Good day, ladies and gentlemen, and welcome to the Exelixis' First Quarter 2019 Financial Results Conference Call. My name is Gigi and I'll be your operator for today. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to your host for today, Ms.

Susan Hubbard, Executive Vice President of Public Affairs and Investor Relations. Please proceed..

Thank you, Gigi and thank you all for joining us for the Exelixis' First Quarter 2019 Financial Results Conference Call. Joining me on today's call are Mike Morrissey, our President and CEO; Chris Senner, our Chief Financial Officer; P.J.

Haley, our Senior Vice President of Commercial; and Gisela Schwab, our Chief Medical Officer, who together will review our corporate, financial, commercial and development progress for the first quarter ended March 31, 2019. Peter Lamb, our Chief Scientific Officer is with us as well and will be joining for the Q&A portion of the call.

During the call today, we will refer to financial measures not calculated according to generally accepted accounting principles. Please refer to today's press release, which is posted on our website for an explanation of our reasons for using such non-GAAP measures as well as tables deriving these measures from our GAAP results.

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 and results could, of course, differ materially.

We refer you to the documents we file from time-to-time, with the SEC, which under the heading Risk Factors, identify important factors that could cause actual results to differ materially from those expressed by the company verbally and in writing today.

Including without limitation risk and uncertainties related to product, commercial stuff, market competition, regulatory review and approval processes, conducting clinical trials, compliance, that applicable regulatory requirement, our dependence on collaboration partners and the level of costs associated with commercialization, research and development, business development and other activities.

Now 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 is off to a strong start in 2019 with important progress from a clinical, commercial and financial perspective. As you'll hear from the team today, new patient starts, demand, chronic revenue and cash all grew in the first quarter.

As we executed on our strategy to make CABOMETYX the number one TKI in RCC and launching the new second-line HCC indication.

We maintained strong momentum to move aggressive way throughout 2019 to grow the CABOMETYX business, initiate the next wave of cabozantinib pivotal trials and add new agents to our oncology pipeline from internal and external sources.

We're pleased to see that the CABOMETYX business grew in the first quarter in the phase of anticipated seasonal headwinds from both an inventory draw down and higher gross-to-net fees.

Our first quarter results support the projection that cabozantinb's best-in-class TKI profile can drive strong growth in the phase of the emerging competition from ICI based combination therapies in RCC and a broad offering of both TKIs and ICI in HCC.

Our first quarter results are notable in the context of the RCC competition where first quarter 2019 U.S. revenues [indiscernible] declined compared to fourth quarter of 2018 as was the case with most other oral oncology products that have been reported on this quarter.

I'll begin today by providing a brief summary of our key first quarter milestones and then turn the call over to Chris, P.J., and Gisela for details on our Q1 financials, the commercial performance of CABOMETYX and finally cabozantinb’s development activities.

Key highlights for the first quarter 2019 includes first, a significant growth in new patient starts, demand and product revenue in the face of higher gross-to-net fees and an inventory draw down.

Net cabozantinb franchise revenue for the first quarter was approximately $180 million, non-GAAP first quarter net income was approximately $85 million, non-GAAP diluted earnings were $0.27 per share and we exited the first quarter with greater than $1 billion in cash and investments. Chris will cover the full first quarter financials shortly.

Second the continued strong performance of the CABOMETYX business where we maintained its leadership position as the best-in-class TKI for advanced RCC, and initiated sales and marketing activities in HCC.

CABOMETYX continued to gain additional RCC market share throughout the first quarter and we're pleased with our initial launch in HCC where we see notable traction in the second and third line setting.

The depth and breadth of the METEOR and CABOSUN in RCC and the CELESTIAL data in HCC continues to differentiate CABOMETYX from all other TKIs approved in these indications. Notably CABOMETYX is the only TKI with a pronounced and statistically significant overall survival advantage in both RCC and HCC.

Third, we continued to advance our cabozantinb development program as we aggressively pursued the next wave of cabozantinb late stage clinical trials, four pivotal trials highlight important progress in this area, including CheckMate 9ER with the CaboNivo combo in first line RCC, COSMIC-311 with single-agent cabozantinib in second-line DTC, COSMIC-312 with the cabo atezo combination in first-line HCC and with today's announcement COSMIC-313 with the triplet cabo nivo ipi combination in first-line RCC.

And fourth, our integrated discovery development in BD team is employing a combination internal efforts and external collaborations to build deep portfolio development candidates that we can efficiently evaluate in the clinical setting.

Our progress throughout the early months of 2019 highlights the team's performance across all components of our business during a dynamic time where both the RCC and HCC treatment landscapes are rapidly evolving. Our overall strategic goals remain the same.

We seek to grow revenues, manage expenses carefully, and reinvest free cash into the business to build long-term sustainable growth. Through focus, determination and teamwork, we strive to deliver on our goals every single day for patients and shareholders.

So with that, I'll turn the call over to Chris and he will provide more details on our first quarter 2019 financials..

Thanks Mike. I'm very pleased to share with you our strong financial results for the first quarter of 2019. The company reported total revenues of $215.5 million in the first quarter 2019. Total revenues for the quarter included cabozantinb net product revenues of $179.6 million.

Total revenues also included the recognition of $35.9 million in collaboration revenues from the company's commercial collaboration partners Ipsen and Takeda. On a sequential quarter basis, CABOMETYX net product revenues increased by approximately $4.3 million.

This result included an increase of approximately $4.5 million in CABOMETYX product volume and $9.2 million due to the first quarter price increase and it was offset by decrease in trade inventory of approximately $2.3 million and deductions from gross sales, which increased to 19.8%.

The increase in deductions from gross sales for the first quarter was $7.2 million and was 2.4 percentage points higher when compared to the fourth quarter of 2018 which was 17.4%.

