on with Exelixis. With me today, I have Andrew Peters, Chief Strategy Officer. My name is Michael Schmidt, Biotech Analyst with Guggenheim, and I am looking really forward to this. Welcome, Andrew. Good to see you.
Thank you for having me.
Andrew, Exelixis just reported a solid third quarter earnings. The stock is near an all-time high. zanza is under FDA review. How would you describe Exelixis' focus today as you bridge from CABO to the zanza franchise?
Yeah, it is a great place to start, actually. Thanks for the invite for the conference. Always great to be in Boston this time of year, and great meetings today. Before I begin, as a reminder, going to be making some forward-looking statements today, so please see relevant disclosures around the risks to our business in our filings with the SEC. The bridge to zanza is a great place to start with Exelixis right now. We are really at a fun time for the company, meaningful time for the company as we transition from this period of CABO being the TKI of choice in the 2020s towards our vision of zanza being the TKI of choice in the 2030s.
Behind that, obviously, we have seven pivotal studies ongoing or that have read out with zanza in kind of that first wave, and then we've talked about wave two coming. From our perspective, we couldn't be more excited about everything that we have ongoing, kind of this emerging second franchise with zanza, while the CABO business continues to do extremely well, we're keeping our head down and just executing. That's really the theme of the company right now, is just executing across all of those pillars. First with CABO, then with zanza, and then it's that third and that fourth and that fifth asset, whether it's internal from our earlier stage portfolio or looking external from a BD perspective. That's kind of how we see the future as we transition from this blockbuster franchise CABO company to what's next.
Okay. Before we talk about zanza, I did want to spend a couple minutes on CABO, which is still growing, actually, 13% volume, I believe, in the third quarter. What has been the main growth driver at this stage in the life cycle of the product?
Yeah. I mean, I think it's something that we're especially proud of. You highlighted the growth that we're continuing to see, and it's incredibly rare in this business to see that continued market share gain this long after a launch. As PJ talked about on the last earnings call, it's continuing to go out and work hard to fight for every market share point in RCC. Then in NETs, we're still in that first year or a little bit past our first year in the launch phase. That's just something that we're going to continue to fight and execute on as well.
We've talked about new patient share and going out increasingly to the community and talking about the data, how it can be meaningful for patients, and just some of those dynamics that we've highlighted in the past around how NET patients are treated right now. But it's really that commercial execution and hyper-focus that we have, the commercial ops and analytics that we can go out and target prescribers, pockets of prescribers who maybe don't use CABO as much. Those are the sorts of things that we can do on the margin that are really paying dividends.
Okay. Is it fair to assume that NETs is now the main growth driver, or is RCC still contributing?
As PJ talked about, we are seeing kind of growth across the board. Obviously, CABO is the number one TKI in RCC, and we are seeing very strong share in NETs as well. That is something that, again, our goal is to go out every day in the commercial organization and fight for every market share point, and we want to continue to do that.
Okay. As we think about sort of modeling CABO out through the end of its life cycle, you have obviously settled with most of the ANDA filers at this point, so I think there is less ambiguity around generic entry. There are a couple 505(b)(2) applications underway as well that are being pursued, an alternative strategy. One of them was approved recently. How do you think that might impact the CABO franchise?
I think they are really kind of, I do not even want to say apples and oranges. It is apples and something pretty different there, between kind of the normal and the generics and the 505(b)(2) products. As a generalizable statement, 505(b)(2) products in oncology haven't really been successful commercially absent meaningful clinical data. You point to, I think ABRAXANE is probably the most famous example of a 505(b)(2) product. Their use and utilization is really driven by robust data that they were able to generate. Absent of that, given the non-AB rating, the non-substitutable, lack of guideline inclusion generally, those are all things that historically have really prevented these products from being adopted broadly. Our focus, again, is always on two things, maximizing and doing what is best for the patient. Two, ensuring our kind of intellectual property rights.
Thematically, those are things that we're going to continue to do, and we're going to, as I said before, continue to fight for share in RCC.
Okay. Great. Then maybe a few questions on zanza. The STELLAR-303, the first phase III study, obviously met overall survival outcomes in colorectal cancer study in a full population. The FDA did extend the review a bit to March 3rd, PDUFA date, now next year. Just remind us what drove the push in timing, and how confident are you in approval at this point?
