Susan Hubbard - Investor Relations Mike Morrissey - President and Chief Executive Officer Chris Senner - Chief Financial Officer Gisela Schwab - Chief Medical Officer P.J. Haley - Vice President, Commercial Peter Lamb - Chief Scientific Officer.

Eric Schmidt - Cowen & Company Stephen Willey - Stifel Stefan Quenneville - Morningstar.

Good day, ladies and gentlemen and welcome to the Exelixis Second Quarter 2015 Financial Results Conference Call. My name is Tyrone and I will be your operator today. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to your host for today, Ms. Susan Hubbard, Investor Relations. Please proceed..

Thank you, Tyrone and thank you all for joining us for the Exelixis second quarter 2015 financial results conference call.

Joining me on today’s call are Mike Morrissey, our President and CEO; Chris Senner, our newly appointed Chief Financial Officer; and Gisela Schwab, our Chief Medical Officer, who will together review our corporate, financial and development progress for the quarter ended June 30, 2015 as well as recent key development and corporate events. P.J.

Haley, our VP of Commercial and Peter Lamb, our Chief Scientific Officer are also here with us and will participate in the question-and-answer session of the call. As a reminder, we are reporting our financial results on a GAAP basis only, and as usual, the complete press release with our results can be accessed through our website at exelixis.com.

During the course of this presentation, we will be making forward-looking statements regarding future events and the future performance of the company. This includes statements about possible developments regarding clinical, regulatory, commercial, financial and strategic matters. Actual events or results could, of course, differ materially.

We refer you to the documents Exelixis files from time-to-time with the Securities and Exchange Commission, which under the heading Risk Factors identifies important factors that could cause actual results to differ materially from those expressed by the company verbally and in writing today, including without limitation, risks and uncertainties related to the timing of data presentations and the regulatory approval pathways for cobimetinib and cabozantinib.

Clinical trial risks, risks connected with compliance with applicable regulatory requirements; the uncertainty of Exelixis’ ability to maintain its rights under existing collaborations and enter into new collaborations; risks regarding Exelixis’ financial outlook and the sufficiency of the company’s capital and other resources over time; and the risk of product commercial success and market competition.

With that, I will turn the call over to Mike..

Alright, thank you, Susan and thanks to everyone for joining us on the call today.

Exelixis had a productive second quarter and significantly expanded our momentum in July in several fronts, including by first, with the release of positive top line results for METEOR, our Phase 3 pivotal trial for cabozantinib and second line RCC and second, by a successful financing where we raised approximately $146 million net to help us implement our plans to commercialize cabozantinib for RCC in the U.S.

pending approval. With positive top line results for METEOR in hand, the top priority now for Exelixis is to expedite the submission of regulatory applications for cabozantinib in advanced RCC in both the U.S. and EU, which we expect to file in early 2016.

We are very excited about the METEOR top line results, which Gisela will review momentarily and look forward to being able to provide this new treatment option to RCC patients if approval is granted. Over the last several years, the RCC indication has been impacted by the entry of a number of new therapies that offer only modest benefits.

The evolving treatment landscape continues to be very dynamic. In fact in the last month, we saw both our positive top line results for METEOR and the announcement from BMS for nivolumab in second line RCC patients.

Assuming that these therapies succeed in securing regulatory approval, we believe that the future RCC opportunity is large enough to support multiple new potentially improved therapies, which could each play a meaningful role in providing greater benefit to RCC patients.

As a reminder, the current market for second and later line RCC includes about 17,000 patients in the U.S. and approximately 37,000 patients worldwide with global revenues for current second line RCC agents of approximately $1 billion in 2014.

We are excited about additional opportunities in this indication and are preparing for future potential late stage development in RCC, both by exploring cabozantinib alone as a first line therapy and by evaluating rationale combination approaches, including the recently announced cabozantinib immunotherapy combinations under investigation at the NCI.

Following the announcement of positive top line results for METEOR, we executed a successful financing that raised approximately $146 million net of expenses. Chris will provide additional details of the offering in our financial update.

We are obviously very pleased with the response to our financing and have brought in the additional funds to help expedite our regulatory submissions and the commercial buildup necessary to support a potential U.S. launch of cabozantinib for advanced RCC.

I want to assure everyone that we will continue to be highly disciplined with respect to cash utilization moving forward and that future spending will be tightly gated to key upcoming regulatory milestones. As discussed previously, Exelixis is seeking a partner for ex-U.S.

territories to help us maximize the global commercial opportunity for cabozantinib without making the significant investment required to build an ex-U.S. commercial infrastructure ourselves.