The CABOMETYX wholesale inventory at the end of the first quarter of 2019 was approximately 2.6 weeks on hand as compared to approximately 2.9 weeks on hand at the end of fourth quarter 2018. The increase in our deductions from gross sales is primarily related to increases in our public health services or PHS utilization.

CABOMETYX had higher growth and PHS utilization than experience and overall patient demand. A segment of our payer mix, which is subject to much higher discount requirements than other pair segments.

Additionally, our Medicare coverage gap liability increased significantly when compared to the fourth quarter of 2018 which can be attributed to both a relative increase in Medicare patient utilization and the increase in the Medicare Part D discount from 50% in 2018 to 70% in 2019.

Taking into consideration these various components of [indiscernible] we project that our CABOMETYX deductions from gross sales will be between 19% and 20% for the full year 2019. Total revenues also include collaboration revenues of $35.9 million for the quarter ended March 31, 2019.

These collaboration revenues includes the recognition of $9.4 million of $10 million milestone from our commercial collaboration partner Takeda for their CABOMETYX filing in Japan for advanced RCC.

Collaboration revenues also include $14 million of royalties earned from approximately $63 million of cabozantinb sales by Ipsen, $2.5 million of profit share and royalties earned under the cobimetinib collaboration with Genentech and Roche and $10 million of additional license, research and development, and product supplier revenues that were recognized from the company's collaborations.

Our total costs and expenses for the first quarter of 2019 were $130.9 million compared to $117 million in the fourth quarter 2018.

Within total cost and expenses, our R&D expenses increased by $6 million and is primarily the result of increases in the clinical trial spend as we invested in the next wave of CABOMETYX pivotal trials and to a lesser degree increases in licenses and royalties spend primarily from Invenra project fee.

Selling, general and administrative costs increased by approximately $7.8 million, the increase in SG&A expense was primarily related to increasing expenses for corporate giving, personnel, branded prescription drug fee and marketing.

Income tax for the quarter ended March 31, 2019 was $14.9 million and our effective tax rate for the quarter was approximately 16.4% compared to $2.5 million and 2.1% respectively for the comparable period in 2018.

The 16.4% income tax rate in the first quarter is below our guidance range for 2019 and was favorably impacted by certain discreet deductions that occurred in the quarter. The company reported GAAP net income of $75.8 million or $0.24 per share on a fully diluted basis for the first quarter of 2019.

The company reported non-GAAP net income of $85.5 million or $0.27 per share on a fully diluted basis. Non-GAAP net income excluding the impact of approximately $10 billion of stock based compensation net of the tax effect.

Cash and cash equivalent, short and long term investments in long-term restricted cash and investments totaled approximately $1 billion at March 31, 2019, compared to $851.6 million at December 31, 2018. The increase in our cash reflects approximately $90 million of cash flow from operations.

We received a $60 million of milestone payments from our collaboration partner Ipsen and approximately $18 million of royalty and reimbursements from our collaboration partners. Now turning into our financial guidance, the company is maintaining its financial guidance for 2019.

Cost of goods sold is expected to be between 4% and 5% of net product revenues. Research and development expenses expected to be between $285 million and $315 million and includes non-cash expenses related to stock based compensation of approximately $20 million.

Selling general and administrative expenses expected to be between $220 million and $240 million and includes non-cash expenses related to stock based compensation approximately $35 million. Guidance for the effective tax rate in 2019 is between 21% and 23%.

And finally over the last several quarters we have experienced increasing variability in our deduction from gross sales and wholesale inventory levels that should be considered when modeling future revenue trends.

As I mentioned earlier, we projected our deductions from gross sales for CABOMETYX will be between 19% and 20% for the full year 2019, also we expect increased quarterly variability in wholesaler buying patterns which can lead to variability and how much inventory wholesalers hold. As we and other bio pharma’s experienced in the second half of 2018.

Some of this inventory variability can be attributed to the implementation of new price transparency regulations and hence provide wholesalers opportunity by extra supply in advancement dissipated price increases. And with that I'll turn the call over to P.J. .

Thank you Chris. I'm very pleased to discuss in detail with you today the strong performance of CABOMETYX in the first quarter. In Q1 CABOMETYX built on this position of being the number one TKI for new prescriptions in RCC and became the leading TKI in total prescriptions for TRx in RCC.

Additionally, the approval and launch of CABOMETYX in HCC is off to an encouraging start across a variety of metrics that I will touch on in these remarks. In Q1 we saw positive trends in the business, in terms of demand, new prescriptions and expansion of the CABOMETYX prescriber base.

Patient demand grew by 33% year-over-year and 3% quarter-over-quarter and this growth was driven by both RCC and HCC. New Prescriptions or NRx were up by 17% in Q1 relative to the fourth quarter of 2018. The growth in new prescriptions in Q1 was driven equally by RCC and HCC.

We are pleased to see the growth in demand and new prescriptions coming from both of the new tumor types for which CABOMETYX is indicated. This underscores healthy fundamentals for both parts of the franchise and I will go into more detail for each momentarily.

Additionally, the prescriber base grew by 10% quarter-over-quarter and 53% year-over-year from 2018. This growth was driven by new community prescribers for both RCC and HCC, as well as new academic prescribers within HCC. CABOMETYX net revenue grew to about $176 million, representing an increase of 36% year-over-year and 2.5% quarter-over-quarter.

As Chris mentioned, net revenue in Q1 was impacted by increased PHS utilization, increased Medicare donut hole expenditures, and a drawdown of inventory following two successive quarters of inventory build. Inventory is now on the low-end of the range that we historically observed for CABOMETYX.

Furthermore, inventory was built across the industry in Q4 last year and that appears to be the case for the RCC oral tyrosine kinase inhibitor market as well. I will now turn to more specifics of the RCC marketplace, which continues to become increasingly competitive.

We have long anticipated approval of PD-1 TKI combinations in RCC and very recently the combination of pembrolizumab and axitinib was approved in the first line setting.

