Good day, ladies and gentlemen, and welcome to the Exelixis’ Fourth Quarter and Full Year 2020 Financial Results Conference Call. My name is Latif, and I will 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, Latif, and thank you all for joining us for the Exelixis’ fourth quarter and full year 2020 financial results conference call. Joining me on today’s call are Mike Morrissey, our President and CEO; Chris Senner, our Chief Financial Officer; Gisela Schwab, our Chief Medical Officer; and P.J.

Haley, our Executive Vice President of Commercial, who will together review our corporate, financial, development, and commercial progress for the fourth quarter 2020 ended December 31, 2020. Peter Lamb, our Chief Scientific Officer is also here and will join us for the question and answer session following our prepared remarks.

During the call, 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 discovery, product development, regulatory, commercial, financial and strategic matters.

Actual events or 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, risks and uncertainties related to product commercial success, market competition, regulatory review and approval processes, conducting clinical trials, compliance with applicable regulatory requirements, our dependence on collaboration partners and the level of cost associated with discovery, product development, business development and commercialization activity.

And with that, I will turn the call over to Mike..

All right. Thank you, Susan and thanks to everyone for joining us on the call today. Exelixis ended 2020 with a strong fourth quarter, hit the ground running in January as we strive to accelerate revenue growth in 2021 and beyond with the cabo/nivo launch in first-line RCC and a variety of mission-critical developments and regulatory milestones.

Please see our press release that was issued an hour ago for our fourth quarter and full year 2020 financial results, and an extensive list of key corporate accomplishments. We’ll keep our prepared remarks short today as we had a full update recently at the JPMorgan Healthcare Conference including providing 2021 financial guidance.

Obviously, we are thrilled with the recent approval for the cabo/nivo combination in first-line RCC based on the positive results from the CheckMate -9ER pivotal trial.

We believe we have significant momentum heading into the launch and anticipate a near doubling of cabo RCC revenues by the end of 2022 when we expect to exit with a $1.5 billion annualized runrate in the U.S. if our assumptions and modeling are correct.

This week will be busy for us as we share a number of important clinical updates for cabozantinib at ASCO GU both as a single agent and ICI combination partner.

In addition, over the course of 2021, we foresee a broad fleet of important discovery, clinical and regulatory milestones including first, three potential sNDA submissions; second, up to two additional INDs; third, advancing the cabozantinib COSMIC and CONTACT clinical trials; fourth, building the XL092 full development program; fifth, the early evaluation of our new clinical stage molecules XL102 and XB002; and finally sixth, advancing a deep bench of exciting discovery programs toward development candidate status.

It goes without saying that 2021 will be an action-packed year for the Exelixis team, and we are working as one to maximize the chance of success across the range of milestones ahead of us.

I am incredibly proud of the commitment and focus displayed by the entire team in 2020 and excited for the future as we drive our business forward during these challenging times. So with that, I’ll turn the call over to Chris, who will provide an update on our fourth quarter and full year 2020 financial results. .

Thanks, Mike. For the fourth quarter of 2020, the company reported total revenues of $270.1 million. Total revenues for the quarter included cabozantinib franchise net product revenues of $200.4 million. Net product revenues in the fourth quarter of 2020 were positively impacted by higher demand and by an increase in wholesaler inventory.

CABOMETYX wholesaler inventory increased from approximately 2.8 weeks on hand to approximately 3.1 weeks on hand. Total revenues also included $69.7 million in collaboration revenues from Ipsen, Takeda, and Genentech. Our operating expenses for the fourth quarter of 2020 were $245.8 million compared to $273.7 million in the third quarter of 2020.

R&D expense was the primary driver of the decline in operating expenses, which declined by approximately $27.9 million and was primarily related to declines in stock-based compensation expense, clinical-trial-related expenses, and licensing and milestone fees associated with existing and new business development activities.

Benefit from income taxes for the fourth quarter of 2020 was $300,000, compared to $6 million for the third quarter of 2020. The company reported GAAP net income of $28.4 million or $0.09 per share on a fully diluted basis for the fourth quarter of 2020.

The company also reported non-GAAP net income of $43.2 million or $0.14 per share on a fully diluted basis. Non-GAAP net income excludes the impact of approximately $50 million of stock-based compensation expense net of the related income tax effect. Cash and investments for the quarter ended December 31, 2020 was over $1.5 billion.

Now, turning to our financial guidance for the full year of 2021, which we previewed at the JP Morgan conference in January. Total revenues are projected to be in the range of $1.15 billion to $1.25 billion. Net product revenues are projected to be in the range of $950 million and $1.05 billion.

Cost of goods sold is projected to be between 5% and 6% of net product revenues. Research and development expenses are projected to be in the range of $600 million and $650 million and includes non-cash expenses related to stock-based compensation of approximately $45 million.

Selling, general, and administrative expenses are projected to be in the range of $375 million and $425 million and includes non-cash expenses related to stock-based compensation of approximately $60 million. Guidance for the effective tax rate in 2021 is between 20% and 22%.

And finally, we’re projecting cash and investments to be in the range of $1.6 billion and $1.7 billion. The R&D expense and cash investment guidance does not include the impact of any potential new business development activities. And with that, I’ll turn the call over to Gisela. .

Thank you, Chris, and we have made great progress during the last few months of 2020 and are off to a great start in 2021, and I am pleased to provide a brief update on our cabozantinib regulatory and development program, highlight our progress for XL092 and new compounds moving towards clinical evaluation, and our focus is on a preview of ASCO GU 2021 as the main topic today.

Starting with CheckMate -9ER. Just recently, on January 22, we announced the approval by FDA for the cabozantinib and nivolumab combination for the first-line treatment of patients with advanced RCC.

