Exelixis, Inc. (EXEL) CEO Michael Morrissey on Barclays Global Healthcare Conference (Transcript)

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About: Exelixis, Inc. (EXEL)
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Exelixis, Inc. (NASDAQ:EXEL) Barclays Global Healthcare Conference Call March 13, 2019 9:30 AM ET

Company Participants

Michael Morrissey - President and Chief Executive Officer

Conference Call Participants

Geoff Meacham - Barclays Capital

Geoff Meacham

Welcome to the second day of the Barclays Global Healthcare Conference. My name is Geoff Meacham. I’m the biopharma analyst here. My team here are Rick Harrison up on the stage with me, and we’re really excited to have Exelixis doing the fireside chat and Mike Morrissey, CEO. Mike?

Michael Morrissey

Good morning. Thanks for the – well, thanks for the invite. Great to be here, yes.

Geoff Meacham

So the – I guess, let’s just start with the core franchise cabozantinib has been a real success, and maybe just give us kind of your high-level view of kind of how we got here, and kind of your general view going forward?

Michael Morrissey

Okay.

Geoff Meacham

And then we can get into trials and nuances, RCC and other market details.

Michael Morrissey

Sure, yes. So it’s been a long journey. This is a tough business, and it’s one that we’re going into our 25th-year now. So it’s kind of mandatory to reflect on where we’ve gone, where we’ve been, where we’re going.

Cabozantinib is an interesting compound. It’s one that we discovered in-house and developed in-house and along the way, we’ve learned a lot. I think, did some good work, made the obligatory mistakes along the way in some of the, maybe early trials, certainly in prostate. But we’ve learned a lot and I think we’ve taken that – those learnings and that knowledge and moved the compound forward and the company forward in a way that we think is very enabling for both patients and all of our different stakeholders.

So where we stand today, we’ve got that four approvals now in the label. We have survival benefits in two really difficult to treat and difficult to see survival-type indications with RCC and HCC. And I think we’ve built a strong team, both commercially, but also across the organization to be able to take that momentum forward and do more with cabo, more with other related analogs that could be improved, as well as then rebuild our discovery pipeline.

So we’ve got a lot going on right now. It’s certainly a very exciting time to be a profitable, free cash generating company, with a molecule that’s vectoring towards $1 million a year in global sales. And I think we can move to the next level with that, so.

Geoff Meacham

Yes. Let’s talk about the competitive dynamics and first-line RCC. You have, obviously, the recent data from Merck. You have a dynamic in I/O and RCC that sort of underpins the TKI that are already there. Maybe just help us with kind of what – how you see the evolution of cabo between first and second-line…

Michael Morrissey

Yes.

Geoff Meacham

…given the success of some of these I/Os?

Michael Morrissey

Yes. I think it’s probably the most pressing question right now, and one that I think we’ve been thinking about a lot over the last couple of years. The combination data I/O, I/O I/O TKI results that have come out over the last few months or the last few years isn’t really all that surprising to us.

We’ve been expecting first-line to become somewhat congested, somewhat segmented around the different combinations. The historical phase 1b data for all those combos has looked really good, 50%, 60% response rates, long DCRs, high DCRs, long duration of response rate.

So there’s no surprise that those trials worked. Certainly, KEYNOTE-426 and the CheckMate 214 trials looking at them kind of with a – taking a step back and looking at them kind of side-by-side with all the normal caveats, raises a lot of questions about how they’ll be used, where they’ll be used, how academics and safety community docs might differ in their prescribing patterns based on their some of their built-in biases and beliefs around what’s the best way to treat patients with.

We’re very excited about cabo’s role across the continuum, first-line, second-line, third-line. We certainly have what we think is a best-in-class PKI profile based upon the METEOR data, where again, we saw a survival across risk factors. We saw doubling of PFS and then coupling that with the CELESTIAL data, where we – we’re the first – had the first data with cabo beating, so that went head-to-head in the first-line population.