To get a better sense for the evolving competitive dynamics through Q1, we analyzed the IQVIA data for the RCC oral TKI inhibitor, our TKI market comprised of sunitinib, pazopanib, axitinib and CABOMETYX.

As you can see from this analysis of publicly available data, CABOMETYX became the leading TKI in total prescriptions in Q1 surpassing, [indiscernible] gaining three share point for TRX market share of 34%. We are pleased that CABOMETYX continued to grow in Q1 despite the competitive marketplace.

This represents significant progress in a share point increase of 3% relative to the last quarter and a growth rate of 8% in TRX relative to Q4 2018. Additionally, these data show that CABOMETYX became the number one TKI for total prescriptions in the RCC market.

Turning to NRx, you may recall the CABOMETYX became the leading TKI in RCC for new prescriptions in Q4 and the CABOMETYX NRx share continue to increase in Q1 to 36%. Also encouraging, is the NRx growth trend in Q1 relative to Q4 showing that CABOMETYX NRx grew at 17% outpacing the TRx growth rate of 8% Q-over-Q.

Both growth rates were higher in Q1 relative to Q4. The RCC market will continue to be driven largely by the sequencing of therapeutic options and we feel good about cabo’s placed in the market is sequencing of ops.

Most patients will have the opportunity to receive either CABOMETYX followed by ICI therapy or an ICI combination followed by cabo and sequence.

The number of second-line patients who have progressed on the combination of NivoIpi increased again in Q1 and we expect this gradual trend to continue in the coming quarters is there are many frontline NivoIpi patients that have yet to progress.

CABOMETYX has well positioned to be the treatment of choice for these patients as well as patients who progress on pembro/axi. Market research continues to indicate that approximately 90% of key opinion leaders surveyed would choose CABOMETYX is their therapeutic option after a first line ICI combination, whether it is NivoIpi or a PD-1 TKI.

The RCC business has strong momentum heading into Q2. According to data from IQVIA brand impact, CABOMETYX new patient market share was stable in the first line and increased in the second line in Q1.

Furthermore, since the approval of NivoIpi in April, the vast majority of the patients who have progressed on this combination have received CABOMETYX as their second line treatment.

In fact, data from IQVIA brand impact suggest that CABOMETYX captured the vast majority of market share of patients in Q1 who progressed on NivoIpi consistent with our market research just mentioned. We continue to see broad utilization across academic and community settings, lines of therapy and clinical risk groups.

Given the patient flow dynamics and the strength of the CABOMETYX data, we expect RCC demand to continue to grow in 2019. In addition to the continued momentum of CABOMETYX in RCC, we're excited to also drive growth in the newly received indication in HCC representing a third tumor type and forth indication for the cabozantinib franchise.

Our team began executing on the launch and immediately upon receiving approval for the second line HCC indication on January 14 and we are pleased with the progress made. We're still in the early days of the launch, but the key metrics indicate that we're exceeding our expectations.

As we have stated for some time, HCC is a market that will need to be built as new therapies become available for these patients. This is consistent with external market research which indicates that the HCC market will grow in the coming years.

Our market research indicates that CABOMETYX is already achieving significant awareness relative to the other TKIs in HCC. If aware of CELESTIAL data, the majority of physicians indicate that they intend to prescribe CABOMETYX consistent with its approved labeling.

Initial market research indicates the cabo will be the TKI of choice in pretreated HCC patients and we're seeing this in the market as cabo is already taking share from regorafenib. We viewed these collective observations as encouraging and consistent with the initial HCC market trends we are seeing in terms of both new prescriptions and demand.

As I mentioned earlier in my remarks, we are seeing HCC contribute to approximately half of cabo’s demand growth and half of the brand's growth in new prescriptions in the first quarter. We are pleased that HCC and RCC are growing with regards to both of these metrics.

Based on the fact that CABOMETYX is demonstrated a survival benefit in a second tumor type. The HCC indication seems to have generated additional competence in cabo among the physician community and other synergies for the CABOMETYX brand.

Importantly, the HCC approval has increased account access for our sales force and facilitated not only productive HCC discussions but as increased the number of meaningful RCC discussions and interactions with prescribers as well.

In fact, our preapproval RCC sales footprint covered approximately 95% of the combined RCC and HCC market potential, and we began calling on the remaining HCC specific prescribers immediately following approval. Well, early days, external share voice data is validating our strategic approach to the market.

This CABOMETYX has the leading share of voice in second line plus HCC while maintaining the leading share of voice in the RCC market. Our established footprint and community oncology and community physician familiarity with CABOMETYX is aiding the uptake within HCC.

Our market research had indicated that there would be an increased interest in prescribing CABOMETYX for HCC, if the physician had previous experience using cabo and RCC. This is playing out in the market is approximately 80% of HCC prescribers in Q1 had previously written cabo and the other 20% are largely academic based.

We are pleased to see this uptake for HCC in both the academic and community segments of the market. We are also pleased with the results of Q1 but believe that many more RCC patients and now HCC patients could benefit from CABOMETYX. CABOMETYX grew in Q1 in terms of new prescription and demand in both RCC and HCC.

The HCC approval continues to augment the overall positive perception of the brand and gives our customers more options as they strive to help patients with difficult-to-treat cancers.

CABOMETYX is now the number one prescribed TKI and RCC and we look forward to building on this momentum in RCC, HCC, and other potential future indications as the cabozantinib development program expands.

Our team is focused and motivated to compete every day to bring the benefit of CABOMETYX to every eligible patient as we continue to build the franchise. With that, I'll turn the call over to Gisela..

Than you P.J. I'm pleased to provide an update on the progress of the cabozantinib development program and we'll start with an overview of our combination trials of cabozantinib with immune checkpoint inhibitor.