The FDA reviewed the parallel filings of Exelixis and BMS under the RTOR or real-time oncology review program that enables FDA to expedite its review of regulatory submissions for life-threatening conditions, and we are delighted that the approval was granted well ahead of the set PDUFA date of February 20,2021.

FDA’s approval was based on demonstration of superiority for cabozantinib plus nivolumab, compared with sunitinib for all three efficacy endpoints, progression-free survival, overall survival, and objective response rate.

Additionally, the combination of cabozantinib at 40 mg QD and nivolumab was generally well tolerated and associated with a low discontinuation rate. Detailed results of the study were presented for the first time by Dr. Tony Terry [ph] at the recent Virtual ESMO Conference in the Presidential Symposium.

The presentation also included a high level analysis of health-related quality of life, or HRQOL, and despite the fact that this study enrolled a patient population with a higher proportion of intermediate and poor risk per IMDC as well as a lower proportion of patients with nephrectomy compared to other first-line trials in RCC.

The high level quality of life results included in the primary analysis has showed improved quality of life bifunctional assessment of Cancer Therapy Kidney Symptom Index 19 or FKSI-19 for the combination of cabozantinib and nivolumab as compared to sunitinib. We look forward to the more detailed presentation of the HRQOL results at ASCO GU by Dr.

David Shella [ph] as we think these results may provide important additional differentiation for the cabo/nivo duplet compared to other first-line TKI IO options. Turning to the ongoing Phase 3 program for cabozantinib.

We have continued our efficient execution of COSMIC 021, 311, 312 and 315 studies that have either completed or are nearing full enrollment on a global level. And we’ve either completed or on track for top-line results for these trials as previously shared and have provided a brief summary on key highlights for the program.

For COSMIC 311, and radio iodine-refractory DTC patient who have received prior VEGFR targeted therapy, we announced in December 2020 that the trial met its primary endpoint of progression-free survival with cabozantinib highly significantly improving PFS versus placebo with a 78% reduction in the risk of disease progression or death resulting in a hazard ratio of 0.22 that was highly statistically significant with a P value of less than 0.0001.

We are working towards a supplemental NDA submission, based on these strong results in a patient population with unmet medical need.

COSMIC 312, our Phase 3 trial of cabozantinib plus atezolizumab versus Sorafenib for the first-line treatment of advanced HCC completed approval and the global study in mid-2020 and we anticipate top-line results of the event-driven analysis of PFS and the concurrent interim analysis of overall survival in the first half of 2021.

And COSMIC 313 comparing the triplet of cabozantinib, nivolumab and ipilimumab, versus nivolumab and ipilimumab in first-line RCC patients with intermediate or poor risk per IMDC is expected to reach its expanded approval goal of 840 patients shortly.

As a reminder, we had expanded enrollment in COSMIC 313 for representation of updated long-term follow-up results from the CheckMate 214 study showing a longer median overall survival of 48 months for the nivolumab and Ipilimumab combination then originally assume when we decline the COSMIC 315 trial.

We look forward to the event-driven analysis for this study in 2022. For COSMIC 021, we look forward to a final analysis of the objective response rate by independent radiology committee of cohort 6 in the metastatic CRPC setting in mid-2021. And we are planning for regulatory submissions of the result’s data providing.

And importantly, we are happy to report that our three phase trials and our collaboration with Roche the CONTACT Phase 3 program are actively enrolling patients globally.

If you are looking back on this quarter, I am thrilled that the regulatory and clinical development progress for the cabozantinib program and the high level of execution by both our own teams and our clinical partners’ teams. I’ll now turn to the progress on our XL092 program and our next new IND projects.

First XL092, our next-generation MET, AXL, MER and VEGFR targeting kinase inhibitor with a shorter pharmacokinetic half life is advancing quickly and we are in the midst of evaluating the combination with atezolizumab in a parallel Phase 1b part of the study, while completing the single agent dose range study.

As discussed on the third quarter call, our XL092 development plan includes a broad and comprehensive program across various tumor indications, lines of therapy and settings of broad therapeutic interest.

We intend to pursue the comprehensive evaluation of XL092 in combination with various established checkpoint inhibitors and potential new combinations including promising new checkpoint inhibited doublets, as well as other combination partners.

With the goal to potentially start late-stage trials as soon as 2021, we are focusing on advancing the Phase 1b dose ranging in combination with checkpoint inhibitors rapidly to move into expansion cohorts that may support data-driven late-stage development options across a variety of tumor types.

And secondly, we are excited to initiate studies with our latest IND candidates in 2021. We have recently announced the initiation of the XL102 Phase 1 trial and we plan to file an IND for XP002 an antibody drug conjugate for ADC targeting tissue factor shortly following completion of product release assets.

For both new IND compounds, Phase 1 trials are designed as efficient dose escalation trials with a disease specific expansion cohort to allow for early assessment of initial anti-tumor activity. And I look forward to updating you on our progress on our clinical pipeline in the future.

And lastly, at the Virtual ASCO GU Conference is starting this week, I’d like to provide a brief overview of some key presentations for cabozantinib at the conference. We look forward to the presentation by Dr. Morrissey of updated results with a longer follow-up toward the CheckMate 9ER trial.

As you are seeing in the abstracts that are now online, and also in our own press release, the efficacy results are consistent with the earlier presentation and demonstrate sustained efficacy across all key endpoints of overall survival, progression free survival and objective response rates including an increase in the CR rate with further follow-up.

Additionally, patients with sarcomatoid histology are traditionally difficult to treat patient population derive significant and consistent benefit from the combination of cabozantinib and nivolumab. As mentioned earlier, we will also see a detailed presentation by Dr.