So we’re not surprised by what’s happening right now with the combinations. We think we can maintain and build upon our first-line share based upon what we’ve got right now, it’s the single-agent cabo, but then with what’s happening with 9ER that would have worked out. But I think the main focus in the short-term is to really dominate second-line.

All of the feedback from KOLs and boards what we’ve heard kind of in news and at ASCO-GU few weeks ago was that based upon the survival data for METEOR and second-line with cabo, that’s really the go-to agent for patients that progress on single-agent molecules first-line on combination approaches first-line, because cabo has got that survival advantage that nobody else has. So we can again build on that, work on that and move forward.

Geoff Meacham

Do you still see an opportunity for differentiation just giving in – from a I/O TKI perspective, just given the data that we’ve seen from Keytruda and Inlyta. In other words, does the 9ER study, what – maybe what’s your more sort of detailed outlook on that relative to what we’ve seen so far?

Michael Morrissey

Yes. It’s a good question. Yes, I think that’s – obviously, we have to finish the experiments and get the data and the data will speak for itself, where this is a data-driven type exercise. But certainly, the 426 data looks good in terms of hitting endpoints with good hazard ratios and pretty compelling data. But I think it’s a bar that can be surpassed…

Geoff Meacham

Yes.

Michael Morrissey

…based upon just what we know cabo can do and kind of the expectations for what cabo could do with the appropriately PIK-PD-1. So I think you’ll get some of the AE profiling, some of the PFS data, it looks good, but it can be improved upon. So we have to run the experiment, we have to get the data. But we’re certainly not overwhelmed by what we saw in 426 or for that matter with 214.

So we think there’s lots of room to improve. And we’re certainly with the doublet 9ER, but also with the triplet CaboNivo ipi, we think we can bring better potentially activity and certainly more options to patients as we go forward.

Geoff Meacham

Great. Just curious what are your thoughts on the development and the COSMIC-021 study. The early data seemed encouraging…

Michael Morrissey

Yes.

Geoff Meacham

…but just kind of how you’re looking at that going forward?

Michael Morrissey

So we’re really using that trial. And COSMIC-021 just for some background for people in the audience, is a broad basket trial looking at the combination of cabo with atezolizumab, that’s Roche’s PD-L1 antibody in 18 – currently, 18 different tumor types, they’ll probably add more as time goes on, that have shown some, for the most part, some level of sensitivity to single-agent cabo.

So we’ve got baseline activity, and I think that’s been part of our narrative around cabo for the last several years is that, it has – we think it has franchise potential on top of what we’ve seen in renal and liver and thyroid because of its broad activity as defined by bonafide confirmed RECIST responses in a variety of different tumor types. I think, we’re over 20 right now.

So O21 is an exercise to help us understand, validate and then prioritize the next wave of pivotal trials across GU, GI, thoracic and breast, a wide variety of different tumor types that helps us attack both hot and cold tumors those that have documented activity with the PD-1 those that don’t like prostate or colon, where we think the combination could be really interesting.

So our goal here is to get that trial enrolled quickly, generate data quickly, and then be able to prioritize what moves forward, either in terms of expansion cohorts that could lead to an early – some kind of early filing based upon really compelling response rate data or more likely the idea of then having the next wave of pivotal trials going in the near future. So it’s an exciting program, great working with Roche in that regard, and we have high hopes for it, for sure.

Geoff Meacham

Let’s shift gears to HCC and maybe just give us the updates that you have just with respect to the launch and we’ll talk about the dynamics between first and second-line?

Michael Morrissey

Yes. So we were approved for second-line HCC based on the CELESTIAL data back in January. Again, we had a survival benefit there in a mixed population of second and third-line patients. As we’ve gone well off of our way to hopefully be consistent about this – this is a different launch compared to renal. The market is very different. The patient population is very different.