Our clinical collaboration with BMS combining cabozantinib with nivolumab alone for cabozantinib with nivolumab and ipilimumab is making great progress.

The ongoing Phase III CheckMate 9ER study in treatment-naïve RCC patients comparing cabozantinib in combination with nivolumab versus sunitinib has completed enrollment recently with the last few patients in Japan are going through the screening period before randomization.

This study is sponsored by BMS and co-funded by ourselves and our partners Ipsen and Takeda together with BMS. We are very pleased with this progress and we are expecting data from this study early next year as BMS committed on their recent quarter four. We look forward to these event-driven analysis and we’ll provide further updates [indiscernible].

Also as announced today, we are initiating a further Phase III trial, COSMIC-313, evaluating the triplet of cabozantinib in combination with the cabozantinib and nivolumab versus nivolumab and ipilimumab in the first line RCC. We are steady sponsors and BMS is collaborating with us and providing nivolumab and ipilimumab free of charge.

The primary endpoint of this 676 patient trial with PFS and secondary endpoints includes overall survival and objective response rate. Despite the significant progress in the treatment of RCC during the last few years for that improvements are needed.

This study further builds on the positive outcome of our CABOSUN study in first line RCC on cabozantinib demonstrated superior PFS compared to sunitinib in patients with intermediate- or poor-risk RCC.

As well as positive CheckMate-214 trial, this demonstrated superior overall survival with a combination of nivolumab and ipilimumab as compared to sunitinib. Both of these trials have led to regulatory approvals for the respective compounds.

So we are excited to move these agents with proven activity in first line RCC forward in combination as we believe that cabozantinib target profile resulting in a more immune committed environment paired with immune checkpoint inhibition, a result in further improvement of important outcome in first line RCC including the depth of response DRH as well as duration of PFS and OS.

This is the first trial to compare a TKI checkpoint inhibitor combination to the approved checkpoint inhibitor combination of nivolumab and ipilimumab in first line RCC.

The preliminary activity and tolerability of both of the combination of cabozantinib and nivolumab and the triplet combination including ipilimumab has been previously abbreviated in a Phase Ib study chaired by Dr. Andrea Apolo.

In this Phase Ib trial conducted in previously treated patients with advanced GU tumors, including RCC and tolerable dose of 40-milligrams of daily oral cabozantinib together with other 3 milligrams per kilogram nivolumab or 303 milligrams per kilogram nivolumab plus 1 milligram per kilogram ipilimumab every three weeks [indiscernible].

We are also making great progress in our collaboration with Genentech Roche with our combination Phase Ib Trial of cabozantinib and atezolizumab at COSMIC-021 Phase 1b Trial after free enrolling patients across 20 expansion cohorts in various different tumor settings.

In our Phase III trial, COSMIC-312, in patients with previously untreated advanced hepatocellular cancer with enrolling patients in the United States and abroad. With our COSMIC-021 and COSMIC-312, we are collaborating with Genentech Roche, who are providing atezolizumab and our partner Ipsen is co-funding this study.

Further late-state checkpoint inhibitor combination studies and indications including potentially bladder cancer and non-small cell lung cancer and promising tumor types from the COSMIC-021 are also anticipated and we will provide more details as we get ready to initiate these trials.

In separating on the regulatory side for cabozantinib in late breaking news announced just a few days ago, Takeda our partner for cabozantinib in Japan filed an NDA for cabozantinib for the treatment of advanced RCC with the Japanese regulatory authority.

In addition to the very active cabozantinib development program, we are working on expanding our development pipeline late in quarter four 2018 because a new IND for a next generation tyrosine kinase inhibitor targeting VEGFR and MET and the Phase I trial for XL092 is now actively involved in patients.

[Indiscernible] by the data, we plan on advancing this compound quickly through dose finding and disease-specific single-agent cohort expansion as well as combination approaches, setting the stage for late-stage development. I will close with a brief update on cobimetinib.

Two Phase III pivotal trials in previously untreated melanoma have been enrolled fully last year. These include IMspire150 on TRILOGY evaluating cobimetinib plus vemurafenib plus atezolizumab in BRAF mutation-positive patients locally advanced or metastatic disease.

In IMspire170 that evaluates cobimetinib and atezolizumab in BRAF wild-type metastatic disease. For Roche’s full year 2018 results call in January of 2019, potential regulatory filings have planned later this year if data are supported. And finally, we are preparing for the annual ASCO conference starting at the end of the month in Chicago.

And looking forward to the conference where nine cabozantinib and two cobimetinib related abstracts will be presented and to the opportunity to connect in person with key opinion leaders and partners.

So in summary, I'm very pleased with the progress made in our development program and with the important milestones reached during this quarter and look forward to updating you in the future. And with that, I'll turn the call back to Mike..

All right. Thanks, Gisela. I will close by saying that Exelixis maintain strong momentum in the first quarter of 2019 and we are excited about the growth potential of our company across all aspects of our business.

Notably our Q1 results highlight that we continue to grow the business quarter-over-quarter and year-over-year due to the strength of the CABOMETYX launch, our ex-U.S. deals with Ipsen and Takeda and disciplined expense management.

Cabozantinib is vectoring towards the $1 billion per year global run rates and has helped literally tens of thousands of patients with RCC and now HCC live longer and recover stronger.

The strength of our business provides a compelling opportunity for potential long-term growth as we continue to invest in R&D with future additional cabozantinib late stage trials and new product candidates through both internal and external R&D efforts.

I want to thank the entire Exelixis' team for their dedication and commitment as we navigate the opportunities and challenges that lie ahead of us. As I said previously, we have a team and culture that is focused, energized, and extremely resilient.

We remain committed to making every day count as we discovered developing, commercialize the next generation of our medicines for cancer patients do need a better and more effective therapies. We look forward to updating you on our progress.

Thank you for your continued support and interest in Exelixis and we're now happy to open the call for questions..

