All right, so we'll get started. Good morning, everybody. Thanks for attending our 45th Growth Dot Conference this year and for your interest in Exelixis. I'm one of the biotech analysts here at William Blair. Before we get started, for a full list of disclosures and conflicts, please visit our website. It's our pleasure to introduce Andrew Peters, Senior VP of Corporate Strategy. Andrew, I think let's get started maybe with a quick intro, and then we can dig into various different topics.
Yeah, great. Thanks for having us. Thanks for the invite. Always like the conference, always like the crowd here. Before I begin, we'll be making board meetings every day, so please see relevant disclosures around risks in our business and regulatory filings. Yeah, glad to be in Chicago. Look forward to this conference every year in part because it's coming off of the heels of ASCO. ASCO, obviously a big meeting for us, not only in terms of the data that we presented from our kind of key pipeline programs and select NIB. Frankly, I think one of the most heartening points of feedback I heard kind of throughout the weekend was around our presence in the kind of exhibition hall and from kind of our commercial booth and our MSL booth. I think someone described it as kind of Exelixis was standing among the redwoods.
What that means was we were there really among the big pharma players. I think that's a good way to think about our business. Cabometyx , our main drug, is one of the standards of care, the leading IO/ TKI or TKI in kidney cancer. The success that we've had with Cabo metyx to kind of define the standard of care and really be that number one player is just a good example of what good data can do and what a good team can do.
When I was walking throughout that kind of hall and seeing the robust presence we had, not only just kind of in the scale of our booth, but the people that were there and the clinicians and all of the conversations that we were having not only about RCC, but our newest indication in neuroendocrine tumors, it's just something that to me resonates where we are as a company. I think we've been kind of at this verge of a breakout for a while as a company. Obviously over the last several years, we've had to work through the dynamics of it and the challenge and kind of patent litigation and all of that stuff. Really starting in the third quarter of last year, once that was resolved, we had an opportunity to essentially redefine Exelixis for the street, for stakeholders.
I say this is who we are. Who we are is a commercial oncology company doing roughly $2 billion a year in our main drug, Cabometyx, with guidance or aspirational guidance to grow that to $3 billion by 2030. Fast on the heels of that, Zanzalintinib, our key pipeline drug that I mentioned before, in six planned or pivotal studies or ongoing pivotal studies that has the potential to help our top line grow through that end of LOE for Cabo in 2031. Big picture, if Cabo's potential $3 billion, we gave a number for $5 billion for Zanza by 2033, and really understanding either through our pipeline investment or external innovation that we can be opportunistic with, given our balance sheet and financial wherewithal, can we find that third drug?
Because simplistically, as a strategy guy, our industry is pretty simple. The more patients we treat, the more patients we help, the more value we can create. We are certainly doing that with Cabo. We certainly have aspirations to do that with Zanza. Whether it is new data coming from our pipeline or seeing at a conference like ASCO, another drug that we have the opportunity to bring in, aspirationally, we want to help more patients. When we do that, we think we can create a lot of value. Given that we have this kind of scale and expertise as a big small company, we want to do that again and again and again and again. Big picture, we think we are kind of at this breakout point and just want to continue on that momentum.
Great. I think we could spend a lot of time talking about the fundamentals and drivers, but I want to get one thing out of the way is the share repurchase. You talked about some of the drivers that can fuel top line growth, but some of the accretion you see at the bottom line can be driven by some of the stock repurchase. So $1.5 billion done, another $500 million. Can you just talk about maybe how you're thinking about capital allocation and durable?
Yeah. So kind of capital allocation, I guess we think about it in three buckets. The first is continuing to invest in our internal pipeline. So we spend about $1 billion a year in R&D. And one of the dynamics about Exelixis that I think is especially relevant in a conference like this is that we have a kind of a funny saying is we run Exelixis like a business, not a biotech. And what we mean by that is we're pretty disciplined in terms of how we spend and how we think about spend. And that billion dollars is probably more of a flat dynamic going forward than a lot of companies just think of R&D as an ever-growing line item. So that's kind of bucket one. We think a billion dollars is a lot to spend in R&D.
Within that, we obviously want to prioritize what we think is going to be successful. We want to invest in the winners and kill the drugs that aren't going to establish new standards of care as quick as we can. That's kind of point one. Bucket two is kind of external opportunity, external innovation. We want to be strategically positioned to have that optionality that if we do see that high conviction external asset that can fit well within our portfolio, we want to be able to move on that quickly. On that front, what I mentioned before, this big small company dynamic. What we mean by that is if you look at Exelixis from the outside, in our little sleeve of the world, kind of GI, GU oncology, we probably look more big pharma-like than anything.
