Good. Busy.
Yeah.
Great, great schedule, and there's another meeting going on today, too.
I know. Lots of, lots of fun stuff.
Yeah. It's good.
Yeah. It's all good. Well, thanks for.
Yeah.
Yeah. Good to be here.
All right, everyone. I think we'll get started here with the first session after lunchtime, but my name is Derek Archila. I'm one of the senior biotech analysts here at Wells. Very excited to have Exelixis, and with us today, Michael Morrissey, the President and Chief Executive Officer. Thanks for being here.
Yeah. It's great to be here. Thanks again. Beautiful day in Boston.
Indeed.
It passed the summer mugginess and heat. It's gorgeous here, but thanks again for the invite. You had a great, great day. Just packed one-on-one. So.
Awesome.
Really super.
Good to hear that. Yeah, maybe just to kind of level set us, kind of just give us the state of the business here in terms of what's going on at Exelixis. We have obviously plenty of questions to dig into, but maybe just set us up and then we'll move on from there.
For sure.
Before I begin, let me just remind you I'll be making forward-looking statements. So please see our SEC filings for a description of the risks that we face in our business. So yes, so Exelixis, commercial stage biotech company focused exclusively in oncology. Main value driver immediately is around cabozantinib in its tablet form called Cometriq as the leading drug for RCC. Strong commercial performance over the last number of years. I would say certainly in the kidney cancer space, the most enabling data that we've achieved recently was in the 2020 timeframe with the 90-hour trial that we did in terms of Cabo plus Nivo in frontline RCC. We think that certainly for us, for our business, has certainly revolutionized the reach we have in the kidney cancer space for the last, I think, 11 or 12 quarters. Cabo has been the leading TKI for RCC.
We've seen strong growth. We went from about $750 million in 2019 and 2020 to, I think, $1.8 billion or so last year and factoring towards $2.1 billion plus this year at the midpoint of our guidance, so really strong performance. Great story around how you can take novel insights in terms of kind of mechanistic pharmacology in terms of what drives tumor growth and resistance and convert that into really game-changing data for patients, so we're super proud of that. The Cabo franchise has certainly enabled us to look at how do we build a multi-compound, multi-franchise company going forward. Next compound up is zanzalintinib that is in a variety of pivotal trials. I'm sure we'll talk about that today. First pivotal trial in late line colorectal cancer, STELLAR-303 trial, readout positive, so we're super excited about that and moving that downstream.
And then we have a pipeline behind that. So we've got Zenza in five either ongoing or about to start pivotal trials and more to come. And then we have a very, very deep pipeline of both small molecules and biologics to be able to, again, meet this aspirational vision for this multi-compound, multi-franchise company. That's how you build value for patients. That's how you build value for shareholders. And that's the aspirational goal for the company.
Awesome. Well, maybe let's start with the base business first in terms of what you're seeing right now with Cabo and some of the growth opportunities, particularly within obviously your in-line indications, but also the recently launched pNET indication.
Right. Right. So yeah. So kidney continues to grow. As we highlighted on the Q2 call a few months ago, we saw strong performance. So it was 19-20% growth year over year comparing Q2 2025 to Q2 2024. So strong growth there. Again, with tiny price increases based upon kind of the new IRA framework. So really demand-driven. I think demand grew 18% in that same timeframe. Maybe from a market share point of view, we grew four points over that year. So about a point a quarter, which years into a launch off of 9ER just really reinforces how we very, very carefully and obviously compliantly, but in a very in-depth fashion, target and educate both existing prescribers and new prescribers around the value that we have in the data. So the Cabo story just really reflects that. We think we have more room to run here.
We're never satisfied with where we're at. And we have just phenomenal deep analytics into understanding the marketplace and the market basket as it really applies to any indication and certainly using all that information to target our salesforce and our marketing team about how to go about educating and moving the needle for patients and for prescribers. So excited about that. So the kidney cancer, the base business, if you will, along with thyroid cancer and liver cancer, other indications we have there continues to grow. And then we add NET to that. Both epNET, extra-pancreatic NET, as well as pNET are both important new indications that were added earlier this year at the end of Q1. Strong data from the CABINET trial in both indications, if you will, since they're individual indications in that trial.