We use the analogy of liver is kind of where renal was a decade ago. There aren’t a lot of really good agents in liver cancer. Patients are triaged in a kind of a – in a bifurcated fashion between medical oncology, as well as interventional radiology. And patients that often get some level of targeted therapy previously would come on after they had a round or two a case, which kind of puts them in a bad position anyway, right?

So our – part of our job is with this data is to help rebuild the markets and help provide the opportunity, along with other companies with newer agents moving into the fray to help move patients really in a very systematic fashion towards a medical oncology arm, where we think systemic therapy is early is probably the best thing for them.

So we launched, again, within – I think, within hours of getting the approval letter. As we’ve talked about previously, the overlap, especially in the community between RCC prescribers and HCC prescribers is very, very high that business is about 95% overlapping.

So we didn’t need to do a lot of building around our existing very well entrenched and large commercial organization. So we got out there and it’s been going as we’ve kind of would have expected. Lots of interest and lots of synergies between talking to people about RCC and HCC at the same time or going in to a doc with a pitch on or educating on HCC, but then he has RCC patients and vice versa.

So having the extra indication really provides an enhanced level of access and really an enhanced level of interest in the molecule. And that halo effect is very important as we talked to old prescribers, new prescribers as we build that business and kind of broaden that approach.

Geoff Meacham

What do you think the tipping point is to put HCC data more conventional path of medical oncologists as opposed to being seen between bunch of different specialists, because the diagnosis can be somewhat complex?

Michael Morrissey

Right, I totally agree, yes. No, I think the biggest move for that indication is to have something frontline, right, first-line, that’s going to be the magnet for and a catalyst for patients to move in that direction. And certainly, there’s a lot going on in the I/O space right now, CheckMate 459 should be reading out sometime this year that single-agent Nivo against sorafenib, obviously, if that would have worked, that would be a big move for doctors and for patients to kind of move in that direction in mass.

All the combos and there’s, at least, by the last count, at least, three going now, TKI, I/O or VEGFR targeting I/O with different mixes of those different agents. So, again, better data will do that, but I think it’s incumbent upon us to keep investing. We’ve got a horse in that game with the 312 study with cabo atezo that we’re excited about and first-line against sorafenib.

So, again, more data, longer-term investment is really going to move this. But when you think about growth potential, this is an indication that is top three globally in terms of incidence and probably mortality rates, and in terms of the – its actual revenue potential is very, very small. So the ability to grow that business is really, I think, very, very attractive with better compounds, better combinations and better data.

Geoff Meacham

Right. So how are you thinking about sequencing an HCC of – among the different agents in between first and second-line and being able to really drive your share in the second-line?

Michael Morrissey

Yes. Well, second-line for us, I mean, obviously, we have to market in a complaint fashion. So we’re pretty locked in, in terms of what we’re talking about, what’s in the label and having the trifecta of survival benefit, PFS benefit and response rate benefit, compared to what we saw in the CELESTIAL trial.

The market is evolving pretty rapidly first-line right now between Sorafenib and lenvatinib. Second-line is a little bit more complicated right now, both nivo and pembro have been approved in second-line based upon response rate data from Phase 2 trials. As you know, the 240 study with single agent pembro didn’t readout positive. They missed on both the PFS and OS.

NCCN just announced yesterday that was not down to Category 2B recommendation. So there’s lots of movement there. So, again, we don’t market against anybody per se or any other compounds. We talk about our data. We educate on our data, and we try to make sure people understand the benefits we bring based upon the published data sets and what’s in the label, right?

So – but we’ve seen, I think, good interest and good uptake around cabo being a very attractive second-line agent relative to what they see with, either sorafenib or lenvatinib first-line. When I/Os are used second-line, again, the vast majority of patients will blow right through that, because the response rate is in the 10%, 15% range. So as we can get patients relatively early post and I/O as well. So – but we’re excited. Lots of work to do here. But again, it’s an area that we have to build on and invest in going forward to really maximize the value.