Certainly, our commercial organization can execute and can scale with all of our peers. As a company, we've run 20-plus pivotal studies. We have that ability to really, at scale, invest and maximize value for any particular asset. We think we can, through a differentiated lens, understand is this a good drug or not? How does this look like in our hands versus what does it look like right now? How do we create value? Lastly, that kind of third bucket of stock buybacks and kind of more of the shareholder-friendly focus. I think the success that we have around Cabo and hopefully with Zanza allow us to continue to kind of invest in those three buckets and be opportunistic in how we think about value creation overall.
Great. I wanted to dig a little bit deeper into the Q1 dynamics. Stock reacted super favorably afterwards. It's a beat-and-raise quarter. The competitive dynamics have been pretty stagnant, I would characterize, in the past three years. Now you have Cabo in Q1 taking market share from every single competitor in the TKI space, especially pronounced in the new patient segment. I guess everybody's trying to figure out what's going on there.
Yeah. I mean, at the end of the day, it's about the data and it's about the team. I think on the first part, we had the five-year update to the 90-hour study at ASCO GU in January. To us, it really just emphasizes that the data set of Cabo in combination with Nivo really is suggestive of a best-in-class therapy. There are a lot of kind of nuances to that. Those are the sorts of things that our team goes out and markets to. To the latter point, we really think we have kind of a best-in-class in biopharma commercial organization. We have the ability to really hyper-focus just on Cabo and really go out day after day after day after day with our foot on the gas.
Recognizing that as other companies either shift priority or frankly just take their eye off the ball, we have the ability to immediately kind of grab share. We have a sophisticated analytics organization. We have a sophisticated just commercial organization in general that we think allow us to kind of continue to maximize every opportunity that we can see. When we talk about, say, 2030 Cabo guidance, a big part of that is just continuing momentum in the base business. To us, it's a bit of an example of why we are an outlier in our business. If you look historically, most drug launches tend to hit steady state around five to seven quarters after approval. We're now 4+ years into 9ER, and we're still growing.
I think, again, that's a testament to the data, but it's also a testament to the team in how we can kind of continue this momentum and expect to continue this momentum.
Okay. Maybe moving on to one of the newer indications in neuroendocrine tumors, kind of going back to small company running on large-scale commercial infrastructure. You said you basically detailed 70% of the prescriber base in the first few weeks. Kind of talk about that dynamic, right? You basically have clinical operations also kind of running alongside commercial organization at the same time. Commercial is launching in Cabo and clinical operations enrolling patients with Zanza. Can you kind of talk about that? Is there synergy that can be derived from those two initiatives?
Yeah. I mean, obviously kind of we want to grow into the market leaders in neuroendocrine tumors similar to where the market leaders in RCC, whether it's true across kind of the clinical landscape, certainly on the commercial side. As we think about the NET launch in the past, kind of we've talked about some unique or especially favorable dynamics that we have. As an example, what we've said, 75%-80% of NET prescribers, neuroendocrine tumor prescribers, already write Cabo scripts for another indication. There's this inherent familiarity with Cabo as a drug that I think is certainly favorable.
With any new drug launch, you kind of have this learning curve on the physician side, on the prescriber side to really understand how do you give this patient, how do you manage them through tolerability issues, how do you just deal with reimbursement issues, and all of the kind of practical things that can be challenging. The fact that we had such a significant overlap with our existing kind of Cabo business really starts us off on a pretty favorable footing. Secondly, that kind of 20%-25% of prescribers who haven't written Cabo, we found that the vast, vast majority of those were actually in centers that were already prescribing Cabo. I like to talk with our commercial folks because they have all these funny expressions and jargon about stuff. They talk about things like windshield time, which makes sense.
Reps are driving from office to office in front of a windshield. From a windshield time perspective, if they're already going to an oncology center where they're seeing someone, say, for RCC, but a NET specialist happens to be in the office next door, that's kind of an inherent, again, built-in synergy that we can really take advantage of. Maybe the prescriber may not be as familiar with Cabo, but the back office and all of the kind of operational things that are involved with getting patients on drug and working through insurance and all those dynamics. They may be there.
When we think about the NET launch, one of the reasons we've been so optimistic is not just about the data, which I think, again, coming back to my earlier comments about the data and about the team, the data in CABINET are particularly strong. We're super excited about it. All of our market research has been consistently favorable. It is about all of the other things that I think we do particularly well. NET has been something that we've been especially excited about.
Yeah. Yeah. I want to also talk a little bit about the broad label, right? The label did not specify any sort of grade specifications, any sort of pretreatment kind of restrictions. How does that kind of fit into the launch planning?