Yeah. We're really excited about STELLAR-303 and kind of the potential for the first approval of zanza there in kind of that CRC population. It's an indication where there continues to be a high unmet need. A lot of the market research that we're seeing right now is really favorable towards zanza there, kind of that chemo-free option, the checkpoint-containing option, the activity across all of those different patient subgroups, prior Bev and liver met, non-liver met, that kind of consistency of effect. So, we're seeing that excitement kind of building in the clinical community. As it relates to kind of the FDA, for obvious reasons, we don't really talk about ongoing interactions, but kind of at a very high level, they had asked for some data, we gave them data, and they said it's going to take a little more time to review the data.
Beyond that, don't really want to get into it.
Okay. And obviously, the study did succeed in the ITT patient population, but the original hypothesis sort of missed in this non-liver met subset. Do you think that might affect how the drug might be used if approved on market at the end of the day?
No. Again, kind of that subgroup dynamic, generally what has happened in the past is a concern, was there a particular group of patients that drives the treatment effect across the overall population? Something, say, like with the BRCA patients or something. That is kind of more typical of why this subgroup is an issue. We kind of have the inverse, where the ITT data show a consistency of benefit across that overall population, and then when we specifically looked at the non-liver met subgroup, that original hypothesis that we had around non-liver met patients potentially having differentiated biology, et cetera, that ended up not bearing out. As a reminder, that original hypothesis was really driven by kind of backward-looking empiric observations from some of the prior datasets that we saw in CRC.
It really turns out that that is probably not as much of a biological driver as we thought, and really kind of the key takeaway from our perspective is that zanza atezo does work regardless of liver met status. And so that is something that we are especially excited about.
Okay, great. Maybe sticking with colorectal, you did announce the 316 study, which moves potentially zanza into a much earlier stage of colorectal cancer. How large is that adjuvant opportunity, and how de-risked is zanza's profile in that setting?
Yeah. I would say there, it is kind of following the CABO playbook, so to speak, where the first approval for CABO was in METEOR, kind of in that later line RCC population, and then we continued to evaluate it in earlier lines, knowing, kind of using that first readout as an anchor point to understand sensitivity of the tumor type to the drug. Kind of same thing with zanza here. We know that zanza is active, improvement in overall survival, kind of the gold standard in oncology in a later line population. The question is, as we wanted to move earlier, what are the opportunity sets from an unmet need perspective, and how can a drug with a profile like zanza, shorter half-life, kind of user-friendly combinability, how could that really help patients?
In the backdrop to all of this, Natera had generated this substantial dataset showing kind of the pretty stark differences between DFS for patients who are MRD positive and MRD negative. That, to us, was really kind of where the light went off, so to speak, where there is this huge unmet need in these patients who are MRD positive, who have a very high likelihood of seeing relapse, but unfortunately don't have any treatment options. Therapeutic intervention doesn't exist, so they are essentially in kind of a watch and wait period. We are asking a question with our partners, Merck, around can the intervention of zanza or zanza and pembro have the effect of kind of delaying that DFS period over time so that patients' cancer doesn't recur?
That is something that, as we are able to look at who are the patients who are likely to recur, we are looking at a very targeted population who is at very high risk in a sensitive tumor type like CRC, where we have shown this survival benefit in a much later, more heavily pretreated population. It is a study we are really excited about. From a sizing perspective, we also think it is significant.
We have talked about 12,000, 13,000 patients, how that evolves over time, as kind of the Signatera and MRD testing rate increases over time as well. These are all dynamics that we are looking forward to, but it is really a sense of this new diagnostic modality driving a new treatment landscape, where it is really green space for us. I think I am especially proud that Exelixis is kind of at the cutting edge of offering something to potentially help patients there.
I believe this is a phase II/III study design. Is there sort of a gating stage that would offer opportunity for disclosure of data before moving into the phase III?
Yeah. We haven't really talked about a lot of those sub-dynamics yet, but in general, I think the challenges with any phase II/III studies kind of, can that earlier data inform the later data, and can you use it for the overall stuff? So, kind of stay tuned there. We haven't really gotten into a lot of the specifics.
Okay. Then maybe shifting to STELLAR-304, lots of discussion recently, just given it's the second phase III study that could read out very soon. In fact, you just delayed the guidance to 1Q again. So, I guess, why has it been taking so long? It seems like the readout is far behind initial expectations for the study.
