trial focused on pain palliation, the goal here is to provide very convincing data which would help us differentiate cabo in the dynamic prostate cancer marketplace.

Lots of activity there, lots of success there over the last few years. Obviously we are not hearing anybody from the standpoint of prostate cancer death rate overall having changed. I think the whole goal with cabo in prostate cancer is to really build upon the very unique activity we have seen in the bone in soft tissue and CTCs to be able to, by showing both an extension of survival with COMET-1 and a reduction in pain, reduction in narcotics in COMET-2, really provide a very differentiated label that would help us market the drug potentially in that space.

So we have both trials up. We are continuing to add sites, continuing to screen, continuing to enroll. We think, again, that population for both trials is post Taxotere and post either Abiraterone or Enzalutamide in either sequence.

So really, if you will look at how the market could be evolving over the next few years, really the second line population post Taxotere, is both Abi and Enzalutamide move up first line, it’s a very important population. One that we think is sizeable for the first commercial focus with cabo in CRPC and one that we think we can build upon by doing additional either single agent or combination for us with a variety of different compounds as we move cabo up in lines of therapy.

Marshall Urist - Morgan Stanley

So, maybe a couple of questions, given as you alluded to that the treatment landscape is evolving rapidly. So first of all, how much do we know about cabo's activity post one where multiple antiandrogen therapies?

Then second, is it your expectation that the approval of Enzalutamide recently in the U.S. is going to impact enrollment and your ability to find patients.

Michael Morrissey

So the data that we had at ASCO that Matthew Smith provided in the oral presentation as well as his fellow, Rick Lee talked about in the post there. So we had different ASCO updates. Both looked at patients with CRPC, Matt's had a fairly large dataset with patients who were post Taxotere as well as post Abiraterone showing actually good and similar activity, our PSS looking at recess, defined PSS was similar for both patients who were post Taxotere as well as post Taxotere and post Abiraterone.

We had other patients who were further treated with Alpharadin, with cabazitaxel, other compounds. So to-date we have seen very similar activity across the board. So we don’t see much discrimination between compounds, or between patients who are either pre-chemo, post Taxotere or have further additional lines of therapies. So our view is that based upon that data cabo's activity is fairly consistent across the board.

In terms of the recent approval of Enzalutamide, our view of that is that’s actually a positive thing. We will look at more patients, post chemo, post either Enzalutamide or Abiraterone. So we don’t expect any drop off in available patients for either COMET-1 or COMET-2 on a global scale.

Marshall Urist - Morgan Stanley

That is what I was going to ask you too. Do you think this will shift enrollment more internationally than maybe you guys had originally planned?

Michael Morrissey

Hard to say right now, but I wouldn’t think so.

Marshall Urist - Morgan Stanley

Okay, and then, maybe just touch on dose as well and it's obviously been an interesting exercise. How are you guys thinking about, obviously, titrating dose to bone pain and bone response and ultimately carrying that through on their survival side? Are we are starting to see things that will correlate?

Michael Morrissey

The whole question around doses is one that we have faced fairly aggressively over the last few years. One that is, I think, common in the area of oral oncolytic, certainly around TKIs. Many orally active TKIs have an issue of finding the optimal dose as opposed to the initial active dose.

The challenge is always finding a sensitive population first and then after you prove you have a sensitive population and activity in that population, then finally optimal dose met indication for Gleevec, for Sprycel, for Ponatinib for most TKIs actually, to be able to really find the optimal dose.

We have done that in the Phase II setting. Obviously, we ran the MTC pivotal trial at 140 milligrams. We have seen activity with cabo at 100 milligrams and as low as 40 milligrams based upon the data we had at ASCO. I think the recent work of the last year or so at Mass General, using a bone scan response to be able to really to rapidly be able to find more optimal, better tolerated doses has been a very important for the overall program.

We will have more data at ESMO in a few weeks that Professor De Bono will present from the non-randomized extension cohort looking at the 40 milligram dose which I think will further provide additional perspective around that dose.

Our view is that the 60 milligram dose that we are using in the COMETs and are planning to use in additional pivotal trials is the right dose based upon the totality of data having a lower dose of 40 milligrams being as good from the standpoint of the small percentage of patients that need to be dose reduced. Again, the totality of data across tumor types and the dose reduction schema is fairly consistent with that 50 milligram being the dose.

So we are going to go forward with that and we are quite confident in being able to show a similar activity with better tolerability at that dose.

Marshall Urist - Morgan Stanley

Then, what are your updated thoughts, I know there was obviously a long discussion with the FDA around, obviously, the right endpoint. So what are your updated thoughts on, first of all, do you still feel that pain in the bone scan are approvable endpoints regardless of what happens in the survival trial?