Yeah. A similar question kind of came up earlier today in a chat with an investor. I think the way that I tend to think about it is the label reflects the study. CABINET study was a broad population across pNET, epNET. It really showed a consistency of effect that patients do benefit from Cabo. The market research has been pretty consistent in that there's probably much less of a delineation between all of these different smaller subtypes of NET as opposed to kind of this emerging view that frankly Cabo is effective in broader neuroendocrine tumors. That's something that's a dynamic that plays out. What I always say is we've sat in the back of some of these ad boards and market research sessions.
When you present on a blinded basis, the CABINET data, anytime you have a 0.2 and a 0.4 in the HRs tend to react pretty favorably. Then when we unblind it and say, "Oh, this is Cabo," kind of this light goes off. It's like, "Oh, okay, yeah." One of the things I think we've talked about is that we've been pretty heartened to see that we're seeing scripts for a 40 milligram dose for Cabo being written. That's really indicative of a familiarity with the drug in this population. As a kind of a reminder for the audience, Cabo is approved at several doses. 60 mg is monotherapy, and that's what was studied in CABINET. The dose that's used in the 9ER study is 40 mg.
The idea to kind of rewind the clock a bit around that was in combination with a checkpoint inhibitor, maybe we want to take a little bit off the top in terms of efficacy, but it's a more kind of user-friendly dose. The fact that it's a dose that physicians are comfortable with, they kind of know the nuances of how to treat through these adverse events, it just shows that a lot of the things that we had hoped for as we were looking ahead to the launch are starting to play out.
Oh, interesting. Okay. This is the first kind of broker conference after ASCO. It is a good opportunity to kind of talk about the poster presentation, actually the oral presentation along with the poster presentation at ASCO. The RCC cohort largely mirrors that of what was presented for CheckMate- 9ER. Can you talk about some of the takeaways maybe from an efficacy perspective, largely very similar tolerability perspective, right? That is the kind of hypothesis that went into the design of Zanzalintinib inspired by Cabometyx.
Yeah. Obviously kind of hot off the presses on the heels of this weekend at ASCO. Kind of key takeaway, Zanza is a highly active drug in RCC. To kind of take a little bit of a step back and remind the audience of kind of the hypothesis around Zanza, we think Cabo is a very effective drug, obviously commercially very successful. When we were thinking about how to improve it, we had identified kind of its one liability, so to speak, is it has a particularly long half-life, around 100 hours. What that means from a practical management of patients' perspective is you think about a patient who's on Cabo, either as monotherapy or in combination, all patients on TKIs ultimately see an adverse event.
When you see an adverse event, you dose hold for resolution of symptoms and then rechallenge it at a lower dose. Given the half-life, given the accumulation in plasma, that kind of dose hold washout period can be 10 days, two weeks, sometimes even longer. What that means is you have a metastatic cancer patient who's not being treated. When you layer on the fact that we think the future of oncology is likely in multimodality combinations, anytime you have one drug that's being held, you may not be able to know, is it Cabo that's causing this particular event, or is it the other one? Do you dose hold both? It gets particularly challenging from, say, just a treatment algorithm perspective.
The genesis, the idea around Zanza was, can we phenocopy the kinase inhibition profile of Cabo, kind of the sweet spot, the secret sauce of why we think it's effective, but change the half-life to make it more user-friendly? What our medicinal chemists were able to do was to take that core cabozantinib scaffold, engineer a metabolic liability into really kind of the non-active portion of that scaffold, and take the half-life from about 100 hours to a little under a day, around 23 hours. All of the data that we've presented so far are roughly consistent with that hypothesis, that we've been able to kind of maintain that highly active TKI with a much shorter half-life that presumably is more user-friendly and combinable and blah, blah, blah.
Unsurprisingly, when you change the half-life, you change some of the physical properties of the drug around, say, things like tissue distribution, amount of drug that's in plasma versus tumor, that sort of stuff. That is where early days, but we're potentially starting to see some differentiation on tolerability, say, things like PPE or hand-foot syndrome certainly look different. From our perspective, the way we think about the world is the cosmic truth around what Cabo looks like is ultimately going to come from the pivotal data. As much as we all like to go and look at posters and orals and all the fun stuff at ASCO, really kind of the key stuff is the phase III's. The ASCO data were certainly consistent with a highly active drug, certainly an interesting kind of emerging tolerability profile.
Personally, I'm looking ahead to the two pivotal readouts that we have later this year, first in third-line colorectal cancer in combination with Atezo, and then later in combination with Nivo in a non-clear cell RCC frontline population. There we'll kind of get a much better understanding of what Zanza is and what it's likely to be. I look at the ASCO data, and I think it's clearly indicative of a good drug.