Yeah. Again, it's hard to speculate on what the cause for the delay is, but it's really as simple as kind of counting event rates as they're coming in. As a reminder, PFS is the co-primary endpoint in the study. So the primary analysis is triggered when we hit a certain number of events, and we kind of see those events come in, and we can narrow our timing based on kind of how many events we need and how many events are coming in on a monthly, weekly, quarterly basis. Then, it's really as simple as that and kind of counting events.
Okay.
What Dana talked about on the last call, based on everything that we're seeing right now, we're approaching clinical cutoff, and that's what's driving that 1Q timing.
Is the data readout driven by PFS events or perhaps OS? When I look at
PFS.
Okay.
Yep.
Because when I look at the design paper, there's a response rate outcome as well as-
Yeah, response rates are co-primary as well, but PFS is what's going to be the primary analysis.
How much should investors read into the STELLAR-304 study result, once available, in terms of validation for other zanza opportunities? How important is it in terms of validating the hypothesis around zanza?
I think the challenge with kind of that, obviously, all data is informative and helps kind of shape the overall profile of the drug, but candidly, it is really hard to understand how RCC and CRC and NETs and some of the other tumor types that we are looking at, they are all different combinations, different settings, different drugs. I kind of look at everything individually. But to me, the excitement that I have around zanza is really that breadth of opportunity. CRC and then non-clear cell RCC, and then the two clear cell RCC studies, and then NET and meningioma and earlier line CRC and then wave two.
It is kind of that building on those layers and layers of opportunity and that breadth of opportunity that drive the excitement, where we can really get a sense of zanza being not only building on CABO but growing to be much larger as well. That is kind of what we are really excited about.
Okay. A question on clear cell RCC. Obviously, CABO is the most important market, perhaps one of the bigger opportunities for zanza as well. Merck is running LITESPARK-033 in the first line setting, and then you have the 034 study in second line patients with belzutifan. How would you describe zanza's role in clear cell kidney cancer evolving, especially as the CABO franchise matures?
Yeah. One of the things I talked about kind of in the beginning was this idea of CABO being the TKI of choice for the 2020s, zanza being the TKI of choice for the 2030s. There is a bunch of kind of nuance to that. One, as we look to, say, like the LITESPARK-033 study, that is that first line post-adjuvant setting. One of the observations that we see in the RCC landscape is as patients are increasingly getting adjuvant pembro over time, that question of what should they get after they have exhausted their checkpoint is increasingly coming up. LITESPARK-033 is specifically designed to answer that with pivotal data. Similarly, kind of 034, combo with belzutifan in kind of a later line setting.
That is the sort of thing where we are asking not necessarily how are patients being treated today, but what does that patient journey look like in the 2030s, and how can we ensure that zanza is a key part of that? The other dynamic that I would highlight is, say, following the recent ESMO conference, we saw the failure of the LITESPARK-012 study. That was the triplet of pemlan and belzutifan. That really kind of, to me, opened the door to the question of, what are we going to do? What is Exelixis going to do with zanza in that frontline space? We think we have a real opportunity there with kind of the wave two studies in that frontline setting to really kind of, again, define in that frontline metastatic space, zanza as the TKI of choice for the 2030s.
So, kind of stay tuned there, but that is really kind of the lens that we see it is, in the future, how do we establish zanza as the dominant player in RCC?
I tried to ask this sort of on the earnings call. Minus things, but belzutifan is now also approved in adjuvant, clear cell with pembro. Does that impact how this may be used in the metastatic setting?
Yeah. So, one of the dynamics that we have talked about in the past and kind of is somewhat self-evident in how patients are treated is, if you look at the adjuvant space especially, having a survival advantage has historically been kind of the most important driver of adoption. Because functionally speaking, a lot of these patients are essentially cancer-free, so the treatment choice, the treatment decision essentially becomes, do you want to add on a therapeutic intervention with additional tox for these patients?
What is the benefit that you are seeing? Kind of that combination versus sequence question that comes up a lot kind of in any cancer setting. When you are adding on belzutifan on top of pembro, what is the benefit that the patient is seeing? Is it just on DFS? Is it on survival? Historically, that survival data for pembro especially has been one of the real drivers.