We believe that both the strength of the METEOR data and the additional cash from our recent financing puts us in a strong negotiating position as potential partnering discussions continue to advance.

On the cobimetinib front, Exelixis and our partner, Genentech, have completed our commercial readiness activities for the potential approval and launch of cobimetinib in combination with vemurafenib, which includes our involvement in the co-promotion of this potentially important new medicine in the treatment of patients with mutant BRAF positive melanoma.

As a reminder, Genentech and Roche completed the submissions for cobimetinib in 2014. In the U.S., cobimetinib has received priority review from the FDA and now has a PDUFA date of November 11, 2015. An additional update for the cobim trial was planned for the Society for Melanoma Research Meeting, which will take place in San Francisco in November.

We will be prepared to support Genentech’s launch of the product if and when approval occurs. Finally, the readout of METEOR was clearly a pivotal event for the company, and the exciting top line results for RCC enables us to plan for the future with a high degree of confidence.

With additional financing resources on hand, we remain highly focused on advancing cabozantinib and cobimetinib through their important near-term regulatory milestones. So, with that, I will turn the call over to Chris to review our financial performance for the second quarter of 2015..

Thank you, Mike. I would first like to say that I am thrilled to have joined Exelixis at this exciting time in the company’s history. I am eager to work with Mike and the team to build an organization that can maximize the opportunities that are before us.

I will begin with a review of our second quarter 2015 financial results and then provide an update on our 2015 financial outlook. My comments will be focused on the highlights of our financial performance and I refer you to our press release and Form 10-Q filed earlier today for additional details.

Net revenue for the quarter ended June 30, 2015 were $8 million compared to $6.6 million for the comparable period in 2014. Net revenues consisted entirely of product revenues related to the sales of COMETRIQ.

As a reminder, first quarter 2015 net revenues of $9.4 million were positively impacted by one-time adjustment of $2.6 million due to the conversion from the sell-through to the sell-in method of revenue recognition for our domestic revenue.

Research and development expenses for the quarter ended June 30, 2015 were $24.5 million compared to $51 million for the comparable period in 2014.

The decrease was primarily related to net decrease in clinical trial costs predominantly due to the continued wind down in costs related to common studies in metastatic castration-resistant prostate cancer and decreases in personnel-related expenses resulting from an overall reduction in headcount.

Selling, general and administrative expenses for the quarter ended June 30, 2015 were $12.8 million compared to $16.5 million for the comparable period in 2014.

The decrease was primarily related to a decrease in personnel and stock-based compensation expenses resulting from an overall reduction in headcount, consulting and outside services and legal and patent costs.

Those decreases were partially offset by higher marketing expenses, including expenses from cobimetinib under the company’s collaboration agreement with Genentech. Restructuring charges for the quarter ended June 30, 2015 were $1.3 million.

The restructuring charge was primarily related to the exit of certain facilities, the early termination of one of our building leases and subleasing activities during the period. Total cost and expenses for the second quarter were $39.3 million versus $68.3 million for the same period last year.

The total cost and expenses for the first half of 2015 were $71.4 million versus $138.1 million for the same period last year. These year-over-year decreases are primarily due to the reductions in clinical trial and personnel-related costs I discussed previously.

Other income and expense net for the quarter ended June 30, 2015 was a net expense of $12.1 million compared to a net expense of $11.7 million for the comparable period in 2014.

The net expenses comprised primarily of interest expense, which includes $7.2 million of non-cash expense related to the accretion of the discounts on both the 4.25% convertible senior subordinated notes due in 2019 and the company’s indebtedness under the Deerfield notes for the quarter ended June 30, 2015 as compared to $7.3 million for the comparable period in 2014.

Net loss for the quarter ended June 30, 2015 was $43.4 million, or $0.22 per share compared to a net loss of $73.4 million or $0.38 per share for the comparable period in 2014.

The decreased net loss for the quarter was primarily due to decreases in research and development expenses and selling, general and administrative expenses and an increase in product revenues.

Cash and cash equivalents, short and long-term investments and short and long-term restricted cash and investments totaled $167 million at June 30, 2015 compared to $242.8 million at December 31, 2014. The June 30, 2015 cash position was prior to the public offering of stock in July 2015, which netted the company approximately $146 million.

We are pleased with the caliber of institutional investors that participated in this offering and fully appreciate their continued commitment to Exelixis. Turning to our financial guidance for the second half of 2015, with the positive METEOR data in hand, we will make the investments necessary in our regulatory efforts to fully support our U.S.

and EU filings in early 2016 as well as building the incremental infrastructure necessary to prepare for the potential U.S. launch of cabozantinib in advanced RCC. We are now providing guidance that our operating expenses will be in the range of $80 million to $90 million for the second half of 2015.