Geoff Meacham

We’ve talked about RCC and HCC, and you’re right, there is a sort of growing consensus that maybe I/O plus TKI kind of – could help and even in the cold tumor setting. Maybe just kind of give us what opportunities as you guys look at our more greenfield for cabo?

Michael Morrissey

Yes. Well, I think a lot of those indications within the 021 study reflect our interest going after things like prostate indications, like prostate in colon, pancreatic, potentially that are tough to drug with any kind of molecule. You look at the prostate cancer space, which we have some experience and right. We think we have – we understand the activity of cabo in that setting.

We understand why the comets, I think, to a large degree, didn’t work, and going in with a little bit lower dose that appears to be active in renal when combined with atezo, we had a response rate in the 80% range and the phase might be dose escalation part of that trial, really reflects the activity of that combination relative to other combinations.

So exploring is something that makes a lot of sense right now. And we’ve got some, I would say, some ISTs going to single agent cabo in those different indications as well. So it’s a mix. It’s – can you make the hot tumors better, but then can you salvage patients in the “cold tumor setting” that really don’t have a lot of options after they’ve exhausted standard of care, right? So that’s exciting. I think, we’ve got a lot of – a lot going on there and a lot of interest from investigators and academics that we think we can really mobilize around.

Geoff Meacham

Right. With respect to COTELLIC, maybe just give us an update of the studies there in melanoma just move beyond cabo?

Michael Morrissey

Yes. So COTELLIC is a MEK inhibitor that we have partnered with Roche. It’s again very interesting MEK inhibitor one that we have highly optimized for once a day dosing grade, both pharmacokinetics and pharmacodynamics and certainly good efficacy pre-clinically and clinically as well.

I think that the disappointment from our point of view was that, it was just a little bit late to the – to that game, if you will, relative to the GSK, Novartis combination, with arguably great data, survival benefit, PFS benefit, high response rates, but not really differentiated from what was there a couple of years before.

What’s important for us now is the – is what’s going on in melanoma looking at the two different unit types, either with triplet, cobi, atezo, vem and the BRAF-positive population and then cobi, atezo versus pembro in the wild-type population. So going against standard of care really in each case and we’ll see.

So with – obviously, the Phase 1b data that’s been published looks really good. The triplet has a 80%-plus response rates and handful of patients on a long durable responses, et cetera. So if we can – we could pitch away that data that might be a really interesting way to go in terms of combining pathway and MAP kinase pathway inhibitors with a PD-L1 antibody to really improve outcomes from patients. But, again, data – those trials are more fully enrolled and Roche is guiding to have top line data and file this year and successful So we’re excited about that, get us some data.

Geoff Meacham

So when you’re prioritizing your kind of R&D investments, how are you thinking about your focus between developing newer agents versus expanding the opportunities for cabo?

Michael Morrissey

Yes. I think it’s a key question in terms of how we allocate capital. I mean, we know the most about cabo. We have probably the most insight in terms of dosing, in terms of safety, certainly in terms of activity. So in the grand scheme of things, cabo is first in line as it should.

We have very – we got very clear plan, tactical plan to maximize the value there over the mid-term, which makes sense. And we’re executing on now and you’ve seen a start pivotal trials in 2018 – at the end of 2018, will start more this year. We’ve got that cooperative groups going as well, but we’re not going to stop there.

I think, the announcement around the IND standards for XL092, which is a next-generation cabo like molecule reflects the fact that we’ve got 10-plus years of knowledge gained from studying cabo clinically and pre-clinically from understanding the nuances of how it works and how it could work better based upon certain parameters.

And we’ve done, I think, a pretty – the people in discovery, who are now again we instituted back in Alameda and we have full – fully operational labs, again, done a really great job of having a molecule that, I think, addresses some of those key hypotheses based upon all those learnings from the last decade. So that’s in Phase 1 right now. If that looks good, we could expedite that into late-stage trials very quickly, both as a single agent and in combination.