The question that I think is going to exist in the market is, what is that added benefit of adding belzutifan in the adjuvant space relative to, say, just using pembro or not treating and then waiting for the metastatic disease to come on, and then you get IO TKI or IO IO, or now, IO HIF or TKI then HIF, and all of these kind of sequenced questions. There's just a lot to kind of play out there.
Okay. Just want to check two more real quick. STELLAR-311 looks at zanza in NETs as well, sort of a wave one opportunity. How will zanza be positioned relative to CABO in the NET space?
Yeah. Again, I'd say kind of similar dynamic to what we talked about in RCC around kind of how patients are treated in the 2020s versus how patients are treated in the 2030s. Obviously, there are some pretty significant differences between the CABINET study, which was the label-enabling trial for CABO in NETs, and 311 controlled study against everolimus, slightly different patient population. They're kind of asking two different questions. But again, our hope is to establish zanza as kind of that TKI of choice for NET patients in the 2030s.
Okay. Then you've talked about meningioma, which is a unique opportunity as well, perhaps with an accelerated approval opportunity. I guess, how would you describe that market and potential situational path?
Yeah. So, that's one that, again, we're especially excited about just because of that unmet need and real opportunity there. Meningioma, it's a common CNS-related cancer, but similar to, say, the dynamics in NETs, where the patients tend to be a little bit more indolent, slower-growing tumors, et cetera, but also without really many treatment options. This is one where, based on our experience with CABO, we can point to clear, robust efficacy signals that inform why we're developing there, going into a setting where we think if we're able to establish robust activity, hopefully with good duration, it can really translate into a pretty sizable market for us. It's that idea where unmet need, more indolent sort of patient population can hopefully translate to longer treatment duration for patients, translating to a significant revenue opportunity.
Okay. Then you recently highlighted these sort of wave two opportunities, sort of going back into lung cancer, for example, among other things. How do you prioritize opportunities to pursue in that second wave?
Yeah. I think prioritization is probably one of the things that Exelixis does best. We're hyper-focused on being an efficient company. Our internal tagline that we joke about a lot is, "We run Exelixis like a business and not a biotech." One of the through lines of that is that discipline on the expense side, discipline on the decision to invest in new trials especially. We want to ensure that we're running studies and opportunities that make sense for patients and opportunities that make sense from a commercial perspective that we think have a high degree of probability of success of establishing zanza as a new standard of care. An example of that is, we have a lot of prior CABO data in bladder cancer.
We never really pursued CABO there, in part because there was a lot going on from a development perspective around Seagen, Pfizer's PADCEV. We wanted to really understand how that treatment landscape would shape up before investing in bladder. As now PADCEV is established as kind of the first line MIBC or first line metastatic with pembro, there's now this opportunity and this question of what should patients get post-PADCEV? We have a phase II study ongoing right now of zanza in that population, and so that's an example of the sort of wave two studies that we could potentially initiate if data continue to look good, that we're seeing responses there that looks like an opportunity for patients.
That's the sort of thing that we'd really want to invest in because significant opportunity from a market perspective, huge unmet need for patients because once they come off of PADCEV, there's really no idea of what they should be getting. Clearly an active indication for zanza, and so it's just a matter of understanding the profile that we're seeing and then what that study could look like from a pivotal perspective.
Okay. I just wanted to squeeze one more in before we wrap up. With zanza, additional phase III studies ramping up next year and in coming years, you guys have been very active in terms of the share repurchase program. How do you see that evolving as you invest more in the pipeline next year and thereafter?
Yeah, so capital allocation we kind of think of in three buckets. Obviously, internal investment. We've highlighted that we expect to spend about a billion dollars in R&D, and that to stay flat going forward. So that's kind of bucket one. Bucket two is external innovation, kind of on the BD side, looking outside the company for new assets that we can bring in, new franchises we can bring in. Then the third one being kind of that shareholder-friendly buyback perspective. Given the success that we have financially, the tailwinds with CABO, we don't view them as mutually exclusive. We think that we can do all three with our balance sheet as well as we don't have any debt, so should we see something externally, the ability to lever up, et cetera. So, we think we can kind of continue across all three of those.
Great. Well, Andrew, thank you so much for that. We'll wrap up.
Appreciate it.
Thanks.