David Cella of the patient reported outcomes on health reported quality of life from CheckMate 9ER. At a high level, the combination of cabozantinib and nivolumab resulted in improved quality of life as compared to sunitinib with a reduction in disease-related symptoms and a significantly extended time to confirmed deterioration of quality of life.

Further, final results of the Phase 1b trial of cabozantinib plus nivolumab alone or nivolumab and ipilimumab in patients with advanced genitourinary malignancies will be presented in a rapid oral presentation by Dr. Apolo.

This Phase 1b study laid the foundation for the dose selection of cabozantinib of 40 mg daily for the combination with nivolumab and for the triplet combination including also ipilimumab. High response rates were seen in RCC and in Urothelial cancer and also in rare GU malignancies.

Durable responses and an encouraging median overall survival of 15.9 months were seen in this Phase 1 trial including heavily pre-treated patients with various GU malignancies. Importantly, we will also see the first presentation of the NCIC sponsored PAPMET or SWOG 1500 trial results in papillary RCC by Dr.

Sumanta Pal as part of the oral presentation session on February 13. He will present the results of a four arm, randomized trial comparing each of three experimental arms of cabozantinib, savolitinib and crizotinib versus sunitinib, the guideline recommended therapy for papillary RCC.

While both savolitinib and crizotinib arms were discontinued as a result of planned futility analysis, cabozantinib demonstrated superior PFS over sunitinib in this randomized Phase 2 trial. And lastly, there will be an intriguing retrospective analysis of cabozantinib’s effect in RCC patients with brain metastases presented by Dr. Lara and Dr.

Toni Choueiri showing an encouraging high intracranial and systemic response rates in this patient population with difficult to treat disease.

We are very much looking forward to these presentations and to all the new results of ASCO GU 2021 and hope that you will be able to join us for our investor briefing on February 13, at 5:30 PM Eastern to hear renowned RCC experts Dr. Toni Choueiri, Dr. Daniel George, Dr. Sumanta Pal and Dr.

Rana McKay discuss the most recent important trial results in RCC that will be presented at the conference and provide their expert opinion and further context on implications for the clinical management of patients with advanced RCC. And with that, I will hand the call over to PJ. .

Thank you, Gisela. I am pleased to discuss the CABOMETYX business with regard to Q4 2020 and importantly to discuss the first combination approval for CABOMETYX received approval for use in first-line RCC in combination with nivolumab on January 22 and the team immediately began promotion.

The strong 9ER data and recent approval position the cabozantinib franchise to return to significant revenue growth. CABOMETYX ended the year with a strong Q4 and we expect the launch from 9ER to build on that momentum.

Additionally, potential growth could be further driven by data readouts and other important indications that the robust cabo development program continues to generate data.

I will discuss the opportunity that 9ER provides Exelixis looking forward as we continue to build upon the foundation in RCC where we remain the number one prescribed single agent TKI. Before turning to 9ER, I will highlight a few of the key metrics from Q4.

NRX volume for CABOMETYX increased by 8% in Q4 relative to Q3, while the overall NRX market volume was stable. This translated to an increase of NRX share from 30% to 32% for CABOMETYX.

The increase of prescriptions in Q4 was primarily driven by growth in second-line RCC new patient market share as more ICI experienced patients have progressed to the second-line setting. Turning to the first-line, the ICI combination opportunity is large with 15,000 RCC patients in the U.S.

eligible for treatment with ICI combination therapy consisting of approximately 80% of that market. According to this brand impact data, ICI/TKI combinations constitute about 50% of the first-line share and are widely used across clinical risk groups demonstrating the broad potential for CABOMETYX with nivo in the first-line setting.

CABOMETYX was approved in RCC over four years ago. During this time, it has developed very strong brand equity and is viewed as the best-in-class TKI in RCC.

The Exelixis team has significant experience in RCC with two prior successful launches and we look forward to this opportunity to educate physicians on the 9ER data, so that more patients can benefit from CABOMETYX therapy in the first-line.

The strength of the 9ER data speaks for itself, but doubling immediate progression-free survival and ORR and superior overall survival versus sunitinib.

Importantly, clinical benefits were observed in the vast majority of patients in the trial resulting in a low rate of primary progression regardless of IMDC risk status or patient subtype supporting broad use in the marketplace.

In addition, the optimized cabo combination starting dose of 40 milligrams daily yielded a compelling safety and tolerability profile, along with a low treatment discontinuation rate and favorable quality of life, all of which has been notable with physicians in our research and discussions.

The 9ER data were particularly impressive when you fit it in the context of the challenging patient population enrolled in this study which had more IMDC patients and fewer patients with nephrectomies than other Phase 3 studies in first-line RCC.

Taken together, the combination of a best-in-class TKI like cabo with a well-established immune checkpoint inhibitor like the nivolumab in RCC, supported by strong efficacy and safety data from CheckMate -9ER present Exelixis with the opportunity to share compelling and highly motivating story to our customers and to enable broad positioning across clinical risk groups in first-line RCC.

Feedback on the CheckMate -9ER data with both academic and community oncologists has been extremely positive and we believe we can leverage the success and prescriber familiarity of both cabo and nivo to gain traction quickly in the combination.

There is a great deal to be excited about as we think about the totality of the CABOMETYX RCC business looking forward.

With regard to the launch of 9ER, we are extremely pleased with the rapid execution of our experienced team, which is well prepared and is deeply experienced in the RCC market and start reaching out to customers immediately the afternoon of approval.

We have received positive feedback on the label and data and prescribers have generally expressed enthusiasm for the combination. Many of our digital promotional tactics went live with the approval and the team is fully enabled to detail customers virtually or where appropriate in person.

Additionally, we have already executed numerous speaker programs including a national broadcast. While it’s early to discuss any metrics from the launch, I can say that we are very pleased with the energy and execution of the launch thus far and continue to be optimistic on 9ER based on our initial customer feedback.

