Exelixis, Inc. (NASDAQ:EXEL) Stifel Healthcare Conference Call November 19, 2019 9:10 AM ET
Mike Morrissey - Chief Executive Officer
Chris Senner - Chief Financial Officer
Susan Hubbard - Executive Vice President, Public Affairs, IR
Andrew Peters - VP of Strategy
Conference Call Participants
Stephen Willey - Stifel
Alright, so we're going to go ahead and get started. I’m Stephen Willey, one of the Senior Biotech Analyst here at Stifel. As part of our next presentation we have the CEO of Exelixis, Mike Morrissey. With him in attendance is Susan Hubbard who runs up their communications efforts; Chris Senner who is their Chief Financial Officer; and Andrew Peters who heads up their BD function.
We're just going to go right into a fireside chat. This is designed to be interactive. So if anyone has a question feel free to acknowledge yourselves and hopefully we’ll get it asked.
Mike, not sure if you want to make any kind of introductory comments with respect to kind of where you are, maybe what you do, and then we'll go right into Q&A.
Alright, awesome. Good morning, everybody. Before I begin, I'll just start by saying that I'll be making forward-looking statements, so please see our SEC filings for a description of the risks that we face on our business.
Exelixis commercial stage biotech company focusing on oncology, we have four different products now in the market from our early discovery through development efforts, most notably is CABOMETYX.
Now a billion dollar global brand mainly focused in RCC and HCC with little bits of thyroid tumors with CABOMETYX, the capsule formulation leading to TKI and RCC and one that we're pretty excited about in terms of growing relative to what it can do in the approved indications and then beyond with a lot of work that we’re doing right now clinically and things will start in 2020.
So, we can get into Q&A, but lots going on. It’s a very exciting time for us and certainly lots of momentum in terms of how we sit here today, both financially, but also clinically.
Q - Stephen Willey
Great! So we know the treatment of newly diagnosed RCC is kind of a pretty dynamic, competitive landscape right now. Can you maybe just talk a little bit about what you guys are seeing in the marketplace and you know how some of these changes to frontline therapy is affecting or impacting the CABOMETYX franchise?
Sure. So not surprisingly as I think we all saw coming – going back a couple of years now. IO combinations are dominating the first-line setting in RCC, whether it be IO/IO or IO TKI, there’s I think pretty compelling data which we saw emerge at Phase Ib. Its small, non-randomized Phase 1b trials, but then we are confirmed in you know larger global pivotal trials.
So as we expected and talked about over for the last year, 18 months or so, the first-line setting is really now dominated by either IO/IO or IO TKI combinations, and we’ve seen that market share grow pretty substantially if you look at brand impact data in the 75% to 80% range now, so no surprise.
Obviously, we’ve got a lot going on there ourselves with the CheckMate 9ER study, that BMS is running the cabo/nivo combination, both cabo and nivo individually. You know we are leaders in the second-line space cabo with first-line data as welcome form cabozan. So we're excited about the quote we have in that rates. You know obviously we need to get data. BMS is starting to have data in early 2020, which will be a pretty important year for us and a pretty impactful year for us across the continuum of different trials that we're running and things that we can do.
But again, you know the population is growing, the market is growing and we've seen that from the IMS data over the last several quarters. There’s more options to really improve patient survival. There is more options for patients when they progress. We think cabo certainly has a dominant position now in the second-line, which has been there for a while, and what we think will continue to grow as the frontline IO combination patients.
So the question is really one of kinetics, reaching steady-state and how the ins and outs kind of look relative to patients entering first-line and then leaving upon progression, a little bit longer with the IO TKIs based upon longer PFS, which isn't surprising compared to ipi/nivo upfront, but we're seeing very good traction and I think the support from KOLs and from market research that we're doing, so cabo being the dominant second-line player is pretty strong.
So, you've indicated that kind of this little blip of attrition and demand growth that we've seen is I guess due to both some cannibalization of single-agent frontline cabo, as well as this delayed patient progression kinetics in terms of how they are flowing from frontline down to second line. Do you have any sense as to how those two things attribute to us in terms of which is having the greatest impact.