And we're super excited to have that approved and now launched in the U.S. And then Ipsen, our partner, saw approval of that just at the end of Q1 as well. So we're excited about that too.
Gotcha. I guess in terms of the underlying growth for kind of the non-NET indications, how sustainable growth or how sustainable do you think that growth is that you just mentioned in terms of what you're seeing in share gains and all that kind of demand-driven growth?
Yeah. So we have 25% plus or minus market share in the frontline setting. So there's plenty of room to grow there. Right. Overall, I think second line, we're in the 45% or so range, maybe a little bit higher. So we're seeing most patients at some point in time in their journey in kidney cancer. The question is, can we shift the second line utilization to frontline utilization and then get the stacking that comes with a duration of PFS of 16-17 months? So that's the goal. So again, we don't believe that we should be satisfied with where we're at. And if there's a plateau, we think it's many, many quarters out. But our view is to grow market share every day through every visit, through every detail that we have and every quarter as we go forward. So how that looks, we'll see.
But again, we're very, very committed to continuing to build on that business as we go forward.
Gotcha. And then just on NET specifically, how do you frame that opportunity in terms of the adoption? I know some people were like, is there going to be a bolus or this? So I guess how do you feel like that trajectory for that launch will kind of also underpin some growth here in the next four years?
Yeah. Yeah. No, it's a great question. And there was lots of swirl in your world, in the sell-side world in the Q1, Q2 timeframe. So let's just kind of level set expectations here. Number one, there's no warehousing of patients. This isn't like Hep C. If you have advanced progressive NET as a disease, it's an indolent disease, right? And you'll be able to cycle through therapies. But you're on an active therapy because you have active tumor growth. Right. So what's rate limiting for us right now is really having patients who are, if they're being well served on their current therapies, that's great. At some point in time, they will progress. And that's rate limiting for them to then have the opportunity to go on to Cabo. So first quarter of launch, first full quarter was second quarter of this year.
We had, I thought, a great coming out party. Market research highlights that we have about a 35% market share within literally a couple of months of launch. So to go from a standing start of zero up to 35% is a great kind of first stake in the ground on that march forward. We also, based on market research, have best-in-class designation in terms of how prescribers view the data we have, the opportunity they have. So having that early in a launch gives us a lot of momentum. We talked about 4% of our revenue out of the $520 million that we did was related to NET. So I can do that math. That's about $20 million.
In terms of a first quarter of launch, where the vast majority of bottles that we're selling are based on new patient starts and not really having the opportunity for refills, I thought was just a fantastic way to start. You do the math on that. It's actually higher than the 35% market share that we got via our market research. So great start. Q3 continues to evolve very nicely. Won't go into the numbers right now. Obviously, we're tracking that very closely. Excited about that trajectory. And again, the question is just going to be growth, right, and what that figure looks like month over month, quarter over quarter. And hard to draw a line with one point. So as we go out, we'll be able to see what that looks like.
I'll just remind everybody that, again, the RCC ramp from Q1 2021 to Q2 2025, we've easily almost tripled revenue on that. We're confident that this is just one of those opportunities where we just have to grind it out and continue to raise the awareness, educate docs. There's a large prescriber pool. Many of those doctors have used Cabo. Everybody we talk to is very excited about the opportunity to use Cabo when it's appropriate for their patients. The question is just when they're available and when they choose to use it. The team is very strong and we're looking forward to being able to push that as we go forward.
Gotcha. I mean, are you still, I think you guys have said in the past that you think Cabo peaks out at like $3 billion, I think. So I guess, do you still, I guess, do you reiterate that? And also, is it more of a slowing growth for kind of like, let's say, mostly renal with a pickup and kind of driving the NET? It's like, I guess we already know we're kind of at like $2.1 billion. How do we converge to $3 billion?
Yeah. Well, I mean, you can do the math. Again, this is math I can do to go. So we gave that aspirational perspective back last year, 2024. To get there by 2030, you need a 10%-11% kicker to be able to get there. Right. And certainly we did that last year easily on RCC alone. And now having that on top of that, again, feel really good about being able to meet that as we go forward. Right.