Beyond 9ER, we are very excited about – by the cabozantinib development program as it moves forward broadly across multiple indications and with different combination partners.

We look forward to building on this momentum in RCC, HCC, DTC and other potential future indications such as prostate and lung as our development program evaluating cabozantinib, in combination with immune checkpoint inhibitors advances.

Our team remains highly focused and motivated to compete everyday to bring the benefit of CABOMETYX all eligible patients as we continue to build the franchise and maximize its clinical and commercial potential. And with that, I’ll turn the call back over to Mike. .

All right. Thanks, PJ.

As we outlined at JPMorgan a few weeks ago, 2021 has the potential to be a transformational year for Exelixis as we launch the cabo/nivo combination in first-line RCC and set the stage to pursue numerous additional indications with new data readouts and potential sNDA filings, all while building a diversified portfolio of assets that provide significant growth opportunities.

I am excited for ASCO GU this weekend and hope everyone can join us for our virtual investor meeting on Saturday afternoon at 2:30 PM Pacific Time, 5:30 PM Eastern Time. I’ll close by thanking everyone at Exelixis for their efforts in 2020 under what were obviously extremely challenging conditions.

While we may be starting to see the light at the end of the COVID tunnel, we continue to acknowledge the potential risk to all of us and of course, to our business should the vaccine roll out stalls.

I am incredibly proud to say that the entire Exelixis team continues to work as one with great team work, expertise and energy in making every day count as we discover develop and commercialize the next generation of our medicines for cancer patients who need a better and more effective therapies.

We look forward to updating you on our progress in the future. Thank you for your continued support and interest in Exelixis. And we are happy to now open the call for questions. .

[Operator Instructions] Our first question comes from the line of Asthika Goonewardene of Truist Securities. Your line is open. .

Hi guys. Thanks for taking my questions and congratulations on a well executed 2020. I got a quick question for PJ. Just curious on the rebound on scrips that you’ve seen in 4Q.

Could you give us a sense of what proportion of that 200 basis point growth in share was from second-line? And then a quick financial question for Chris, what’s your expectation for the SG&A for the next few quarters? Are we expected to sort of stay in line with 4Q? Thanks. .

Yes. Hi, Asthika. This is PJ. Thanks for the question. With regards to Q4 in the scrips, I mean, we certainly had a strong quarter closing the year as we discussed in the remarks and really, well, I am not going to go into sort of specific details of the proportion of that driven by various market segments.

Clearly, the second-line market share growth that we experienced in RCC was strong and driving a lot of that. So, I won’t go into detail beyond that, but what I will say is, we did see strength across all the segments, better momentum also in second-line HCC as that market evolves as well.

So, we are pleased with that, and I look forward to building on that momentum as we go forward here in 2021, particularly with the 9ER launch. .

Asthika, it’s Chris. So, I guess, your question on SG&A was, it’s going to be relatively the same as Q4, Q3 and Q4. We did give guidance of $375 million to $425 million, that which – if you look at that on just an average basis, if you look to the midpoint, that $400 million or so, the runrate there is in that, it would be in the $100 million range.

So, that was – I am not going to give you quarterly guidance, but that’s kind of where we are looking at our SG&A growth going to. .

Great. Thanks guys for the questions. .

All right. Thank you, Asthika. .

Thank you. Our next question comes from the line of Jason Gerberry of Bank of America. Your question please. .

Hey guys. Thanks for taking my questions. Two just on the early-stage pipelines, just on XL092.

Can you talk a little bit about any key internal hurdles on the efficacy side as you think about when you ultimately evaluate the expansion cohorts and make the decision to move XL092 into pivotal trials later this year? And then, we know with numerous short-term goal emerging with the new to clinic pipelines, has the imperative to do bus dev [ph] lessened in any way or does it ultimately remain unchanged in terms of thinking about perhaps some more advanced asset later on in development that could accompany cabo in the portfolio? Thanks.

.

Yes. Jason, thanks for the questions. Gisela, do you want to take the first one? And then, I’ll loop back and get the second one. .

Sure. Happy to do so. Thank you for the questions.

So, XL092 is making good progress as I mentioned in its Phase 1 study and also in the Phase 1b evaluation with atezolizumab, and we look forward to further combination approaches, as we are making decisions based upon expansion cohorts and early observations, certainly we’ll be looking at the continuum of safety, tolerability, as well as efficacy signals and those will be very much dependent on the indication that we will take forward of course, and the competitive environment.

So, it’s a variety of factors that we will consider and certainly take into account the data that will be emerging from the expansion cohorts. .

Fantastic. Thank you. On the BD side, look obviously, we are looking at a range of opportunities across the continuum of stages of assets. We have done a number of early-stage, back-end loaded small upfront deals, and there is certainly more of those to be done in the short-to-mid-term.

We have a few of those lined up that we think that the very important part of building our early-stage portfolio that complements our internal discovery efforts around small molecules, and I think that makes a lot of sense relative to building a pipeline for the future.

We are working at a variety of, I would say, mid and late-stage assets as well, obviously different questions there in terms of the value proposition, and as I am sure you are aware, things are pretty frothy right now out there as well as the data that goes with those opportunities.

So, we are looking closely and if we find the right asset, the right opportunity at the right cost, and we’ll be inclined to move those forward. But again, we are not looking at the reality of overpaying for assets just because of the frothy market dynamics and people looking for a lot.

So, we are going to maintain a high level of discipline as we had in the past and go for good science and good value at the same time. .

All right. Thanks. .

Thank you. .

Thank you. Our next question comes from the line of Andy Hsieh of William Blair. Your line is open. .

Thanks for taking my questions. So, first one, maybe, Gisela, so, I am just wondering if you can frame expectations for the kind of mid-year update for cohort 6.