[Operator Instructions] Your first question comes from the line of Andy Hsieh from William Blair. Please proceed..

Great. Thanks for taking my question and congratulations on the quarter. So impressive. 17%, NRx growth rate.

I'm just wondering, is there any – among patients who have previously been treated with Opdivo, Yervoy in the frontline setting, are you seeing any sort of pattern there in terms of patients going on Cabo, are they rapid progressors? Are they stable disease patients who have failed after a short period of time, any sort of trend lines that you can provide there?.

Yes. Andy, thanks for the question. This is P.J., we're certainly pleased that, what we're seeing in the market research data, the brand impact data is that we're getting the vast majority of the patients the last couple of quarters progressing off nivo ipi, we're really, – what we're seeing because it's kind of in that 90% range.

We're really getting all types of patients who are progressing on nivo, ipi across the board and that's been approved as you know now for over a year. We see the kinetics of kind of those patients progressing, continue to increase, which is I think logical, given the timing and given their data.

And furthermore, our market research continues to indicate that we should really capture the vast majority of those patients progressing on either nivo, ipi or PD-1TKI. So we're seeing that broadly. We're pleased with that and certainly we'll continue to really ensure that those patients have the opportunity to benefit from CABOMETYX..

Great, that's helpful. So moving on to HCC.

I'm just wondering based on the conversation you have on the field with physicians, following the setback with keynote 240, are you seeing a decrease or I guess hesitancy in terms of prescribing checkpoint inhibitors for HCC patients there?.

Yes, thanks for the question Andy, P.J. again, definitely interesting sort of times and data in HCC is that markets expanding in new options are becoming available.

I'd say it's kind of early days to really understand any potential impact of that announcement of the keynote data, but what we really are seeing and I think every tumor type is different, is that the perspective of physicians treating HCC is quite positive towards TKI.

And I think with Cabo coming to market, here we're seeing really good feedback on the CELESTIAL data.

We're seeing excellent uptake with regards to taking market share in both the second and third lines, predominantly expensive regorafenib and I think, that momentum and the demand growth and new prescription share growth I think really sets us up with good momentum heading into the rest of 2019..

Great, okay. And regulatory question in terms of HCC, I guess the question is for Gisela.

What other studies or conversations does Takeda need to have in order to have that approved in Japan, obviously that’s very, very large market there for HCC?.

I won’t comment for Takeda. Obviously Joe addressed this question and I suggest to address [indiscernible] our partner. And typically, what one would do in education for positive [indiscernible] that have been conducted, but I won’t address Takeda’s question..

Got it, okay. Awesome. That’s all for me. Thank you for answering all my questions..

Good. Andy, thank you..

Thank you. Our next question is from Yaron Werber from Cowen. Your line is now open..

Yes, great. Thanks so much for taking my question. So a couple of things Number one, maybe I don’t know who wants to take us one on, when I look at, I’m trying to get a handle of how the launch in HCC is going too far in terms of maybe a little bit more absolute numbers. So when you referring to about half of the growth of the brand coming from HCC.

Are you referring sort of on a quarter-over-quarter basis? Let’s say over the $5 million sort of quarter-over-quarter.

Is that sort of the way we should think about that, maybe half of that?.

Yes. Hi, Yaron. This is P.J. Let me take that. So with regards to the growth, I was referring to kind of the new prescription growth and the demand growth are approximately half and half, RCC, HCC. But with respect to your question, I’m trying to talk about the overall business.

What we saw in Q1 is approximately 4% to 5% of the business was driven from HCC. And what I’ll say about that is, as is often the case in oncology prior to Q1, there was some unsolicited off label utilization of CABOMETYX in HCC. This is something we had seen years ago with regards to COMETRIQ being used in RCC.

Certainly something we didn’t promote, don’t promote off label. But that’s how you get to kind of the 4% to 5% of the business being HCC in Q1..

Got it, okay. So maybe kind of 7%, 7% to 8% roughly, let’s say absolute sales are in HCC, but maybe of that $2 million to $3 million is the growth quarter-over-quarter in HCC..

Yes. We’re not going to address specific numbers, but I think hopefully that helps you kind of frame it with all the other data we provided..

Yes, thank you. And then just moving to 9ER and the powering of the study on both PFS, but more importantly on survival. So the study is now about 650 patients and certainly unquestionably well powered for PFS. Just comparing it to some of the other studies that have been done recently, there’s sort of in the 850 range.

I’m talking about one on one and obviously KEYNOTE-426. How are you – how did you arrive with Bristol at that study size from a survival standpoints and then a power extent point is you can give us a sense us to how you got there. Thank you..

Yes.

Just in general to comment on the 9ER study [indiscernible] when you look at other trials in this space, [indiscernible] some of these trials achieved that with relatively few and then a number and I think our own experience with [indiscernible] and maybe lastly, another point to consider, you said [indiscernible] and also new volume of individually are single agent overall survival endpoint in their respective registration.

Does that help [indiscernible].

Yes, absolutely. Thank you. Thank you..

Thank you. Our next question is from Michael Schmidt from Guggenheim. Your line is now open..

Hey, thanks for taking my questions. I just wanted to dig in a little bit more into the 1Q 2019 CABOMETYX sales figure. So I think when I look at, understanding inventory movements and some of that gross to net impact.

But looking just at pure volume growth and I think you said that was about 3% sequential growth in volume, some of that driven and eight by HCC, which is obviously less than what you had in the fourth quarter and then a third last year. I think you had 4% or 5% and 6% volume growth respectively sequentially back then.

Can you just help us understand how we should think about growth dynamics in particular in RCC going forward over the rest of the year? Is that a growth rate that we should look at from a forward looking point of view?.

Yes, thanks for the question, Michael. This is P.J. Couple of things. So we’re not going to provide guidance on specific growth for the remainder of the year. But what I would say is that, we’re certainly pleased with the fact that we had growth in Q1 from both RCC and HCC.