This range includes approximately $10 million of incremental non-cash stock-based compensation expense related to the vesting of performance stock options tied to the readout of positive top line METEOR data results.

With the recent extension of the maturity of the $100 million Deerfield notes to July 1, 2018 and the receipt of approximately $146 million in cash from our public offering of stock, we are now on solid footing from a cash perspective. As Mike highlighted, we are in continued discussions with potential partners for ex-U.S.

territories, which if successful, ultimately could bring additional financial resources to the company in the form of upfront and other milestone payments. So, with that, I will now turn the call over to Gisela..

Thank you, Chris. A couple of weeks ago, we announced positive results for METEOR, our Phase 3 trial comparing cabozantinib and Everolimus in advanced RCC patients who have experienced disease progression following treatment with at least 1 VEGFR TKI.

We were very excited to see the trial succeed in meeting its primary endpoint of improving PFS for cabozantinib as compared to Everolimus and to also observe a strong trend in overall survival at the planned interim analysis.

In addition, cabozantinib was generally well-tolerated with a low rate of discontinuations for adverse events not associated with disease progression. Just a reminder, I will quickly run through the top line data. The primary endpoint of the study was progression-free survival.

The analysis of progression-free survival per the independent radiology committee showed a highly statistically significant benefit for cabozantinib with a hazard ratio of 0.58% and 95% confidence interval of 0.45 to 0.75 and a p-value of less than 0.0001. Cabozantinib treatment reduced the risk of disease progression or death by 42%.

In METEOR, we have now seen a clinically meaningful and statistically significant improvement in the primary endpoint of progression-free survival compared with Everolimus. Data pertaining to overall survival in the entire study population of 658 patients, a secondary endpoint of the trial were immature at the data cutoff as would be expected.

But an interim analysis triggered to occur at the time of the primary analysis for PFS showed a strong trend favoring cabozantinib with a hazard ratio of 0.67, an unadjusted 95% confidence interval of 0.51 to 0.89 and a p-value of 0.005.

At the time of the interim analysis, the pre-specified p-value of 0.0019 to achieve statistical significance was not reached. Needless to say, that we were very pleased to see the strong trend in overall survival at this early time was a minimum follow-up of only six months for this endpoint.

The trial will continue to the final analysis of overall survival that we anticipate in 2016. The overall survival interim analysis provides a first early look at this data and we are encouraged about the observed strong trend favoring cabozantinib.

This is of interest, as to-date the majority of Phase 3 studies in advanced renal cell cancer and in particular in the second line setting, the RECORD-1 study and the AXIS study failed to show a survival benefit for their respective compounds under evaluation although they succeeded in improving progression-free survival.

The rates of serious adverse events regardless of causality were similar between treatment arms and discontinuations for adverse events were low at about 10% in both treatment arms and consistent with those previously reported for Everolimus.

Further detailed analysis are ongoing, but we believe that the low discontinuation rates may in part be due to the optimized dose of cabozantinib at 60 milligrams per day and a high level of familiarity of the renal cell cancer treatment community with the use of both Everolimus and the VEGFR targeting TKI.

We hope to present the data at an upcoming medical conference in and we will keep you informed when we have confirmation of the date and venue for their presentation. We are now intensely focused on our next steps towards filing for regulatory approval in the United States and in the European Union in early 2016.

These regulatory submissions are now the highest priority for the company over the coming months and this mobilized all appropriate resources to expedite these filings as soon as possible. We will update you on progress for these activities as appropriate.

Beyond our focus and efforts to complete our regulatory filings based on METEOR, addition clinical development in renal cell cancer continues in the form of trials sponsored by our collaborators at the National Cancer Institute’s Cancer Therapy Evaluation program as well as through our investigator sponsored trial program.

Most notably, an important study in first line advanced RCC is currently ongoing in the cooperative group known as the Alliance under the CTEP IND. The cabozantinib trial is a randomized Phase 2 study comparing cabozantinib versus sunitinib in first line therapy of intermediate or poor risk patients per the standard risk classification.

The primary endpoint is progression free survival and the steady achieved achieve its target enrollment of 150 patients in March of this year. Given the historical PFS duration in patients with intermediate or poor risk RCC in the first line setting, we are expecting data some time in 2016.

We look forward to providing you with the results when available. In addition, our CTEP collaborators have initiated a Phase 1 study evaluating the combination of cabozantinib plus nivolumab with or without ipilimumab in patients with genitourinary cancers, including RCC.