Michael Morrissey

We had a long, I think, very productive discussion with the agency around the COMET-2 study in terms of looking at pain being the primary endpoint. The point in time where we disengaged from that discussion was around the magnitude of that response in terms of the SPA process.

We had 17% delta between the control arm and the cabo arm built into that. In their view, that wasn’t big enough to get around the issue of inter pertinent blinding by having two different arms, having two different sue which is certainly a fair perspective on that. In the recent ASCO data, we had in June, our pain response rate was approximately 55%. We modeled the pain response rate for the COMET-2 study to be about 25%.

So our view and I think the feedback we got from the agency was that it will be in the data from the standpoint of how large that (inaudible) response will be will define the relevance of it in terms of an approvable or label enabled antibody.

So we are doing the study. I think that the data has been consistent all along that we are seeing activity at the bone in terms of bone bio markers, in terms of any tumor activity, in terms of pain response, narcotic reduction. In the ASCO data set we had in June, about a third of the patients actually discontinued narcotics which is something you rarely see in this population. So we think the response is real and we have to prove that now in a pivotal trial that’s ongoing.

Marshall Urist - Morgan Stanley

Where are we in terms of understanding mechanism in the bone? There has been some interesting data in terms of metastases, talking about MET and VEGFR2. So where, from a basic signs, it looks like you are getting to mechanism given the dramatic response that we are seeing?

Michael Morrissey

We have a lot going on there right now, in terms of both in our clinical and pre-clinical activity, we have been able to recapitulate the clinical activity in the pre-clinical setting in trying to understand mechanism of what's happening there. Done a fair amount of work already in terms of understanding any tumor activity in the bone with other modalities besides Technetium-99 bone scan response. I will have some of that hopefully at ESMO this year.

Certainly, that’s an important component of the story to show that we have direct anti-tumor activity in the bone that we are looking at that as well through a variety of investigator sponsored trials. Looking at MRI, looking at PET, looking at actually bi-ops, bi-histology as well.

So, I think over the next block of time, we will be able to nail that, provide additional data which supports the idea that cabo has very profound activity in the bone. Both active bone itself, by looking at bone bio markers but more importantly at tumor in the bone, going forward to get there.

Marshall Urist - Morgan Stanley

Okay, great, and then, just on COMET-2, in terms of interim analysis and what is the communication plan around that for COMET-2?

Michael Morrissey

So COMET-2 has no interim analysis. It's simply enrolled a study. It’s a landmark analysis. So after the last patient has been enrolled, the 12-week timeline would basically define when the study would be done, when we will get the data and we will communicate it. So there is nothing special there. We are guiding that we will have top line data for both trials in the first half of '14.

Marshall Urist - Morgan Stanley

Okay, great, and the enrollment progress, everything still pointing to that being on track for that. Okay, great, maybe just touch on MTC a little bit too. How you are thinking about that, the importance of that for the company? How big of a commercial investment do you think you are really going to need there until maybe some of the bigger indications come through?

Michael Morrissey

So we haven’t said a lot of MTC in our plans for the commercial outreach there, just to respect the current overall review process. So I don’t want to put the cart before the horse. Clearly, MTC is a small niche, micro niche population. What we have said publicly is that we will scale the commercial outreach to really be pragmatically focused on that population to really match the size and scope of that.

It's an event that will be, I would say, somewhat transitional but not transformative for the company in terms of what we will be doing going forward. We are still going to be focused heavily on the developments, starting new pivotal trials, enrolling, completing pivotal trials, really we focused on the development stage of the company.

I think the MTC is an important outreach, if you will, for the commercial setting within cabo but we will still be focused on making sure we can stand the opportunity with cabo going forward is the main focus.

Marshall Urist - Morgan Stanley

Then, on the regulatory process there. What was the communication around the ODAC to you guys? How do you put all that together in terms of how that played out?

Michael Morrissey

Again, I am not sure and I don’t want to say too much about that just to respect the process. We were invited. We said, thank you, we will be happy to attend and then a few weeks later we got word back that our presence wasn’t needed at that ODAC for the review of cabo.

So that’s fine. I think it’s a fairly straightforward communication in terms of either being there or not. There was no color or commentary provided. So we are just going to continue to proceed to facilitate with the review and the PDUFA date is still at the end of November. So moving forward.

Marshall Urist - Morgan Stanley

Then, when are we likely to see the OS data from this trial. Anything that’s going to be important from a regulatory perspective?

Michael Morrissey

So, we have a SPA with the 301 with the MTC trial with PFS as the primary endpoint. Overall survival was a secondary endpoint. At the time of ASCO, at that presentation, we had not reached the required number of offense for OS. We still haven’t. I guess it's probably safe to say, we will probably hit that sometime in the 2013, 2014 timeframe depending upon how long patients live.