Yeah, so one is immediate and the other is delayed, right. So frontline patients going on IO combinations are going to obviously shrink the pool or the piece of the pie relative to the TKI monotherapy, and we've certainly seen that cabo is still the leader in that space. But that's definitely that we’re shrinking a piece of that pie, right, and that’s immediate and then patients have to then get their treatments and obviously there's a distribution on that based upon the CABOMETYX data from the different trials before they progress onto the second line, so.
So that's why we talked about it on the Q3 call. We're more or less flat Q3 versus Q2. For really the first quarter, we didn't grow since we launched in the second quarter of 2016. So you play with the numbers and the CAGRs there relative to you know the growth rates that’s still pretty impressive, but that just needs to hit steady state, right and some of the updated data at KCA for the KEYNOTE-426 data suggests that the PFS is about a five, six month delta between sunitinib and the experimental arm with [inaudible].
So when that even does steady-state wise, I wouldn't want to speculate per se, but certainly we saw this with ipi/nivo and in that case the PFS really is a little bit longer relative to cabozantinib. So that also had that same Kinetic kind of run before it hits steady-state and then second-line kind of kicked it. So we think it will happen. Obviously there's lots of moving pieces here, but you know there's many other ways to grow the business and we're certainly excited about 9ER all the trials we've got going on, new indications etcetera.
So my focus is less quarter-to-quarter than it is year-over-year, two or three-year horizon where the best way to maintain growth is the added new indications and continue to kind of make that pie as big as possible with the number of patients you can treat with a very long duration of therapy, so that's the goal. So we're not myopic on RCC. We see HCC as a big opportunity. We've got a lot of interesting data moving forward now in other tumor types as well. So it's the full – kind of full-court press to make sure we can maximize the value of that franchise as we go forward.
And those are all things that I want to touch upon, but I am going – I know you’ve got kind of some quarterly kinetics questions, just because those are the questions that we get all the time.
So, I guess have you previously given some kind of estimated single-agent cabo market share prior to the approval of pembrolizumab and axitinib, specifically in the frontline setting and has that number changed meaningfully since the launch of that IO TKI regimen?
No, the only thing we've ever given is market share, a number for frontline. We've avoided that, because we see that as competitive data and some of the syndicated data is questionable value based upon the small ends that you see.
We've certainly seen a drop in our front-line share as the both IO and IO TKI have come on the market over the last 18 months. There's should be no surprise there, and we’ve predicted that, we’ve talked about that, we've also seen a, you know pretty solid commensurate rise in the second-line share as well.
So all that – you know again all that kind of evens out over time. We'll get there, but you know it’s not surprising that a combination with arguably pretty compelling data is going to capture the majority of that first-line pie that we've predicted. You know going into it, if you look at some of our Phase 1b data from 2016, 2017, so no surprise there.
Then has second-line cabo market share essentially remained stable through kind of all of this frontline churn, and is it really just kind of a question of this delay in patients that are newly starting second-line therapy. So I guess second-line is growing and has been growing as a function of patient volume or as a function of market share or both?
And then does nivo still represent a bit of a significant competitor in the second-line setting. I think Bristol had kind of intimated on their most recent call that they've seen nivo single-agent share in the second-line setting kind of stabilize in and around the 30% range.
Yeah, I won't comment on their numbers. You know the patients that get – who are IO compatible, who get TKI monotherapy frontline, right are liable to get nivo, single-agent nivo second-line.
But as that frontline TKI monotherapy shrinks then the second-line nivo is going to shrink as well. So we've seen that dropping; we've seen ipi/nivo drop frontline with the launch of [inaudible] as well, which all it gets consistent with how the KOLs view kind of what their job is and what their therapeutic intent is versus in the community.
So we see you know at frontline, a pretty good separation between the academic KOLs focusing on ipi/nivo frontline, the larger community population using [inaudible], which we think speaks well for what we could do with cabo nivo if we have competitive data there, and then second-line the patients that get some IO right, the combination will then get cabo as the predominant second-line agent. Yeah, that's how that flow seems to be working right now.