So it’s an approach that gives us much more latitude and the some ways much more flexibility about how we operate in this VEGF ample space that, that we’re really expert and that’s really our bread-and-butter. Beyond that, we’re doing a lot of work, both internally and externally with developing the pipeline. As you guys know, we – discovery is in our DNA. It’s been a decade or more doing that back in 2000, 2010 timeframe, and it’s something that, I think, we do well.

We’re doing it differently now than we did back in the day around allocating resources internally and externally, focusing on small molecules and biomolecules, biologics, as well as, I think, asking some fundamental questions, continuing to ask questions around key biological pathways and issues and finding ways to drug those effectively to bring better drugs to patients.

So it’s very – I know just speaking for Susan and Chris and myself, it’s very satisfying to have the opportunity to come back full circle to have the company be pretty solid ground financially to have – be profitable, be generating free cash that we can now reinvest in the business. That was a plan going back almost 10 years now. It took us a while to get there, but it’s great to be back in that space and to be investing in early-stage and mid-stage development, for sure.

Geoff Meacham

Well, just along those lines, how important is that to you? In other words, how is your thinking between investing internally in the business and still being profitable in generating free cash? I think a lot of companies that are your size…

Michael Morrissey

Yes.

Geoff Meacham

…don’t really care about earnings.

Michael Morrissey

Yes.

Geoff Meacham

…and they would instead just choose to invest, invest, invest to expand the pipeline, so?

Michael Morrissey

Yes. There’s certainly both strategic and tactical value to be profitable to generating free cash to living within your means to a large degree from the standpoint of having a growing revenue stream that you can allocate to internal investment. But with the right level of discipline and the right level of focus, so that you’re making good investments, right?

I think, that’s what makes us different than a lot of the companies past and present. We’ve got – we’ve had a great narrow focus over the last years around cabo tactically to get us over the goal line to fix the balance sheet to generate free cash to become profitable.

So we can take a little bit broader view on those investment hypothesis and thesis and still develop a pipeline, still do good work, but still maintain that level of business kind of focus around being profitable in generating free cash. So we have to balance that. Most biotech companies are run as companies, they’re run as biotechs, which is just spend, spend, spend and hoping for the best. And I think our view is a little bit different, and it’s certainly based upon where we came from, wherein – early part – first-half of 2015, we had probably 3x more debt than we had cash, right?

So it’s an an informed view based upon being at the – kind of at edge of the cliff and looking over and saying, I don’t want to go down there, I want to go in a different direction. And we’ve done that effectively in terms of kind of reorienting the company and I think we can continue to execute on a – from an R&D point of view, but doing it in a very focused disciplined manner as we go forward.

Geoff Meacham

And you feel like you are at capacity now with respect to pipeline and resources or other opportunities, for example, for in-license…?

Michael Morrissey

Yes, sure. I think we’re at capacity where we are based upon, where we’re at today, but we can do more, especially if the business continues to grow, right? So we have a very strong effort to look for later-stage assets. We have a lens that can do that, I think, pretty effectively, because if you like in – back to the kind of second-half of 2015. We had what we thought was really good data with cabo. But we did at The Street or the pharma side looking to partner didn’t really see it that way.

So I think, our perspective on assets, our perspective on what value looks like is unique and is – gives us an opportunity to go out and find later-stage assets that people might discount that we have a different view on. So – but again, it comes back to being disciplined, being focused, looking at the right data, asking the right questions about valuation, asking the right questions around how it fits right and moving forward.

So we’re – now we have a very, very, I think, deep team there across all functions of the business in terms of R&D, PV, clinical, regulatory, finance, et cetera, that could be commercial that allows us to take that that view very carefully and we’ll do the right thing at the right time. But we’re certainly looking for those assets for sure.

Geoff Meacham

Okay. We’re out of time. So thanks a lot. I appreciate.

Michael Morrissey

Thank you.

Question-and-Answer Session

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