Gotcha. Okay, well, maybe shifting gears to Zenza and then we'll go through the broader pipeline, but obviously, you had the data for third line colorectal cancer, ITT. I guess what are the next steps here? Obviously, we haven't seen much of the data on our side, so we're still waiting to see.
No, we haven't seen any of the data yet. Yeah, exactly.
Press release. So obviously, kind of what are the next steps in terms of sharing that data and also what's kind of been going on in the background around kind of regulatory discussions of being able to file on ITT before non-liver mets, all that sort of stuff?
So again, top line results were positive. We had that press release at the end of June, winning in the ITT population, which covers liver met patients and non-liver met patients. So in terms of the broadest opportunity, both clinically and commercially, winning in ITT is great. The non-liver met population, which was the other dual endpoint, was not mature enough yet to call it a win. We're close, but it's just a matter of time and events and see how that data looks. So that just continues to chug along based upon events. And it's not surprising that we would accrue events slower there because the prognosis for a non-liver met patient is just so much better than one with a liver met. Right.
So the plan is, obviously, we want to get the data out ASAP in full form, both in terms of presentations and publications and all that works in progress. We're just waiting to hear back on things being accepted in some shape, manner, or form. From my point of view, sooner the better. It gives us certainly a chance to talk about the data in a more fulsome fashion, like in opportunities like this, right, as well as get the filing going and move that forward from a regulatory point of view. Right. So we're excited across the board. The recent FDA guidance on survival plays well with us. This is a survival-based study, both in terms of the ITT and the subpopulations, the liver mets, the non-liver mets. So we're in that game to win. It's very important for us to be able to move the needle for patients.
This is really the first stake in the ground in colon cancer. We talk a lot about franchises, and we think about franchise opportunities in two different ways. Cabo is a franchise molecule by itself because it's active in so many different types of indications, different types of tumors, different combination partners, single agent, doublet, etc. You can also think about franchise in terms of an indication with multiple modalities and multiple opportunities. We're doing that with NETs. We're doing that with CRC. I think having the first stake in the ground for CRC with the STELLAR-303 study really reinforces that. We're super excited about moving up in line of therapy, looking at a post-adjuvant setting with Zenza, as well as kind of a maintenance therapy that we're really excited about.
We think it's a prime example now with the 303 data to be able to move in that direction. We have molecules like XB371, so a tissue factor targeting ADC with a topotecan-based warhead that is really designed exclusively to look at topoisomerase-sensitive tumors like CRC. So you can envision that going into that mix, maybe a combination with Zenza in terms of how we could dose escalate, even in phase 1 to understand safety and tolerability and maybe additional activity. So again, this multidimensional franchise view, we think, is really the way to go in terms of driving value creation for patients and shareholders. Again, the Cabo story was really around Cabo, going up and down indications, but there's other ways to skin that cat that we're very excited about.
I mean, is your intent to file just with ITT before the non-liver mets, or would you have to wait?
Yeah. I think the fact that ITT won, that would be the main focus.
Sure. Sure.
And it was a dual primary, so we just need to hit on one of those two.
Right. Can you give us or provide some context around what we should think is clinically meaningful in that population? Very late line. So what do physicians want to see? And ultimately, do you feel that the data will be clear?
Yeah, sure. So I won't get into the data. People ask me to guide them on what they think they might want to see. And why don't we just wait a few months and you probably see it, and then you can judge for yourself. So we've avoided that commentary because talking around the lines in abstract just is a no-win situation. So it's a win. I'll remind you and the audience, both here and online, that there have been four other trials recently done in third line plus CRC that have failed, right, checkpoint-based with or without other approaches. So the fact that this is a clear win relative to what's been seen recently compares nicely with what's out there too. So I think it'll be a big player.
And I think the other point that we've seen from market research time and time again is that cold tumors like CRC that have not had the opportunity to have a checkpoint kind of be available to them is a really important feature here that we shouldn't underestimate. Right. We've all heard the stories in terms of how patients, as they're becoming more and more aware of the power of a checkpoint approach, are very interested in learning more about that. And the same thing is true here. Right. So a lot to do, a lot to talk about. Let's get the data out there. We'll talk about it. I'm sure we'll have lots of discussions going forward, but we're thrilled to have a positive trial with the first one with Zenza, and we're going to build upon that going forward.