It’s a strong rationale for combining cabozantinib with these types of immune oncology agents, including evidence of the compound’s ability to create a more immune premises environment as well as preclinical data suggesting that cabozantinib can [Technical Difficulty] infiltration into tumors.

Data on the tolerability and anti-tumor activity of the combination studies in this early stage trial could set the stage for later stage evaluation, not only in the genitourinary setting, but in other areas as well like non-small cell lung cancer and histologies that appears sensitive to both agents.

Now turning to other indications, I will provide a brief update on our Phase 3 study in advanced hepatocellular cancer that is called Celestial. The study continues to enroll patients globally.

In this study, patients with advanced HCC who have received prior treatment with sorafenib are randomized to receive either cabozantinib at 60 milligrams per day or matching placebo. The primary endpoint for this trial is overall survival, and we are expecting data in the 2017 timeframe.

There is currently no standard of care available in the second or later line population who have received prior sorafenib, highlighting the unmet medical need in this indication.

And lastly, I would like to briefly speak about our non-small cell lung cancer data presentations at the ASCO meeting a couple of months ago that highlights potential for cabozantinib in this indication. Oral presentations have showed positive results from two trials of cabozantinib in molecularly defined subtypes of non-small cell lung cancer.

An investigator sponsored Phase 2 trial of cabozantinib in RET rearranged non-small cell lung cancer met its primary endpoint exceeding the predefined number of objective responses.

And a second trial conducted by the ECOG-ACRIN Cancer Research Group under our cooperative research and development agreement with NCI-CTEP extended both PFS and overall survival in a statistically significant fashion for cabozantinib and the combination of cabozantinib and erlotinib versus erlotinib alone in EGFR wild type non-small cell lung cancer patients.

Exelixis is committed to working with its collaborators at the NCI and at ECOG-ACRIN to explore further development of cabozantinib in lung cancer, including the evaluation of combination of purchase within immune oncology compound and the potential for late stage development in the later line population evaluated in the randomized Phase 2 study.

And with that, I will hand the call back to Mike..

Alright, Gisela thank you. I will add a couple of closing remarks before we can get to your questions. We are rapidly moving towards two key milestones for Exelixis in the months ahead. Our team is completely focused on the next significant drivers for the business, including first the U.S. and EU regulatory filings for cabozantinib in advanced RCC.

And second the potential approval and launch of cobimetinib in combination with vemurafenib in patients with mutant BRAF positive melanoma. We are entering a new and very exciting phase in the company’s history with the near-term possibility of having two approved products that address commercially significant patient populations.

We look forward to keeping you up-to-date on our continued progress. I will close now by thanking our entire team here at Exelixis for their unwavering dedication and great efforts over the last quarter on behalf of patients with cancer.

Thank you, all for your time today and your interest in Exelixis and we are happy now to open the call for questions..

Thank you. [Operator Instructions] Our first question is from Eric Schmidt with Cowen & Company. Your line is open..

Good afternoon and thanks for taking my questions.

Mike, do you now have a targeted medical meeting for a presentation of the METEOR results or is that still up in the air?.

Yes.

I will let Gisela answer that question, Gisela?.

Sure. Yes, we have submitted at this point in an abstract for the ECC meeting that is taking place in Vienna at the end of September. Obviously, it’s not up to us to decide upon acceptance. So we will just have to stay put and weight for a response and we will be sure to update you when we have it..

Okay.

And then maybe also for Gisela what’s rate limiting on your ability to file the sNDA in the U.S.?.

So obviously, as the highest priority as I said a little earlier, working on the regulatory filings both for the United States and the European Union and we are mobilizing all resources to move things along as quickly as possible we have guided towards a submission timeline in early 2016, but are certainly working towards beating that submission timeline.

And the usual things that need to occur to achieve that obviously, the generation of regulatory documents and finalization of the study reporting and so on. So, that takes a little bit of time..

So, not waiting for anymore cuts to the data or any manufacturing, I don’t know checks and balances or anything like that just processing the filing itself?.

That is correct. And also just to clarify, it’s not an sNDA, it’s an NDA..

Oh, sorry, correct..

Yes, from the COMETRIQ capsule..

Thank you. Last question, in terms of the European MAA filing and your ex-U.S.

partnership discussions, are those independently tracked or do you think a partner might want to have some say in the MMA and therefore might the timing of one be dependent on the other?.

Yes, Eric, it’s Mike. We view those two work streams as being at this point in time, separate. Obviously, if we had a partner in place by the time we had the MAA ready to file that would make future discussions with agencies in the EU probably easier, but we are not going to wait for that. We can file sooner. We will do that.