And what I’d say beyond that with some of which is industry wide, as we saw a really nice sort of kinetics in the demand over the course of the quarter, certainly in the later part of the quarter with regards to that demand and demand growth.

Another thing I’d kind of point to here, as I mentioned, we saw strong growth in NRx new patient starts in Q1 sort of certainly pleased with that both on the RCC side and the HCC side, which are both driving that approximately equally.

And then looking forward, as I’ve kind of mentioned in my prepared remarks in RCC, we see continued demand growth over 2019 and that’s primarily driven by more patients progressing on ICI combinations and CABOMETYX continuing to capture the vast majority of them in the second line.

And we certainly see the potential for demand growth in HCC, as we’re in the very early stages of that launch and all the metrics are very positive. So I think that’s what I’d say with regards to that on the overall perspective..

Okay. And then you said that, more growth than historically was driven by patients and the government reimbursement channel, which contributed to the increase in gross to net. I'm just wondering, if this is something that's driven by disease tie or maybe could you maybe comment how payer makes compass between RCC and HCC.

And if this is a trend that we should keep an eye on going forward?.

Yes. Michael, this is as Chris. Thanks for the question. So, like I mentioned, we did see increased utilization in PHS, which is greater than demand, as you pointed out. And I said, that phenomenon has been going on for the last couple of quarters. We do continue to see a significant portion of our business in the commercial side.

And we do see that, we increased utilization on the Medicare Part D side and also that utilization was coupled with the higher discount rate that we had to take, which is legislated at the beginning of 2018..

Okay, thanks. And then last question, we thought there was an ASCO presentation, actually for a investigator sponsored study in GIST.

I was just wondering if you could help us with some more comments here on expectations for, how big is the study, if there's something that could potentially end up in antigen guidelines, any guidance that would be helpful..

Yes. This will be presented at ASCO. This study is a Phase 2 trial conducted by EORTC and it will be presented by Patrick Schöffski. I can't obviously speak at this point to results, but it is a regular sized Phase 2 study and results are forthcoming. So happy to talk about that at ASCO..

Okay, great. Thank you..

Thank you. Our next question is from Silvan Tuerkcan from Oppenheimer. Your line is now open..

Well, thanks for taking my question and congrats on the quarter.

Could you tell me a little bit more about the new COSMIC-313 trial that you initiated? How do you – what is the importance of that trial compared to 9ER? Are you confident in both trials? And what would be the timeline? Will it be just almost the same patient number as 9ER would it be kind of like a same timeline here?.

Yes. We are very excited obviously to start in this study, I think it's an important study and in the first-line space in RCC. And it's the first triplet combination with cabozantinib, nivolumab and ipilimumab going into the Phase 3 comparison versus the approved new volume of ipilimumab combination. And it's set apart from other trials in this space.

I think, it's spoke earlier to the scientific rationale why we are excited about it, hope and they believe that there is an opportunity for cooperatives or synergistic activity between cabozantinib as a result in a more immune premise environment and the checkpoint inhibitors.

And I think, in RCC events even though there is a lot of progress, that we can look at and that has been made in the last several years. There's still opportunity for improvement with deepening of response and extension of time driven endpoints. Regarding timeline, we have to initiate with study and patient enrollment shortly and have working on that.

With respect to readout, again, it’s too early at this point and more speculate at this point..

Great. Thank you so much. And how will this study impact your spending? I saw you reaffirmed your guidance for this year going forward.

Will there be significant impact from adding the study or not?.

No, Silvan, this is Chris. That we've included COSMIC-313 and future studies in our guidance number. So it's for 2019. So it’s fully included..

Great. Thank you so much..

Thank you, Silvan..

Thank you. Our next question is from Kennen MacKay from RBC Capital Markets. Your line is now open..

Hi, this is Justin on for Kennen. Thanks for taking the questions. A couple quick ones on 313 from us.

Just wondering, if you have an idea of the efficacy part, do you think the FDA is expecting to see it for approval here and additionally, what interim analysis are built in here, if any?.

So as I described earlier on in the prepared remarks, we talked about the design of this study is being a randomized study comparing the approved checkpoint inhibitor combination and it might be included the triplet primary endpoint towards the secondary endpoint excludes overall survival.

In terms of analyses of CELESTIAL would conduct interim analysis of overall survival, roundabout the time of the final analysis PFS, beyond that [indiscernible] critical..

Okay. And one quick one on the impact of the payer patient shift for cabo in Q1.

Is this something you expect to continue going forward throughout the quarter? Or is this just sort of a one-time seasonality event that you're not expecting to repeat for the year?.

Yes. Justin, this is Chris. I guess the way to look at is we did provide guidance or provide a projection here that gross and net would be between 19% and 20% for 2019.

And the way to look at it as – what we've seen in 2018 and 2017 is that we usually start the year at a higher gross to net that it goes down as part of – during the year and then comes back up at the end of the year. So the expectation is all that it will all be within the projection that I provided earlier in my prepared remarks..

Okay. Thank you very much..

Thank you. Our next question is from Ted Tenthoff from Piper Jaffray. Your line is now open..

Great. Thank you very much for taking my question. Congrats on the solid quarter. I’m trying to get a sense for beyond RCC liver, great progress here in terms of expanding the label, obviously a focus on advancing cabo in combination with different IO therapies.

What are the next kind of most exciting indications we should be looking for and paying attention to it? Thank you..

So we are actively working on designs for the trials and I mentioned some of the indications of interest too early to speak about the initiation timeframes that we certainly look forward to updating you on that.

So, but in general indications include a bladder cancer, lung cancer as well as promising indication may merge from the COSMIC-021 that is ongoing data..

Okay, cool. Makes a lot of sense. All right, excellent. Thank you guys for the update and the time..