I know it is company policy you want to have potential follow-ups, and it could be mature datasets, and we expect kind of the full 130 patients from that cohort around midyear?.

Sure. So what we are aiming for is, the independent radiology review for cohort 6.

We had presented, as you know last year at ASCO and ASCO GU the initial cohort of about 40 patients for cohort 6, and we are very pleased with the outcome there with a response rate of 32% and durable responses observed in this metastatic CRPC population with the combination, and that paired with a good tolerability profile.

We have completed enrollment of the 130 patients, and we are looking to see the independently assessed objective response rates. And so, that’s really what we are aiming for in later in 2021..

Got it. That’s very helpful. And maybe for PJ, if you look at slide number 31, we have the frontline patient, new patient share breakdown and I think that’s the same graphic you’ve shown on Q3.

Just curious if there is any sort of material change as we exited Q4 or maybe a little bit into Q1 about any sort of material change to that picture?.

Yes. Hi, Andy. This is PJ. Thanks for the question. You know what I say as we look at certainly a lot of different data sources with regards to market share and various data owners for the market.

So I think regardless of what we looked at over time, these are – I’d say relatively in that ballpark, IO combo share being 75% to 80% and the majority of that being IO/TKI. So, I’d say that’s roughly what we are looking at now and we are very excited to really move CABOMETYX forward with nivo into that IO/TKI market.

As I had kind of mentioned the team is really excited and working hard on the launch. We get a lot of great feedback and I have a lot of activity with that. So I think it will be exciting to kind of move us forward in combination in first-line. .

Okay. Thanks. That’s helpful. So, last question as, this is for Peter. And so, as we think about the company kind of moving away from XL265, that asset really was asking about relevant clinical questions regarding the role the kinases.

So I am just wondering if you are bringing forward any other lead candidates that could potentially fill in that void or you are just going to be kind of focusing on other early stage assets?.

Yes. I think it’s what we learned from the XL265 experience was kind of helpful and I think that was relatively scientifically interesting. On the basis of that, we are going to be focusing on earlier stage programs for our internal discovery going forward rather than an attempt to do a kind of dual version of 265. .

All right. Great. Thanks for answering my questions. .

Okay, Andy. Thank you. .

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

Great. Thanks for taking my question and then congrats on the launch and the nice quarter. Maybe just a couple of questions.

One, just any inventory changes? Can you just remind us kind of where did you finished inventories in Q4? And then, I have a question, when we look at the data, the Phase 1b data for cabo/nivo, cabo/nivo/Ipi, this is patients remind us who they need to have failed one prior therapy, they are the – sales of PB1.

So is this sort of a second-line therapy? The data is obviously better. Obviously, very small samples, but better than cabo alone in the meteor. But when we are trying to compare it to a cabo/nivo in first-line the response rate is higher, the median OS is slightly lower.

But again, is this – the data looks pretty good, but is this sort of a second-line population? Just give us a little bit sense how you think about it. Thank you. .

Yes, Yaron, great question.

Why don’t we start, Gisela, why don’t you answer the last question first and then Chris can cover the inventory question?.

Sure. Happy to. So, regarding the NCIC study, the Phase 1b study that will be presented by Dr. Paul, this is a trial that was conducted in patients with advanced GU malignancies and patients must have received at least one prior therapy could have received multiple prior therapies.

So, it’s a rather heavily pre-treated patient population across the board. And so, I would say, and for the question, it’s second and later line that we are looking at in the results that you will see in more detail explained at ASCO GU. .

Okay. This is Chris. So, on your inventory question, as I mentioned in my prepared remarks, the CABOMETYX inventory we front hand increased from about 2.8 weeks on hand in Q3 to about 3.1 weeks on hand in Q4 and this is equal to approximately $7.5 million on the net revenue. .

Great. Thank you. .

You are welcome, Yaron. Thank you. .

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

Hey guys. Congrats on the quarter and thanks for taking my questions. I had a few as well. I thought this brand impact data that you highlight on Slide 30 was interesting.

I guess, with CheckMate 9ER with the combination now approved, what market share do you ultimately think you might be able to achieve in the first-line RCC setting and what area do you expect to gain more share? If it the mono therapy? The TKI combo or the IO IO combos? Secondly, I thought the CNS data from ASCO GU look quite interesting and I was wondering to what degree it is known whether any of the other TKIs also across the blood brain variable whether that’s the unique aspect of differentiation? And then lastly, on XL102, your CDK7 inhibitor, I was wondering if you could just help us understand how that might fit in into the breast cancer space mechanistically relative to CDK46? Thanks so much.

.

Hey. Thanks, Michael. Why don’t we – why don’t we start there? Peter, do you want to take the one or two questions first? And then, Gisela can do the brain met and PJ can do the question about brand impacts. .

Sure. So, like, the question I think it was specifically around opportunity for CDK7 inhibitor and the mix of 102 in breast cancer.

And there were a number of very compelling pieces of pre-clinical data that support coming in with the CDK7 inhibitor in multiple settings, triple negative breast cancer, this data showing that cell lines are dependent upon CDK7 for growth and so it’s pretty compelling lead growth data there, as well.

In the ER positive breast cancer, there is a direct connection between CDK7 and estrogen receptor whereby CDK7 actually – receptor increases its transcriptional activation potential. So again combinations then with ER antagonists of various types make a lot of sense. And then finally, I think you alluded to this CDK 7 is upstream of CDK 4 and 6.

So it may well be an interesting phase to go in terms of resistance to current CDK 4, 6 inhibitors. So, those three kind of different flavors as you would like of things that could be explored in the breast cancer setting. .

Thanks, Peter. That’s great.

Gisela, do you want to do the brain met question?.