Great. Good segue into the next set of questions that we have, which is kind of digging into some of the topics around the phase III. First one is with the 303. There's been some changes, right, in the primary endpoint. I've got a lot of client questions after the call about what's driving that change. Personally, I actually am very enthusiastic about the change, right? Cabo has shown really good activity in visceral metastases across all solid tumors, liver, prostate, kidney. You basically kind of can really detect that signal by going the ITT. Maybe for the audience and for those listening on the call, can you kind of go through that history? What drove some of the changes, version 2.0, version 3.0, where we landed?
Yeah. I mean, I think throughout our history, we've had experience or we have an expression internally, ultimately, we're in the business of p-values. P-values drive new standards of care. New standards of care drive revenue. We don't want to be in the business of running trials. We want to be in the business of running successful trials. When we first started 303, it was on the heels of a couple of interesting data sets of cabo with durva or cabo with atezo in kind of a similar patient population. After that trial was initiated, Merck had a study called LEAP-017 or LEAP-017, looking at pembro with one of their multi-target TKIs called lenvatinib in a similar patient population.
We looked at that data and came to the conclusion that while we're certainly paying attention to some of the emerging signs and signals from our early Cabo experience, the caveats around limited interpretability of phase one data certainly apply. We recognize and believe that there's likely much more to learn in these large randomized studies around how patients are likely to respond, what patient population or stratification factors matter, and all of that. We recognized in kind of LEAP-017 that, say, something like RAS status was probably less relevant from an overall probability of success perspective than, say, something like, does the patient have liver metastases or not? That was this emerging theme in kind of all colorectal cancer studies that there are almost kind of two functionally different groups, patients with and without liver metastases.
That first amendment that we made actually kind of focused on that dynamic. We had instituted, it's called a hierarchical statistical analysis around first looking at that non-liver met group and then on the liver met group. We amended the study, made some changes there to kind of focus on that and some other things. As kind of the study began to mature, we started seeing, unsurprisingly, a differential event rate in kind of the two groups. The reason I say it's unsurprising, if you think about a patient who has a metastasis in their liver, they're functionally likely to do much worse. Unfortunately, they're likely to die sooner than someone who doesn't have liver mets.
If you think about overall survival as the primary endpoint in the study, on a blinded basis, we were seeing kind of this differential accrual of events in the two populations. The amendment that we made that we talked about on the third quarter call, really simplistically, was more of a temporal one. Given the fact that we were seeing a difference in event accruals across the two arms, what it allows us to do is essentially left-shift the analysis and frankly look at a larger group of patients, the ITT versus the non-liver met group. From a market opportunity perspective, we've talked about the non-liver met group being roughly equivalent to the patients with liver metastases.
The reason for that is even though the NLM population is about 30% of patients, because they tend to do longer, they tend to be on drug longer, from a market opportunity perspective, it actually kind of balances out. If we think about the third-line colorectal as a roughly $1 billion opportunity, what this latest amendment does is it allows us to essentially temporarily shift the analysis into a much larger group. We are excited about the change that we made, and we'll see data later this year.
Okay. And then maybe moving on to RCC, which is kind of the bread and butter of Exelixis, basically a repeat of the highly successful 9ER study, but in a different histology. You also have, I guess, the pet met study, right, from Dr. Powell showing Cabo head-to-head better than sunitinib. I guess my view is it's technically a very low-risk study. I'm curious, in the event of a positive readout, the ongoing message from the KOL community is through the large number of TKI IO combinations out there, learn one and use it well. I'm curious about how this data could really break that message.
Yeah. The non-clear cell segment is a little unique and interesting to me. When we were first thinking about the 304 study, kind of struck m,e and I think a lot of people, it's interesting that there had never been a phase III run in that indication in that population. Part of the reason for that is any drug that has approval in kidney cancer, it's inclusive of both clear cell and non-clear cell. The label doesn't really delineate between the two. Kind of use is technically everything's on label. Adoption tends to be a little bit of a hodgepodge based on NCCN guidelines that are kind of driven by unrandomized small single-arm studies that really don't provide level one evidence as to kind of what a standard of care, what the standard of care and the indication is.
What we think 304 allows us to do is to essentially provide that randomized pivotal data against a standard of care in non-clear cell RCC that has the ability to essentially define what patients should get or could get in that population. It is a trial we're excited for, one that we're going to be kind of on the bleeding edge, so to speak, is kind of that first pivotal data there. Really, that was the rationale behind it, the use and utilization tends to be based more on kind of smaller studies that we all recognize can be complicated to really draw meaningful conclusions from. We wanted to essentially define the new standard of care with a large pivotal study.
Okay. Great. Thank you so much, Andrew.
Yeah. Thank you.
Our breakout room is Burnham A on the second floor, so we can continue the discussion that way. Thank you very much for your.