And then what do you – what's your perspective on this concept of IO retreatment in the second-line setting? I know it’s kind of a little bit of theoretical to maybe think that you would give a PD-1 inhibitor to a patient who would just progressed on a PD-1 inhibitor, but there were some interesting data just kind of presented for Merck at ESMO that suggested that you could kind of follow up post PD-1 with a PD-1 TKI. I think we've seen in other immunogenic tumor types of melanoma where you know things like IO retreatment gets surprisingly institutionalized amongst a lot of KOLs. I guess is this something that you're seeing at all in the marketplace and what's your thought process in terms of if this ever even becomes a thing.
Yeah, no, it's a topic that gets discussed a lot at meetings and I’ve seen a lot of that kind of combo IO, IO after a patient becomes refractory to the first IO. In the marketplace, based on our market research and the data is hard to interpret. You know it's always easy to hand away with small non-randomized study looking at atypical patient populations. I think you're referring to some of the pembrolizumab combination data, but that's beginning a lot of chatter.
You look at that date; I think they have a 40% favorable risk population. So, what does that mean? The patients who are going on with that trial, this is all single institution. M.D. Anderson had a median time on the IO combination of about seven months, which seems light to me. So what does that mean? Are these the early progresses? Are they more TKI friendly to begin with? Would the TKI by itself be as effective? I mean it's, you can ask a zillion questions, because it's a small end trial with single institution and with no control arm, blah, blah, blah.
So you look at the cabo single-agent data post-IO versus [inaudible] you know without and very, very interesting in terms of the 0.22 hazard ratio for PFS in patients that got nivo upfront, first. There has been for four different ISTs, now presented from Dana-Farber, MD Anderson, Sloan-Kettering and then the IGR in Paris response rates for single agent cabo post-IO range from 40% to 50%. PFS is from 10 months to 15 months.
You know so it's all looking very promising from the standpoint of what single-agent could do by itself. So looking at our IO combination with kind of similar data, what does that mean? So we're not – you know we're certainly interested in that, but we are looking at options of cabo combinations second-line, but you've got to do the right experiments to be able to get the right answer in terms of you know, running a randomized single-agent versus combination trial post-IO refractory patients to really answer that question properly, so…
But you know limited data never stops people from pining upon what it could mean, what it does mean. We don't see a lot of that in our market research in terms of being [inaudible] nothing that we're worried about.
You know you make an important point I think with respect to looking at some of this data in a post-IO setting and how some of these trials are defining PD-1 refractory and whatnot. So that's hopefully it for a kind of a quarterly kinetics, unless anyone else has a question?
Alright, so nivo carbo, you talked a little bit about CheckMate early on and we're going to be seeing data I guess sometime early next year. There doesn't seem to be a lot of controversy around your ability to statistically win in this trial. I think a lot of the controversy seems to center around whether or not you can beat the hazard ratio on overall survival that's been posted by Merck with respect to pembro and axi and that is now approved, so that's kind of the IO TKI competitive benchmark.
I guess, do you think that it's kind of a fair comparison that investors are kind of holding you hostage to that data point, and do you think that you need to beat that hazard ratio to become commercially relevant when in the frontline setting?
Look, it's always good to have survival in your label. I think we – you know I think our experience based on the meier data has reinforced that. That was the differentiator for us relative to you know this past kind of group of second-line options and how we rapidly became the kind of go-to agent for the TKI of choices because we had survival data.
So the fact that there's now a combination, a couple of combinations that have that has raised the bar and obviously we're aware of that and have I think taken steps to increase the probability of success there by letting the clock spin a little bit longer to get more events to be able to see that right. So I think it's pretty obvious what we need to see relative to the baseline data, to generate a competitive dataset and you know experiments cooking right now if you will. So we'll find out how that looks early next year.
All of our market research suggests that you know there's different ways to differentiate either from IO-IO with the existing IO TKI combinations. You know I won’t belabor the point now for competitive reasons, but we have a very good understanding of the different levers and toggles we could pull based upon how that data reads out, relative to you know magnitude of PFS response rates, CR rates, survival, mature hazard ratios are as important as maybe some of the medium and/or you know now that the P value is below a certain point to get over the goal line, that's really important things, so we'll see.
So we're ready to roll. We've got obviously a strong commercial platform relative to RCC with both cabo and nivo, with a high-level of name recognition as with the leading agents for years in that space. So we feel pretty comfortable about being able to compete there if we have competitive data.