Absolutely. Yes, happy to see the presentation at ASCO GU on the retrospective analysis of patients with brain metastases from RCC.

And importantly, this study assessed both patients with uncontrolled brain metastases at baseline and also patients with controlled disease at baseline and in both groups impressive responses intracranial responses and also systemic responses were observed.

So, I am highlighting that because patients with uncontrolled brain disease are usually excluded from clinical trials and certainly from large Phase 3 trials, because of potential complications that may occur in those patients and usually they have to have controlled disease to be included if at all in larger studies.

So, that being a very important observation and certainly an understudied group of patients. That said, in terms of penetration of blood brain barrier renal that cabozantinib has the ability to penetrate the blood brain barrier. We’ve seen that in very early evaluations and preclinical studies.

In the context of brain metastases, or brain involvement even with other histologies in terms of the blood brain barrier maybe compromised. And so that is a feature that adds to but it’s not perhaps completely dependent on the penetration of the blood brain barrier.

Looking at the results at a high level that are being reported at ASCO GU, we are very happy to see a high response rate in this very underserved patient population. .

Great. Michael, this is PJ. With regards to the first-line uptake, I think, I won’t discuss specific numbers with regards to market share. But I think we have really the opportunity to gain share broadly in the market and I mean that in a few different ways.

Whether we look at the competitive landscape with regards to ICI/TKI, ICI – ICI or even expanding the combination into TKI mono therapy. We certainly see that. We see broad potential across clinical risk groups, favorable intermediate and poor risk groups with the strength of our data overall.

Certainly excited about the large body of data that will be presented at ASCO GU this weekend to help prescribers learn more about cabo. And I think as we think about that, particularly, in regards to the combination we are really to be helped by experience the prescribers have with CABOMETYX in RCC at this point.

It is viewed as the best-in-class TKI according to our market research and I think what we are going to see is the optimized dose of 40 mg and kind of the tolerability profile, continuation rate with regard to the combination and really how that translates to improved quality of life in I think it’s really going to help us drive utilization across all these different categories.

.

Super. Thank you. .

You are welcome, Michael. Thank you. .

Thank you. Our next question comes from Peter Lawson of Barclays. Please go ahead. .

Thanks for taking the questions.

Just on first-line RCC, beyond that potential broad use of cabo plus PD1, what niches do you think are easier to penetrate? Is it things like patients with brain and bone mets?.

Yes. Peter, this is PJ. I’ll talk about that. I mean, again I think, we do really see the broad potential here. And when we look at the current utilization of ICI/TKI, on the market we see it utilized broadly, particularly in the community setting.

So, I think, we’ll have the opportunity to – and prescribers really want to utilize it for a variety of their patients, particularly looking at that risk benefit profile, and the strong efficacy across sub groups and thinking about the tolerability profile and particularly the quality of life, which is just something not often seen, again, adding therapy, adding a second or third therapy whatever it is, in a combination and seeing improved quality of life in oncology.

So, we think that will give us a really broad opportunity. .

Thank you.

And then, just on that first-line single agent TKI segment, kind of your analysis of that, what kind of share do you think you have versus lenvatinib or [Indiscernible]?.

Honestly, in the TKI monotherapy categories, where we do see in a few quarters, historically is more of the legacy TKIs. If you look the market share data, that’s where you see some significant usage, which is inflammation is kind of in the guideline recommended therapy for non-clear cell.

So, you can – both trains there, and I think with the data we have in 9ER as well as the other data sets that Gisela described, whether that’s PAPMET looking at papillary RCC, that’s where you see some of the monotherapy. So I think the breadth of the data being presented will help us be more competitive there.

And historically, that’s really been more of in sutin use outside of certainly the cabo use that we have there. .

Do you think that’s kind of an easier area to penetrate that single agent first-line TKI mono?.

Well, I really think the – I think the combo is going to be just such a big opportunity and our data is so strong that that should be really probably where we see rapid uptake and it will be more of a dynamic certainly possibly a more dynamic market as we launch into that. Because that’s certainly what we are going to be focused on. .

Okay. Thanks so much. Thanks for the color. .

Thanks, Peter. .

Thank you. Our next question comes from Jay Olson of Oppenheimer. Your line is open. .

Hey, Jay..

Yes.

Can you hear me?.

Yes. We sure can. .

Great. Congrats on all the progress and thank you so much for taking the questions.

Since you’ve rapidly grown the top-line to $1 billion in just a few short years, what do you consider the key steps and timeline for growing to $2 billion in revenue? And then, I had a question about your Adagene collaboration where you recently added another ADC to your portfolio.

What are the key points of differentiation you are looking for in your ADCs versus competitors? And is there a rationale to combine an ADC with cabo or 092?.

Yes, Jay. It’s Mike. Great questions. Peter, why don’t you start there? And I’ll finish up. .

Yes. So, as you’ve seen, we’ve done a number of ADC related deals and partnerships over the last six months or so. And they are intended to work well together.

Essentially, the way we are setting up, building a pipeline for ADCs is to have folks, when the collaboration who - one who get out and find the antibodies and find those raw materials like making ADCs, the deals we did late last year with Catalent and with NBE.

Then give us access to contemporary site specific conjugation technologies which I believe to be increasingly important in terms of advancing high quality ADCs into the clinic.

And it also gave us access to a wide range of pretty interesting payloads and obviously which payloads we are going to do based on which tumor types we ultimately want to target.

So, with respect to Adagene step into this is we have a very interesting antibody masking technology, which essentially is a small peptide if you like that fits in the binding domain of the antibody and really would use the visibility to bind to the target antigen. But it’s released in a tumor specific fashion.