Thanks, Ted..

Thank you. Our next question is from Peter Lawson from SunTrust Robinson Humphrey. Your line is now open..

Hi. Thanks for taking my questions.

Just I did this, because the net was that higher this year, just as last year’s Q1, and was there a larger than expected impact from donut hole this quarter versus last year’s Q1?.

Yes, Peter, this is Chris. So, yes, it’s higher this year versus Q1 last year, and it’s also higher versus Q4 last year. I would say that it, it’s not necessarily the impact of Medicare donut hole is not necessarily larger than we expected it was what we expected.

But it is larger than prior periods partly because of the utilization, but also to a large degree based on the fact that the discount to beneficiaries that went up from 50% to 70%..

Gotcha.

Is there any way of quantifying that in dollar terms?.

No, I wouldn’t want to give that level of detail at this point..

Okay.

And then just on the nivo launch, this kind of the ability to target medical oncologies versus interventional radiologist if there’s been any traction there or any change in the way of thinking?.

Yes. Hi Peter, this is P.J. Thanks for the question.

So, we’ve really been preparing the strategy that target not only medical oncologist, but the key multidisciplinary teams certainly at the top institutions, which includes the interventional radiologists as well as the hepatologist typically, and you know, we’re seeing good momentum and feedback from those whole teams.

We know some hepatologists are also writing for CABOMETYX, which is encouraging. And I think that’s all leading to what we’re seeing in terms of having a really nice awareness, this early in the launch and a as well as sort of those new prescription and the market share uptake we’re seeing and taking shares of quickly from vemurafenib.

So, I picked the teams, got a good strategy and targeting that multidisciplinary team and really balancing the RCC business where we’re getting some really some synergy in having incremental account access and RCC discussions as well, which is just sort of creating synergy for the business..

Great. Thanks so much. Thanks for taking the questions..

Thank you..

Thank you. Our next question is from George Farmer from BMO Capital Markets. Your line is now open..

Hi, thanks for taking my question. See had the opportunity to dig up some early data that you had with nivo, it be in cabo, I guess that was from ASCO-GU last year.

I don’t know if this, this data that we have is stale, but it look quite PFS had been hit in that study has it been hit? I think it was a Phase 1 study?.

Phase 1 study that you’re referring to Andrea Apolo occurred trials and patients, and its population of patients with upon TU tumors. And this has been reported three times and just to focus on the RCC population and previously, treated RCC patients, she had with the combination 50% response rate and these were durable responses.

PFS wasn’t reported at that time. But if patients were on treatment for extended periods of time and could be urothelial cancer experience, she did report PFS and previously treated patients’ new order of 13 months or so..

Right.

So, there hasn’t been any other updates since, right?.

No. No..

Okay.

And to confirm – I don’t know if you said this, your new phase 3, the COSMIC-313, is that going to be with low dose ipi?.

Yes. the dose was established in that Phase 1b and ipilimumab dose is one milligram per kilogram..

Okay. And then with the keynote results and the excitement generated by combining a checkpoint with the TKI. We’ve been hearing from some physicians that there may be a reason why one would want to swap out Inlyta and replace with CABOMETYX.

Do you have any feel for that? Have you done any of your own polling with physicians to see if they may just combine pembro with cabo instead of or maybe soon thereafter within light up in the event of some adverse – more serious adverse events with that combination?.

Yes. Hey, George, it’s Mike. Yes, fair question. Obviously, that’s something that we don’t want to engage in relative to an unapproved use for cabo. So, we’ve heard that shattered to and we just stay out of it, because we’re not labeled for that. So….

Okay, great. Thanks very much..

Thank you. Our next question’s from Stephen Willey from Stifel. Your line is now open..

Yes. Thanks for taking the question and thanks for all the color around DTC. It’s helpful. Maybe just a question for period regarding HCC, can you talk a little bit maybe just about what the physician feedback is like with respect to your ability to take market share from regorafenib in the second line.

is that a perception around safety, efficacy? Are these patients, who for whatever reason just haven’t seen prior sorafenib just curious as to kind of what’s driving the uptake there?.

Yes. thanks for the question, Stephen and happy to talk about that a bit. Yes. As I mentioned, so the research, we’re pleased with the awareness already and the feedback generally, we’re getting on the CABOMETYX profile and the CELESTIAL data is very favorable.

And kind of in terms of looking at the efficacy feedback, it is tracking very well relative to the other TKIs. I think the differentiation point; it has really always been the broad dataset from CELESTIAL, all of the different subgroups. The patients did not need to be tolerant to prior sorafenib.

So, I think physicians are really looking at it as a drug they can use very flexibly and that feedback’s very strong and we’re seeing that translate into new prescriptions as I mentioned significantly. So, I should say the majority of which are coming from regorafenib at this point..

okay, that’s helpful. And then just looking now yes, at the COSMIC-021 study, I guess you’ve got 20 expansion cohorts, I think some of which have been fully enrolled for a while now.

Can you maybe just – it was a little bit of color around just how you are thinking about the communication strategy and should we be expecting to see presentations related to all of these at some point, should we be expecting to see presentations related to just those indications that your clinic to move forward with? I guess any characterization of that would be helpful.

Thank you..

Yes. Steve. It’s Mike. As we said previously, we’re going to speak to and present data from COSMIC-021 as we have fully enrolled cohorts with long enough follow-up time to be able to present stable data. As Gisela has alluded to many times, we also have the ability to expand cohorts based upon signs of activity that we think are encouraging.

So, it’s the study that is enrolling rapidly and is one that we're certainly very exciting from the standpoint of existing cohorts, but also adding additional cohorts. As we've said previously, we're in a situation today where we're really focused on presenting mature stable data.

We're not – we're trying to avoid a situation where we're kind of leaking out data every meeting, three or four times a year, having response rates change, et cetera. We think that's something that we can in our current state, we should just avoid based upon kind of the overall maturity of our organization.