Gotcha. And I guess as you think about CRC in terms of the stack of indications for Zenza, I think you guys have said Zenza maybe $5 billion. So is CRC the majority of the chunk of that? Because now, or was it even expanded? Where do you think that?
As you'll recall from our Q3 2024 slide, where we had that kind of laid out, that kind of aspirational view of what success could look like, of that $5 billion, about 10% was non-GU, non-GI. That was the head and neck opportunity as we saw it. That was being studied in 305. And the other remaining 90% was split more or less equally between GU and GI. Okay, so GI in that parlance was CRC and NET, and then GU.
But was that only assuming non-liver mets? Does that change with the ITT?
Yeah. We didn't go into that level of detail. Yeah. So stay tuned on that. But I would say at a rough approximation, it's a reasonable approximation for what that population could do. Right. And then on the GU side, those are the three kidney cancer trials. The one that we're dealing with, 304, and then the tumor studies.
Gotcha. So maybe, yeah, that's a good pivot to kidney for Zenza. I guess can you just kind of elaborate more on your strategy relative to what you've done with Cabo there? And I guess there's always folks kind of asking like, is it really differentiated versus Cabo in renal? So maybe you can walk us through and why you think so, and I guess how you think that will commercially play out?
Yeah. So differentiation ultimately is derived in a label, right? And the label is specific to an indication. So, again, in terms of what we're doing in kidney cancer, we're looking ahead and asking the question, what could standard of care be in the late 20s, early 30s that would allow us to maintain our leadership position in that indication as the torch is passed from Cabo to Zenza? Right. I think that's the appropriate way to look at it. Now, we haven't gone into detail per agreement with our collaborator here on the actual kind of details around the two trials we're doing with Belzutifan. That will come later. So stay tuned on that.
But I think the overall approach is we will define, if we're successful, new standard of care, and we'll have a new way of looking at how to treat kidney cancer in the 2030s with Zenza as opposed to how we're doing it with Cabo in the 2020s. So it's not so much a matter of what's happening today, but what will happen in the future. And that future will be enabled by whatever data we get and whatever labels we're able to achieve, because the idea of substituting with a combination partner that doesn't exist with the other one is really hard to imagine.
Gotcha. So I guess, do you think that going forward, would you have to, would people step through the Cabo generic to go to a Zenza?
Oh, well, again, I wouldn't want to predict that far advanced, but I think the reality is if the standard of care has changed enough where potentially Cabo wouldn't even be a player by then, right? So in terms of how that overall, the sequence of options plays out going forward. Right.
Yeah.
I mean, I think it's, I guess it can be challenging to look at what standard of care today and then what's going to be standard of care five years from now, ten years from now. Right. If we're doing our jobs well individually and as a community of drug discoverers and developers, it has to change. If it doesn't change, then we're missing something in a pretty important way. And I mean, look, I mean, that's the case with NET, right? That hasn't been a new drug approved in NET for a decade. Shame on us. Right. Colon cancer, again, it's been tough. Right. The biology is hard. Pharmacology is challenging. New mechanisms.
This is a high attrition business, but I think we're in the game to push the envelope scientifically and to really balance that risk-reward from the point of view of building a franchise across different modalities, and I think with the Cabo story, that's actually very instructive. Right. Of the seven or so indications that we've got approved, there's only a couple of big commercial winners, so it's hard prospectively when you're designing a pivotal trial to say, this is going to work like this, and it's going to give you this kind of readouts and revenues. You got to run the experiment. It's all experimental. You just have to do enough in parallel so that the big winners can emerge and then drive your trajectory growth.
Maybe you can just talk about your non-Zenza pipeline and kind of get people a little bit more situated on that. I know for a couple of years, there was not a lot of visibility. You guys have given a lot more visibility in terms of what you're working on ultimately against some of these potential combos. So maybe you just walk us through what you're most excited about.
Yeah, sure. Well, I would say the whole pipeline is really matured nicely. I'm super excited about how quickly things are evolving from the standpoint of concepts to molecules to the right level of validation preclinically from an efficacy and safety point of view, and then rapid evaluation in early stage development to get to the point where we can pick the winners. Again, as I've said on the last few calls, the goal here is not to build a big pipeline. The goal here is to find the winners that we can rapidly advance into late stage development that can become a franchise driver going forward. Right.