So it actually depends on increased protease activity of the tumor surface which then puts this peptide off. So, it’s really intended to increase the therapy again as the index to be like for any on-target side effects that may occur due to binding to look target a normal tissue versus a target in the tumor.

And we think from a overall profile point of view that’s a very attractive technology to have. And as an aside I also point out it actually broadens out potentially the target’s face in the ADC field as well.

With the mask technology you can start looking at targets which you maybe wouldn’t want to pursue if you didn’t have some kind of tumor specific activation going on. So, I think we put those things together. Hopefully, you can start to see where we think our point of differentiation is going to come here.

It’s from using actually having access to some of the most modern conjugation technologies that we are going to able to get a homogenous product. Some of the issues with people seeing with ADCs over the years will stem from a big mixed use of things that could create manufacturing issues, as well ultimately contributing to toxicity.

So, that’s plan – that’s certainly plan from ADC space. And obviously, we have our first ADC, XB002 which will enter the clinic in the not too distant future. .

Fantastic, Peter. Thanks for that deep dive into the overall ADC approach. And certainly, the credit about having Adagene collaboration in place now to be able to move that forward too. Jay, in terms of your first question, look we are all about growing our top-line revenue.

Obviously, that is incumbent upon good clinical trial data, successful regulatory outcomes and then, obviously, very, very strong commercial execution.

We’ve seen that over the last few years in terms of our renal and liver programs and obviously there is a lot going on right now in terms of the commercial launch based on 9ER for first-line renal with cabo/nivo. So that’s a big driver for us in the immediate to short-term.

As I mentioned, and as Gisela mentioned, we have a number of potential sNDA filings this year, top-line data results for first-line liver, prostate, thyroid, lung trials going. So, all in all, nine or ten pivotal trials ongoing right now with cabo and various IO functionalities. And certainly with the opportunity to do more going forward.

The next wave or even two coming beyond that with 092. So, our focus is really on top-line growth. And our focus is making sure that we are executing extremely well across that clinical regulatory commercial framework. So that we can meet our aspirations for success. .

That’s super helpful. Thanks for sharing and being with us. .

You bet. Thank you. .

Yes. Thanks, Jay..

Thank you. Our next question comes from the line of Kennen MacKay of RBC Capital Markets. Please go ahead. .

Hi.

Thanks for taking the question and congrats on the progress and what a year?.

Thanks. .

Question for Chris or PJ, can you help a little bit more with the metrics behind the cabo Q4 results? The printing out trend was an awesome surprise, but I am sort of having a hard time just by demand versus gross connect versus the inventory changes you mentioned.

So, if there is anything you can comment around demand after you back out inventory and gross connect that will be hugely helpful. And lastly, this was discussed a little bit, but I do and want to hear the team’s perspective once more on sort of the small bit of detail we’ve heard from the competitive LENVIMA KEYTRUDA combo in the CLEAR trial.

Obviously, impressive medium PFS and hazard ratio there, but that can obviously be defined by baseline demographics. Thanks so much. .

It’s Mike. Thanks for those questions and certainly they are both really important questions. Why don’t we start with PJ give you a quick update on the conundrum if you will and then, we’ll move over to Gisela to chat about cabo and other competitive programs..

Yes. Hi, Kennen. It’s PJ. Thanks for the question.

So, with regards to the prescription data, and kind of demand in Q4 in our revenue, I don’t know that I am going to be able to solve the conundrum, so to speak, but certainly what we would say is we see, I don’t want to comment on any methodologies or in a way capturize et cetera of the third-party prescription data providers.

But we do see variation in that quarter-to-quarter with our products, with other products in the market basket. So, I think that’s just kind of for better for us, part and parcel of that over time.

One thing I can point out with regard to Q4, if you look at the TRx data for axitinib for example, I think they were up about 6% whereas their Q-over-Q U.S. revenue was up 23%. So you just see some discrepancy there some variability.

I think as we look at it, certainly it’s indicative of the strong momentum we had closing the year and really just setting us up well for Q1 and the launch is ongoing. .

Awesome.

Gisela, you want to say a few words about the competitive situation?.

Absolutely, yes. So, with respect to the Lantum data, we are seeing as everyone on the call have seen the abstract for ASCO GU for the CLEAR study and certainly you’ve seen the efficacy data and see a positive study here which is good news for patients.

I think the abstract is a little sparse on the description of the patient population and I think that is the key that we’ll be looking at when more detail are available later in the week when the full data are being presented.

In terms of the data that we can glean from the abstract is been focusing on the comparator arm with sunitinib, but it has been used in other studies as well and on CheckMate 9ER study and then the KEYNOTE 426 trial and when looking at the results here for the sunitinib arm and the CLEAR study, we see the performance is a little bit more into the KEYNOTE 426 trial with a high response rate for sunitinib of 36% and then overall survival that has not been reached after 27 months median follow-up and that of course indicates that the population may be a population of less favorable risk population patients.

When we look at the CheckMate 9ER data where the median OS have been reached after a 24 month follow-up with sunitinib showing a 29 months median OS.

So, we’ll be curious and looking for a more detailed description of the patient population and in particular, we will be looking at the distribution of the patient population by risk category, favorable risk, intermediate to poor risk number of patients with nephrectomy versus not which may of course affect objective response and CR rates.

And then, also other variables such as patients metastatic spread to more organs with metastatic disease, patients with bone or brain metastases or liver metastases are negative prognostic factors in their own rights. And perhaps it’s a measure of tumor burden and the sum of target lesion diameters if that is being presented.

So, there is a lot to learn for sure in this dataset and also the variables we will be looking at in the patient population.

And just to finish off, in terms of safety and quality of life, we’ll be looking for those data sets as well that was not going into depth certainly on the safety side and there was no mention of quality of life in the abstract.