So I think there’s been some observation within the keynote trial that there appeared to be kind of a higher proportion of favorable risk patients than what you would expect to see, epidemiologically within RCC. Do you know if you actually have a lower proportion of favorable risk patients within 90 or would you expect that number to kind of track closer to what you would expect in the real world [Cross Talk].
I really don't want to comment on an ongoing trial, so can’t do that.
Would you suggest that maybe having a lower proportion of favorable risk patients could be a competitive tailwind for you guys?
Yeah, again speculating on the demographics and how that plays out in terms of data, again hard to go there without actually having all the data in front of me. I don't want to piece them up Stephen. I will say the KCA update for 426 was interesting relative to the activity and the favorable risk population versus the potent intermediate risk which is again demographically speaking about 80% of the population, right.
So the bar there is about 12 months for axi/pem, so that's an interesting stake in the ground for us in terms of kind of the goalpost that we might see, but could easily compete with right relative to existing data. So again, let the experiment finish, let's analyze the data and then we can chat about them much more in excruciating detail as we go forward.
I'll try to stop asking speculative questions.
You’ll get the same answer.
So you are also looking at the combination of cabo with ipi/nivo frontline. Where do you think that regimen fits within kind of the broader front-line treatment paradigm for RCC?
Well, it’s an interesting concept right if you take the best of both worlds potentially – whether it be additive or synergistic, you can go to the next level of impact on these patients from an activity point-of-view.
So I mean the big kind of pulling, calling point for ipi/nivo is the ICI rates and that really resonates with you know KOLs who have a therapeutic intensive – you know KOL therapeutic intensive and what they do. So that really dominates that space because of the CR rates and if you look at that again, it’s going to the old CheckMate-214 data via the PD-L1 positive population did extremely well.
So the questions are, if by adding best-in-class TKI into that mix, can you get the best of both worlds? Can you improve the CR rate more, can you improve the overall PFS data bringing up the PD-L1 negatives as we've seen in the past etcetera? So again, so depending upon how that looks, could you really define a new standard of care comparing the triplet versus being delinquent.
So we are excited about that, there's lots of support for that on a global level. You know we're very pleased to see the level of interest and I think people appreciate what we're trying to do here and that's really pushed the envelope. That was just why they couldn’t put these patients across-the-board.
Yeah, I guess it kind of seems like PFS is kind of the achilles heel of the nivo combination right.
In the PD-L1 negative.
Sure, in the PD-L1 negative. So this will be an opportunity that with the TKI you can preserve those CR, HCC’s with Nivo, maybe even improve upon them a little bit and then take the PFS time associated with the nivo and make it I guess more IO TKI right.
So just switching gears to liver, you've got a year of experience, almost a full year of experience with cabo and the HCC market right now. I guess how would you characterize the performance of that drug and that indication year-to-date, just relative to your internal expectations when you guys launched the product.
Yeah, I would say, second, third-line liver experience is completely in line with expectations going into the launch. Again, as we've talked about this extensively, this is a market that needs to be built or rebuilt. The MOA switching kind of phenomenon that these docs like to do, starting with the TKI going to IO second-line, we get a little bit of second-line, and then we get a lot of third line, so it's that mix population.
So the fact that it's been somewhat of a kind of flattish starts in terms of gaining market share, adding patients in terms of NPS has been fully expected. We didn't think as the market existed, 2018, that it would be as certainly a big of a driver in terms of growth and revenue as RCC was, even though we have survival data in that space.
Now the good news and we talked about this extensively is that what we'd like to see and to help that market grow and the pie grow, is to have IO move-up frontline, right. CheckMate 459 which a lot of KOL’s thought would work, but didn't work, that was single-agent Nivo versus Serafenib that was a disappointment for everybody in terms of KOL patients, the whole market that was a really disappointed result.
But IMbrave from Genentech-Roche, looking at the combination of bevacizumab with atezolizumab, seems to be effective in extending both PFS and OS will see that data into the next few weeks at ESMO Asia. I mean that can play the same rule of having IO move up to Frontline.
Again, then making a second-line IO less meaningful, because those patients as they progress, you know things on the first IO would be hard to salvage with the second IO, there's really no data for them. But also then being the pool for getting patients to come into medical oncology early in their disease after diagnosis or after local progression and really making local therapy less of an option for those patients.