So size is just playing a numbers game and to a certain degree addressing our challenges in connecting the dots from the right tumor biology pathway analysis, genetic genomic analysis into the right modality into clinically meaningful data that helps patients live longer and recover stronger. Right. That's what it's all about. So the pipeline mix of small molecules and biologics. We talked about 371. That's now in the clinic. We've dosed our first patient there recently. Really excited about that. We like using a targeted approach with a very potent TCAN-based, topotecan-based warhead. Has real clear targets in terms of tumor types that are sensitive to TCANs. Right. So kind of a no-brainer. That one is, again, it's built to be combined, and it's overall, at least preclinical stability, safety, certainly activity is outstanding.
So again, got to get an IND, ask the right question in the right species, and get some data and understand kind of how fast that can go forward. But the opportunity to combine that with Zenza, we think is really exciting. Yeah, for sure. But later, more advanced, our USP1 inhibitor, XL309, is a molecule that's in a class that has seen some pretty serious attrition over the last couple of years. Most of the competition there has kind of fallen by the wayside for either PK reasons or tox reasons or lack of efficacy reasons.
We think we have a good view on dose, on regimen, both as monotherapy and as a combination partner with PARPs, and have a good sense in terms of how to navigate both the PARP genomic space, but also the HRD positive genomic space down to the number of specific mutations that might appear to be sensitive there. So still early days, but I think we're getting into a point where we can start asking some key go-no-go questions. And again, if it's going to rise up and say, "I'm active, develop me," we're going to see that over the next period of time. And that's really exciting.
That transition from could be interesting to, "Oh my gosh, it's going to be great," or, "Let's just stop now because kind of losses and move on." Those kinds of binary decisions are what we're made, kind of how we're built to be able to interrogate these new molecules and these new MOAs as we go forward.
Yeah. I was going to say one of the flexibilities, I think, of your platform is your ability to do a variety of different modalities. I mean, can you maybe just speak to that in terms of where you think you want to be, whether it be small molecule, ADC, other types of modalities, the degraders? Where do you think the platform is headed in the next five years?
Yeah. I would say the platform, we are, and I certainly am. I mean, I'm an ex-discovery guy, right? Medicinal chemist, etc. We are modality agnostic. We are P-value specific. Right. The modality, as long as we can put it in a bottle and get it to patients easily, so we can manufacture. Obviously, the big part of the story. Yeah. I want to match the right molecule with the right target and the right tumor type, with or without the right combination partner, and change the trajectory for patients, improve standard of care. Because again, the Cabo experience over the last decade has taught us that if we can improve standard of care for patients, we move the needle for them. We can generate outsized revenue for our shareholders, and we can build value in the company. That's the key. It's improving standard of care.
Beyond that, nothing else really matters. Okay. So we have a myopic focus on that. Everything around execution is built to make sure that we get that data fast. We're going to win some. We're going to lose some. Some of the ones that we win, we might not actually be able to monetize. You think about thyroid, certainly important indications for those patients, but hasn't been a big driver for us commercially. That's okay. We have to just be in that game and ask the right questions. So again, all modalities are on the table. We've got a very strong discovery team. Our manufacturing group is best in class. You think about the pressure of being a single molecule company and what that group has to do day in and day out to make sure that we never kind of go down the wrong path.
It's just fantastic, both small molecules and biologics. So a lot of juice there, a lot of momentum there. But again, we're looking for the data to tell us follow path A, follow path B, don't follow path C. And that's all we're focused on in a very myopic fashion.
I mean, do you feel like it's mostly just internal looking in terms of the R&D and pipeline development versus external, or do you want to do both just to keep?
Well, I mean, again, our pipeline is built on the foundation of internal work, but also externalization too. So most of our ADC technologies came from the outside. We didn't invent those. We understood the appropriateness, maybe the optimization of some of those technologies, brought those in-house, applied those, did a lot of work on the manufacturing side to make them at scale, and then those molecules are now in the clinic. XL309, we licensed from Insilico, a company out of China and I guess Wilmington. So again, we've got a pretty broad reach. And there's more that we've done and that we're doing. So again, we're very agnostic.