And again, the goal there is to find really the best partner from a broad perspective and our focus is to get the MAA and the NDA filed as quickly as possible..

Thank you..

Thanks, Eric..

Thanks, Eric..

Thank you. Our next question is from Stephen Willey of Stifel. Your line is open..

Yes, thanks for taking the questions.

Just with respect on the European partnership side, can you maybe just remind us what the flexibility is for the current arrangement with Sobi, I guess, with respect to maybe termination and is there any kind of breakup fee there associated with the ending of that agreement?.

Yes, Steve, it’s Mike. Again, as we have talked about previously, we currently work with Sobi as our European distributor for COMETRIQ in the EU as well as supporting the named patient use program globally outside of the U.S. We have a great relationship with them.

They are doing we think a great job in supporting again what is a very small, tiny orphan oncology indication and we enjoy that collaboration and we think it’s gotten off to a great start. That being said, we have the opportunity to move that compound to a future partner if we choose so as part of that ex-U.S.

collaboration or potential collaboration that we are certainly talking about. Right now, there is a small fee that we would pay to Sobi, but it’s a rather small amount and is certainly not in the way of somebody who would like to be able to market COMETRIQ for MTC to move that forward with another partner.

So, again, in fact, we are very happy with Sobi. We think it’s going really well and we will see where this goes relative to the broader RCC discussion term of the ex-U.S. deal..

Okay.

And then with respect to again I guess on the partnership side, would you be looking for a partner that could concomitantly commercialize Japan or do you view that as being a separate deal in and of itself?.

That’s a good question. We are looking at all those different scenarios very carefully. It’s only a math problem more than anything else in terms of the kind of the global economics in terms of both commercialization as well as future developments. So, if one partner can do that, that’s fine.

If we need to go to two to cover Asia, Japan as well as rest of world, that’s okay too. So, we are flexible there. Again, we are looking to maximize our optionality and the economics that we receive as well as the really strong support from a development point of view to really build cabozantinib into the franchise that we think it could become..

Okay.

And then maybe just a housekeeping question, I appreciate the second half OpEx guidance, but just want to make sure that, that doesn’t include any potential co-promotion costs under the cobi agreement?.

Yes. So, yes, it does include the – this is Chris Senner, it does include the co-promotion costs for the second half, so both in the first and the second half include the co-promotion costs. So, they are both – they are in what you have seen in the run-rate, but also in the guidance..

Okay, I appreciate it. Thanks..

Thank you. [Operator Instructions] Next question is from Stefan Quenneville of Morningstar. Your line is open..

Hi, thanks for taking my question. I was curious about incremental sales force requirements given the RCC indications starting next year.

How are you thinking about sort of adding people to what degree you think that’s going to be necessary?.

Yes, thanks for your question. P.J. Haley is here. He leads our commercial group. It’s a great chance for him to say a few words about that.

P.J.?.

Yes, thanks for the question. I think it’s probably best to take a step back and think about our commercial capability that we have developed over the past few years leading up to our approval of COMETRIQ in medullary thyroid cancer. So, we have had a sales force on board promoting that for over two years now.

So, we have developed that capability internally. We have expanded the team and expanded it again recently to be ready for the potential cobimetinib approval in partnership with Genentech, who are working very well and closely with as we continue to prepare for the pending cobi approval.

With regards to that, we have 12 representatives, who will be going from promoting currently COMETRIQ to supporting cobi with that approval and we have 6 reps who will remain supporting COMETRIQ. With regards to COMETRIQ in MTC, it’s a very sort of niche and small population with a small amount of oncologists who are treating that niche indication.

We know these physicians very well these customers and we believe we can continue to support patients over the time there. When we think about RCC going forward, it’s obviously an opportunity we are very excited about.

It’s too early to comment on the details of that, but what I can say is that with the data, we have got a lot of unsolicited interest in folks reaching out with interest to join the commercial organization at Exelixis. We think that’s going to give us great momentum as we continue to move forward with our recruiting efforts.

When I think about other capabilities to commercially that we have built, we have built in-house marketing capability. We have built in-house distribution capability. We have a third-party logistics provider onboard. We have a specialty pharmacy. We are currently distributing the drug through.

So, at a high-level strategically what we will do is look to continue to leverage these capabilities as we prepare for potential launch in RCC..

Great, thanks..

Thank you. There are no further questions at this time. I would like to turn the call over to today’s host, Susan Hubbard. Ms.

Hubbard?.

Great. Thank you all for joining us today. We appreciate your attention and support and we look forward to answering any follow-up questions you might have following the call..

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes your program. You may now disconnect. Have a wonderful day..