It's certainly a piece of the filing, from the standpoint of having that data being reviewed by the FDA. And that’s all I can say about that right now.

Marshall Urist - Morgan Stanley

Okay, sure. So, maybe let's switch gears and talk about some of the new indications and the plans to take cabo beyond prostate. So in terms of where you guys are in terms of time lines and getting to next steps in renal and ATC?

Michael Morrissey

So I think the really important data that we had at ASCO this year was around, again, the depth and breadth of activity for cabo, outside of MTC, outside of prostate cancer. Really speaking to the broad activity we are seeing with cabo across different tumor types including renal cancer, liver cancer, melanoma, breast cancer, lung cancer. It really is showing again this broad activity that we really want to capitalize on and have additional momentum from the standpoint of really enabling additional pivotal trials.

So we are going through, I think, a pretty discrete process right now around analyzing the different opportunities, different lines of therapies, different competitors. I can't give you any specific timelines for the initiation of additional pivotal trials. Certainly the priorities are around being able to elaborate renal cancer, liver cancer, some element of lung cancer.

Starting trials in 2013 would not be unreasonable from the standpoint of having enough time to really both from a clinical and commercial point of view understand the most optimal place to play in those two different tumor types and then get a protocol rating and have an end of Phase II meeting with the agency and then move forward with that.

Marshall Urist - Morgan Stanley

So then maybe touch on your thinking around each of those in more detail. Obviously you saw some interesting activity in renal first. It's obviously a difficult market commercially. So what attracts you guys to that market is a different mechanism? Why is that a good investment?

Michael Morrissey

Well, renal has always been a very important tumor type for us even going back to the 2002 to 2003 timeframe. It was some of the basic biology of the development and the metastases involved in RCC which really focused us around the basic tumor biology for how the MET pathway and the VEGF pathway really work together to increase the aggressiveness invasiveness of those tumor cells.

So we have had a long standing interest in RCC. It's somewhat of, you are right, very competitive complex market, from the standpoint of either the selective VEGF inhibitors or now the mTOR inhibitors showing good activity from the standpoint of either PFS or survival.

I think our view is that a different mechanism in terms of combining MET was just maybe certainly a better way to go in this tumor type and certainly our early data that we had at ASCO this year, I think points with somewhat provocative data around that actually might be the case.

So we, in a relatively small cohort of patients with advanced RCC, second, third, fourth, even up to six lines of therapy saw a very promising activity. We had response rates per recess of about 30% in that population. Our median PFS in getting a small population was about 15 months which compares nicely with what you have seen previously in second line of median PFS of around five months.

So all the caveat that go with that small population, single arm, relatively small number of sites, are in place but it is still important new data, which I think has us and a variety of KOLs very interested in the idea that combining MET inhibition with VEGF inhibition in single molecule could really lead to very profound anti-tumor activity in this physiology.

So we are not looking at cabo as another VEGF inhibitor and if it was then we obviously wouldn’t be pursuing this indication. Our view is that we could potentially see very different enhanced activity. In fact, the case we think even in a more competitive market place could bring benefits to patients and certainly provide a very strong commercial opportunity for us.

So again, we are looking at all that right now but its one area that we think the tumor biology, the competitive dynamics and certainly our initial data looks very encouraging to proceed in a pivotal trial.

Marshall Urist - Morgan Stanley

So early, I know you guys aren’t all the way there, but maybe we can talk broadly about how you are thinking about the trial, you do have Axitinib approved for second line population. So is it your expectation that this is going to have a head-to-head active competitor trial?

Michael Morrissey

Well, thinking that, in a second line study, it will have to be head-to-head against something. If you look at, again, the market dynamics, I think mTOR is probably one are that makes a lot of sense to go after relative to important MOA in terms of mTOR inhibition certainly well defined activity.

So whether we go after, whether we go against VEGF inhibitor or an mTOR inhibitor that will be defined over time. I think the second line makes sense relative to having a relatively high PTS and the potential upside from a commercial point of view as well. Going third line, you go against placebo, it certainly has different competitive and commercial views there as well.

So again, going through that analysis right now pretty carefully and we have a first line study against Ponatinib already on the books with CTEP which we think is an important additional supportive trial to help frame that opportunity from the standpoint of again, PFS and OS in that trial.

Marshall Urist - Morgan Stanley

Okay, great and then maybe let's talk about Hepatocellular as well and again what your thought is on the best path to market there? Guess, maybe it's also worth commenting on have you seen activity of other MET agents in HCC? So how do you think that picture is coming together for this pathway?