So, we look forward to other detailed presentations and also of course we are holding the investor event on Saturday with a number of key experts in RCC, Dr. Choueiri, George, Pal and McKay who will discuss the new information coming out of ASCO GU and we’ll hope that you’ll be able to join us for that event. .

Absolutely. Thanks so much. .

Great, Kennen. Thank you. .

Thank you. Our next question comes from the line of Stephen Willey of Stifel. Your question please. .

Yes. Good afternoon. Thanks for taking the question. It is the follow-up on the 4Q dynamic question. So I know that there was – I think there was a large Phase 3 trial using cabo as a comparator arm that initiated in the fourth quarter of last year.

So, I guess, can you just speak to what extent that trial supply for that study may have impacted product’s revenue in the fourth quarter if at all? And I guess, if not, how does that get accounted for?.

Steve, thanks. This is Chris. Yes, I am not going to comment about the trials and what’s going on out there. If there was revenue in the future you would have account for that normal revenue. .

Okay. And then maybe just a follow-up on Gisela’s comments regarding the potential incidence rate of favorable risk patients in the CLEAR trial. So, I guess, I understand the notion that, higher response rate would imply greater proportion of favorable risk patients perhaps I am clear.

But I know that these favorable risk patients are also a headwind on the event-driven data with respect to PFS and OS because those patients inherently do better on sunitinib.

So, we are just wondering if you can somehow extrapolate those few things for me or do you think the differences here will be more driven by some of the other baseline variables that you talked about like the nephrectomy status and visceral mets et cetera?.

Hey, Steve it’s Mike. Yes, there is a lot of open questions about the data, because it hasn’t been presented yet. So, our recommendation is, before we get too much into the leads, let’s see the data and let’s talk about it on Saturday. .

All right. Perfect. .

On the XL092 phase 1 I noticed that you’ve specified hormone receptor positive breast cancer as a target indication both for monotherapy and for combination with atezo and I was just curious if you can maybe provide some of the rationale there just kind of given some of the under PD101 data that we’ve seen there thus far. Thank you. .

Sure.

Gisela or Peter want to comment on that?.

Sure. And I will be happy to comment on the Phase 1 expansion cohort. So we have still those expansion cohorts placed upon observations. Of course and learnings from the cabozantinib program, single agent experience to our ISP and studies in that space.

Our single agent cabozantinib or combinations and this is an indication where we have seen some activities for cabozantinib as a single agent and our query is about the combination with a checkpoint inhibitor given the cooperative activity that we are assuming here between the two pathways.

And Peter, if you wanted to comment further please?.

No, I would just add there mechanistically, that we think that the rationale combining 092 with checkpoint inhibitors is very broad and applicable to multiple different tumor types and some of the individual targets with 092 like met for example certainly up regulated and over expressed in breast cancer, as well.

So, that’s beyond potential for kind of direct tumors or vital effects from the drug itself. But it’s really around the breadth of the changes that we’ve seen from cabo and I’ve seen clinically with 092 on different components of the immune system. .

Okay. Thank you for taking the questions. .

Sure, Steve. .

Thank you. Our next question comes from Paul Choi of Goldman Sachs. Your question please. .

Thank you. good afternoon and thank you for taking our questions. I have one commercial question for either Chris or PJ and that’s with respect to the gross to net trends.

Can you maybe just comment on how that progressed over the course of 4Q versus 3Q? And as you are promoting the frontline combination here how we should think about the gross to net progression over the course of 2021 relative to 2020?.

Thanks, Paul. So, yes, I mean, gross to net was slightly down in Q4 versus Q3 and we did have a higher proportion of commercial patients in the quarter. So, that did impact our gross to net.

And from a 2021 perspective, we are looking at gross to net as we – based on our guidance that we put forward, the $950 million to the $1.50 billion revenue guidance number working gross to net in that 25% to 26% range for 2021. .

Okay. That’s very helpful. Thanks. Appreciate the details. And then, my follow-up question on the clinical side is, with respect to the XL092 program could you or maybe for Gisela, can you maybe just comment on your level of visibility with respect to the efficacy and safety profile for the mono therapy and the combinations.

I ask this with regard to your comment in the PR and earlier comments just that, that you plan to proceed into pivotal by yearend here.

So, I was just – let the level of confidence and visibility that gives you a sense for being able to move into the pivotal trials by yearend here?.

Yes. Happy to address that question. The XL092 single agent Phase 1 study has been ongoing for a little bit. It’s a dose escalation study and we escalate to higher doses and get towards identification of the MTD.

We obviously have followed our patients for quite some time and we will be looking forward to presenting data at a scientific meeting to present both safety and efficacy across the study and across the dose ranging.

But the data that we are seeing thus far is consistent with how we set out and in terms of constructing the molecule and the pharmacokinetic profile has worn out as it’s hoped for as was mentioned earlier on in the call.

And so, we see the program to a large degree derisk given that XL092 is very similar in its target profile as cabozantinib and we certainly have many, many years of experience with cabozantinib as a single agent and in combination. So that is the backdrop from which we are making the comment of hoping to initiate pivotal studies in 2021. .

So maybe just a quick follow-up, is the question – that you’ll be just advancing the monotherapy into pivotal trials or you could be also be able to advance the combination?.

I think that is something we’d be addressing as we move forward and accumulate data and then ultimately initiate pivotal trials. .

Okay. Thank you very much. .

Thank you. At this time, I’d like to turn the call back over to today’s host Susan Hubbard for closing remarks. .

Thank you. And thank you all for joining us today. We are running quite a bit over on time. So we’ll need to wrap up the call. But thank you for joining us and certainly welcome your calls with any follow-up questions. .

Ladies and gentlemen, this concludes today’s call. Thank you for your participation. You may disconnect your lines at this time. Have a great day..