So we see that as a big, big validator for this market growing, number one, because it really draws patients into the frontline setting and then gives us a much – I think a much better option to come in at second-line with our existing data from CELESTIAL, number one. But also the fact that you know we were running these COSMIC-312 studies, just looking at cabo atezo in the frontline setting against sorafenib and we certainly like the opportunity we have there relative to the potent activity we have with cabo in the liver based upon survival data from CELESTIAL, but also the general activity of that combination.
So if we could be second there with arguably competitive data, that could be a big, big boom for us relative to having played a role in that market. So lots of moving pieces there, but we're super excited about the COSMIC-312 that’s enrolling very, very quickly, so lots to do there over the next few months.
Any questions on liver?
Q - Stephen Willey
So I’m going to ask you a BD question and I know you guys have been fairly active on kind of the earlier-stage front, where you've run kind of a few tuck-in deals, brought in a few assets, and I guess the question for me is you know how challenging is it for a company like EXEL to be competing with a lot of the larger biotech and pharma out there from a BD perspective and do you feel like that inherently requires you to assume more risk, to get kind of a potentially higher return on per dollar spent?
A - Mike Morrissey
Yes, I don't view it as competing directly with big pharma big biotech for assets. I think we have very different wins in terms of how we're looking at really mid, late-stage assets in the oncology space that just sets us apart from how we're viewing the opportunity and how we're viewing kind of our role as arguably value investors to find assets that we can partner and/or acquire that fit into our platform or framework relative to how we want to build the business.
So again, we've got lots of cash we can leverage. Our EBIDA, we can play any game we want to play relative to you know financing a transaction, because we've been so disciplined with how we built, kind of rebuilt the balance sheet in both our cash position and the fact that we're profitable which you know very few mid-cap companies are.
For us it's a matter of being aggressive and being disciplined in how we view the quality of assets and the quality of data in an environment that is very frothy, number one, and certainly very whiplashie, if that’s even a word, relative to you know a small number of patients with reasonable data that kind of can drive 2x, 3x kind of value increases over a couple of days, right.
So we’re looking to be careful and we need to be very pragmatic about how we view investing as opposed to how people view a trading opportunity, kind of in the Wall Street's talent to make sure that we're making the right move, but I don't see us competing with pharma where we have a very different view on that relative to how we're looking to value in a serial fashion going forward, not won and done, but it's how we’ve kind of you know stockpiled assets as we go. In that early-stage we’re doing pretty well and now we're looking later stage to be able to provide later-stage opportunities.
Okay. I just want to finish up here with a question on IP, which is I think kind of a little bit of a source of curiosity for some investors. So I guess the recent ANDA filing is probably not a huge surprise just given the success of the drug that you filed a patent infringement lawsuit against the ANDA filer, which I believe is looking for relief based on the 20-30 polymorph patent, is that correct? So should we assume that you view the polymorph patent then to be kind of the strongest of the non-composition patents, and is that kind of what you are going to be building your case around.
And I believe what you have initiated now will result in there being some kind of declaration of judgment, right, in terms of the validity of that polymorph patent. So should we be expecting I guess one, when's the timing around that announcement; like when does this play out? And then will that announcement then kind of give us clarity on what the exclusivity of the franchise looks like?
Yeah, so I have to be careful of what I say here, again really as I mentioned on our Q3 earnings and we talked about this, I don't want to litigate this publicly. We've got lots of lots of great data supporting all of our IP, certainly specifically around some of the key patents in the orange book obviously, right, because they are in there. But again, I don't really want to get into the details of how we're looking at this.
You know we have spoken publicly around our view. Internally how we're modeling that LOE in our view as the end of 2030 timeframe and we've spoken to the strength of the polymorph patent. Based upon the data we have going into the patent that both enables the production of the key polymorphs, but also the use of that and the vast majority of our clinical, but also all of our commercial samples.
So I'm going to let the legal team kind of take care of that business and as we generate material events, we will obviously communicate that, but certainly don't want to spend a lot of time talking about that publicly for all the obvious reasons.
Q - Stephen Willey
Alright, I appreciate your patients.
A - Mike Morrissey
Q - Stephen Willey
Thank you very much. Good day!