Michael Morrissey

Yes, I think liver cancer is a very important, again, medical, clinical and commercial opportunity for us to explore with cabo. Again, ASCO data from June show that we had good anti-tumor activity, good overall PFS, both pre and post Sorafenib and then our survival data again, a small population of about 40 patients look pretty encouraging for a 15 month medium OS in that population.

Again, cabo is a fundamentally different compound and different MOA from either selective VEGF inhibition or selective MET inhibition and to-date we have not seen activity that has been primarily focused in MET high express as in the case in other compounds. Either small molecules or biologics with liver cancer or lung cancer, et cetera.

So again, we view that in a real positive sense from the standpoint of having a broader market opportunity, broader patient population to choose from and again, liver cancer has been one of those examples where it has been tough to show activity beyond Sorafenib, either head-to-head, in the first line setting with a compound line brivanib or in a second line post (inaudible).

So all the feedback we are getting on a global level from KOLs and liver cancer docs really reinforces the large that we have unmet medical need there and certainly the cabo data that we have in HCC is generating a lot of interest in terms of a potential in a therapy there.

So again, lots of work to do. All the caveats that go with early Phase II data apply here but its one that we think that makes a lot of sense relative to pushing forward pretty aggressively. I think part of the charm here is that we have done this before from the standpoint, if you look at our overall approach from MTC. We had a solid Phase IB data set in about 35, 37 patients in terms of a strong response rates, good durability of response, good overall activity and went from there directly into a pivotal trial.

So our view is that for signals as we have with RCC and HCC, the risk is acceptable from the standpoint of moving directly from a small Phase II data set directly into a large potentially label enabled phase approach for different indications.

So I am excited about the data. I am excited abut cabo in those different indications and we think again with the funding that we have in place today, we can make a lot of progress in prostate cancer and in other indications with the vision of really building a franchise around cabo across potentially different tumor types.

Marshall Urist - Morgan Stanley

Absolutely, and just one more HCC, it does, again, bring up the question of dose and it's obviously a very fragile patient population. Its one of the reasons that other drugs that have issues there. So you are comfortable again that it’s the right decision straight to Phase III or could it merit some more dosing work to get that right depending on the Phase III?

Michael Morrissey

Yes, I think, again we have done a lot of PK work in the Phase II trial. So we understand where those patients, in terms of having any kind of compromised liver functions net out relative to their exposure with the 100 milligram dose and the dose reductions to be able to find better tolerated dose.

So based upon all that data, again, we have a pretty good view of how we can go forward at either 60 or 40 in that population and again have pretty high PTS for that.

Marshall Urist - Morgan Stanley

Great, and then maybe just touch on some of the other bigger indications and how you are thinking about that between, seeing some signals, obviously in breast and lung as well. So you have prostate as a big indication, once manageable, once in renal and HCC. So how are you thinking about taking those forward?

Michael Morrissey

Yes, so we are really excited about what's happening right now with cabo in metastatic breast cancer and metastatic non-small cell lung cancers to larger populations that certainly have high degree of unmet medical need, a large market opportunity. I think a growing understanding of how to work in that space relative to new mechanisms.

Again, we had updates at ASCO on both of those different indications. We have a pretty deep roster of additional Phase II plans in both those indications. I think those would be probably be hard pressed to move into the large populations without additional Phase II work with the exception of what we have seen so far in the non-small cell lung cancer population around the RET transformed types again, similar to what you have seen with AOK.

So I think, again, breast cancer, we have an IST going at Mass General with José Baselga looking at hormonal positive breast cancer patients who have bone involvement in their disease. That’s really a good corollary to what we have seen in line with advanced prostate cancer. So that’s an area that we are excited about and that IST has rolled very well. We should have updates for that later in 2013.

In the area of non-small cell lung cancer, what we focused on primarily is looking at the broad population, including patients with EGFR activating mutations who have progress on Erlotinib, KRAS activating mutations as well as patients that are (inaudible), with no known mutations find and we have seen pretty good activity in all three of those today.

So we are still trying to parse out the data, understand how that looks. We are most excited about looking at the (inaudible) population as a potential large unmet medical need. A large population, if you look at (inaudible) label enabling study for Erlotinib where the medium PFS is around 2.1 months. Our medium PFS from ASCO in about 80 patients was around 4.5 months.

So a very large difference, again, single arm, non-randomized, but I think a pretty interesting from a standpoint of how that compares as well in terms of biology of MET playing in that space as well as in (inaudible).

Marshall Urist - Morgan Stanley

Great, and with that, I think, we are out of time. Mike, thanks for spending the time with us today. Thanks everyone for joining in the session.

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