That being said, you're liable to see us start additional late stage trials, based on the data from 021 probably before you actually see the data supporting that, it’s a good example to liver where we started 312 recently, just because we're seeing data on a regular basis, we understand how to make it all fit with the competition and with the value it can bring and the temporal aspects of that.

And then as that data matures, look at that out. So lots of moving pieces here, we're excited about the combination, certainly the validation in first-line renal looked really encouraging. And we're going full speed ahead..

All right, very helpful. Thank you..

Thanks, Dave..

Thank you. Our next question is from Paul Choi from Goldman Sachs. Your line is now open..

Hi, good afternoon and thank you for taking our questions. Mike, I wanted to ask you, now that you have $1 billion plus in cash and investments building up here, just your latest thoughts with regard to business development and either finding strategic assets or entering into partnerships and additional clinical collaborations here.

And just thoughts on diversifying the revenue base with respect to other assets potentially besides cabozantinib?.

Yes, I mean, the answers are yes, yes, yes. And yes. I mean, we're very interested in doing all those things. We've talked about that pretty extensively in the past.

We have as I mentioned in my prepared remarks, was that a pretty broad efforts between the research development, BD, commercial finance, strategic thoughts as well about how we go about doing this.

We have a pretty high bar for what we're looking for in terms of data, in terms of franchise opportunity, whether it'd be an early stage asset or a late stage asset. But yes, we have a lot of momentum there and I think the right balance of urgency and energy and focus along with being very pragmatic and very thoughtful. Yes, you're right.

We've generated $1 billion in cash and we've earned that, right. And we want to make sure that we maximize its potential going forward in terms of again, building up a broad early stage pipeline, diversifying across modalities is diversifying across pathways in different approaches as well as looking at late stage, mid-stage and early stage asset.

So we've got a lot going on and again, I don't feel any pressure to do a deal, just to do a deal to spend that money. It's the contrary. We want to make sure that we maximize the value of those that hard earned cash that we've got. And that we can then catalyze that to grow the business going forward.

So a lot going on as we finished some of these transactions and there's meaning in the queue, we'll make sure to update you on why them and what we like about them as well as how we think that will fit into our portfolio..

Okay. Thanks for that. And then I had – I guess a clinical question with regard to COSMIC-313, you are focusing on the poor and intermediate risk populations similar to hat was studied as a priority in the CheckMate 214 study.

But just with regard to testing this triplet combination in a favorable risk population, I was wondering if you could give your thoughts there?.

Yes, we focused on the poor and intermediate risk population for exactly the reason that you stating, the approval for both 214 with – 214 study for nivo and ipi in this patient population. And so we wanted to build upon this outcome.

And also I think it's fair to say that poor and immediate risk population obviously a greater need if you will, additional effective therapy. So that's really diverse now..

And any thought to a test the triplet, in the favorable risk population?.

Not immediately, but that may come in the future..

Okay. Thank you for that. I'll let others jump in the queue here..

Okay. Thanks Paul..

Thank you. Our next question is from Asthika Goonewardene, Bloomberg Intelligence. Your line is now open..

Hi guys. Thanks for taking my questions. So looking at KEYNOTE-426 and JAVELIN, we saw some slight differences in the PFS and OS and the landmark analyses was particularly up-front, on the analysis there between the two studies. And I asked this question last quarter and, like you said, you really need to see the data to really comment.

And now that we've seen the data, I wanted to get your view on in which of these two trials behave more like what you'd expect in the real life setting. And I have a follow-up after..

Yes. You are asking cross trial comparisons and those are obviously been difficult and for us with errors and issues. I think, important Day one would look at the composition of the patient observation, and in particular the risk categories and they were not identical.

You look at these two studies, in terms of what one would expect if were to mention as I think of the entire range of expectation of course. And I think we'll look forward to the outcome of the CheckMate 9ER study [indiscernible], so we won't comment on specifics of outcomes..

Okay. And then of course as you said the synergy between PD-1 and TKI is what makes the combo with the Cabo particularly attractive. But then when we add Cabo with Nivo and Cabo, Nivo Ipi, you obviously would expect more toxicities.

I'm curious to know what are the, what kind of dose reductions are allowed, were allowed in 9ER and that you plan on allowing on 313.

And then ultimately what gives you the confidence that if you do a lot of these dose reductions in Cabo, what gives you confidence that these lower dose of Cabo has enough exposure to generate these hypothetical synergistic effects with PD-1?.

Yes, certainly a good and very detailed question and study protocols as one would expect. There are provisions for dose reductions in order to safeguard patient.

They are very much in-line with what one would expect in response to intolerable adverse events, there are a dose reduction or dose halts foreseen, and same road also in terms of dose – for the checkpoint inhibitor.

So I won’t go into all this detail of the protocol and but I think that's the general approach regarding cabozantinib exposure with presented and published exposure response analysis for single agent cabozantinib. I know that even though a dosage of cabozantinib maintained activity.

So, I think appropriate dose management for adverse events is expected to maintain activity..

Yes. And I would just add that, based on the Phase 1b experience where we see high response rates, long durable response, with the doublets, the triplets, et cetera. We feel pretty comfortable starting at 40 and then being able to see a response and then maintain that response.

As patients move forward in their treatments if a dose reduction or hold is needed. The data would support that. They can still maintain that response. Got good data there. We feel good about that and very excited to get, get 313 going and also see the results from 9ER..

All right. Excellent. Thanks guys. Looking forward to it too. .

Thank you..

Thank you..

At this time, there are no further questions. And so I will turn the call over to today's host, Susan Hubbard, Ms.

Hubbard?.

Thank you, Judy. And thank you all for joining us today. We certainly welcome your follow-up calls at any questions that we weren't able to address in today's call..

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program you may now disconnect..