I don't care where the assets come from as long as they're high quality and we can feel good about, excuse me, the path they have towards moving up into the clinic and moving through the clinic at certain gates that allow us to make more investments. So it's all about doing both well. Now, in terms of current BD, our early stage pipeline is pretty deep. So we're not looking for another IND candidate, another preclinical candidate, another phase one asset. We've got a lot of those. Right. Yeah. If there's late stage, kind of mid stage, late stage assets in GU, GI that we think are attractive, that's really kind of in our sweet spot. But as I said before, we've burned many haystacks looking for those, and we've got a few needles that we're interested in. So we'll see. We'll see how those things play out. Right.
Gotcha. Maybe not so interesting for a drug discovery guy, but I wanted to ask about the balance between share repurchases and doing more share repo versus as you kind of think about more and broadening out the pipeline, more Zenza, more early stage. I think one of the things that was interesting was, yeah, a couple of years ago you started doing share repurchase, got all this cash flow. But is there any time where you pivot to more focus on R&D and really to accelerate kind of the next stage post-Cabo?
Yeah. Look, it's super important. Again, this is a super important point. I laugh because we're constantly asked that question, and the reality is it's great to have the option to be able to allocate cash because you've got cash to allocate. Right. Most biotech companies kind of at our stage don't have that. Right. So yeah, so we've committed to keeping our R&D spend at about $1 billion a year, which means that we have to prioritize. I would love to be in a scenario where I have to stop the development on three early stage compounds because we've got two super hot mid stage compounds that are going into full development. That's where the action's at. Those are easy decisions to make from the standpoint of building value for patients and shareholders. So we're constant at that $1 billion mark within R&D. SG&A is pretty stable.
We might add a little bit more on the commercial side as we add new indications and kind of build that out, whether it be for Zanza or something else. Obviously, you have to scale the business there to be able to maximize our chance of success commercially. But that's a good investment to make in terms of how you see that business evolving. But if we're managing the P&L properly, and I think we do, and Chris and I and the whole FP&A team and the whole executive team really focus on that, if revenues keep growing, then we have the optionality to allocate cash appropriately. And I think doing the buybacks makes a lot of sense. It certainly strengthens the stock.
We bought about $1.8 billion of shares back over the last couple of years, and we think that will continue based upon kind of our revenue trajectory and the expense oversight and management that we're so good at. Right. We prioritize. And if you go back to the early days, we were very, very ruthless in terms of how we prioritize. When we were running out of money in 2014, it was the Cabo only story. It's a renal only story. So we have that in our basic DNA, and we have more fuel to play with right now, and that's great. But we're very committed to allocating capital that will have the most impact on patients and on shareholders because those two travel together. If you're not going to move the needle for patients, then you're going to have a hard time building value for shareholders.
So buybacks make sense. We think that will continue going forward. Revenues grow. We can do even more of that potentially as we go forward too.
I mean, could you just at the point where Cabo kind of comes off and Zanza's ramping, I guess, is there a period of, I don't know, squirreliness of revenue growth, or do you think you can grow through that, and I guess what would be the main driver to kind of grow through that?
Yeah. So the goal, look, I think the way we've got it planned out and projected, if the transition from Cabo to Zanza should start before Cabo goes off patent in the 2030-31 timeframe, and if we're successful in our development plans for Zanza, then that cliff could be a pothole, basically, right. In terms of vectoring towards the mid-30s with Zanza, other pipeline molecules evolving quickly, so again, it's truly forward looking, so there's lots of moving pieces there, so I don't want to understate the risks and the upside there because trials have to work. We have to execute well commercially, blah, blah, blah. But the whole goal here is to build value, and again, I've said this before publicly, I and others, we don't think in a linear fashion. We think in a log fashion.
I want to see a 10x improvement in the number of patients that we treat, and if we're able to meet that aspirational goal, then I would expect value to grow in that same manner. Right. Because the two are tied together. Right, so yeah, it's all part and parcel with having the right people, the right team, the right energy and focus and intensity to make every day count, and that's Exelixis.
Gotcha. Well, we'll leave it there. Michael, thank you so much.
Good. Thank you.
All right.