Good day, ladies and gentlemen, and welcome to the Exelixis Secod Quarter 2023 Financial Results Conference Call. My name is Tawanda 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. You may begin..

Thank you, Tawanda, and thank you all for joining us for the Exelixis second quarter 2023 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 Executive Vice President of Commercial; Dana Aftab, our Chief Scientific Officer; and Vicki Goodman, our Chief Medical Officer, who will review our progress for the second quarter 2023 ended June 30th, 2023. Peter Lamb, our EVP of Scientific Strategy will join us for the Q&A portion of the call.

During the call today, we will be making 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 those 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 filed 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 costs associated with discovery, product development, business development and commercialization activities.

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 had a strong second quarter across all components of our business.

We're pleased to see continued growth of the cabozantinib franchise, while at the same time we expedite a range of discovery and development programs to build the Exelixis pipeline of the future, with the goal of helping many more cancer patients.

Key highlights for the second quarter include, first, strong performance of the cabozantinib business with continued growth in-demand and revenue in the US. CABOMETYX maintained its status as the leading TKI for RCC in both the first-line IO/TKI market and the second-line monotherapy segment.

Second quarter 2023, cabo franchise net product revenues in the US were approximately $410 million and grew 18% year-over-year compared to second quarter 2022.

Global cabo franchise net product revenues generated by Exelixis and its partners were approximately $577 million in the second quarter of 2023 and also grew 18% year-over-year compared to second quarter of 2022. Chris and PJ will update our progress in the quarter and provide additional commentary on our financial and commercial activities.

Second, EXEL's top priorities in R&D is to deliver a pipeline of clinically and commercially differentiated medicines for large populations of cancer patients with high unmet medical need. Our singular goal is to improve standard-of-care for patients with cancer.

More patients we help, the more value we create for patients, their families, healthcare providers and our shareholders. We have an integrated R&D strategy spanning drug discovery, development and commercialization activities and are developing a pipeline of biologics and small molecules.

They have the potential to significantly move the needle for cancer patients. Dana and Vicki will highlight our second quarter progress later in the call. I'm pleased to announce that we'll present our R&D efforts at an investor event on December 2nd, in New York City.

Third, business development activities remain a priority as we continue to seek opportunities to access clinical assets with the potential to generate differentiating clinical data in solid tumor indications.

We have several late-stage discussions ongoing and while there is no guarantee of success in closing these transactions, we look to continue using this approach to fortify our product portfolio.

Finally, fourth, Exelixis entered into a settlement and license agreement with Teva to resolve patent litigation where Exelixis will grant Teva a license to market its generic version of CABOMETYX in the US beginning on January 1st, 2031, if approved by the FDA and subject to conditions and exceptions common to agreements of this type.

Our attention and resources remains squarely focused on the second MSN case which goes to trial in October. We will continue to vigorously protect our intellectual property rights.

So with that, please see our press release issued an hour ago for our second quarter financial results and an extensive list of key corporate highlights achieved in the quarter. I'll now turn the call over to Chris..

Thanks, Mike. For the second quarter 2023, the company reported total revenues of approximately $470 million, which included cabozantinib franchise net product revenues of $409.6 million. CABOMETYX net product revenues were $403.3 million, and included approximately $21 million in clinical trial sales.

As a reminder, clinical trials sales have historically been choppy between quarters and we expect this to continue in future quarters. Gross to net for the cabozantinib franchise in the second quarter of 2023 was 27.3%, which is lower than the gross to net we experienced in the first quarter of 2023.

This decrease in gross to net deductions in the second quarter of 2023 is primarily related to lower Medicare Part-D and co-pay assistance expenses. Based on our gross to net in the first half of 2023, we are projecting gross to net will be between 29% and 30% for the full year 2023.

Our CABOMETYX trade inventory decreased by approximately 340 units when compared to the first quarter of 2023. Total revenues also included approximately $60 million in collaboration revenues, including approximately $37 million of royalties earned from Ipsen and Takeda on their sales of cabozantinib in their respective territories.

Additionally, in the second quarter of 2023, we earned an $11 billion milestone from Takeda for their achievement of cumulative net sales above $150 million. Our total operating expenses for the second quarter 2023 were approximately $392 million compared to $380 million in the first quarter of 2023.

The increase in total operating expenses sequentially was driven by higher SG&A expenses in the second quarter of 2023, which was primarily related to costs associated with the 2023 proxy contest.

Provision for income taxes for the second quarter 2023 was approximately $19.2 million compared to a provision for income taxes of approximately $8.3 million for the first quarter of 2023. The company reported GAAP net income of approximately $81.2 million or $0.25 per share on a fully-diluted basis for the second quarter of 2023.

The company also reported non-GAAP net income of approximately $100.3 million or $0.31 per share on a fully diluted basis. Non-GAAP net income excludes the impact of approximately $19 million of stock-based compensation expense, net of the related income tax effect.

Cash and investments for the quarter ended June 30th, 2023 was approximately $2.1 billion.

This level of cash and investments, supported by our ongoing cash flow from operations provides Exelixis with the flexibility to invest in internal discovery activities, to pursue external business development opportunities to expand our pipeline, and allows us to return capital to our shareholders through the $550 million share repurchase program we announced in March of this year.

During the second quarter of 2023, we repurchased approximately $127 million of Exelixis' shares at an average price of $19.22. The second quarter share repurchase activity commenced a few days after our first quarter earnings release on May 9th. We remain committed to fully executing on the $550 million share repurchase program this year.

And finally we are reiterating our full year 2023 financial guidance, which is detailed on slide 14 of our earnings presentation. I'll now turn the call over to PJ..

Thank you, Chris. The second quarter of 2023 was a strong quarter for the cabozantinib franchise. The team continues to execute at a high level, which has resulted in CABOMETYX continuing to be the number one prescribed TKI in RCC and second line HCC.

Additionally, CABOMETYX in combination with nivolumab remains the number one TKI plus IO combination in first line renal cell carcinoma. In terms of the business, CABOMETYX TRx volume grew by 9% year-over-year in Q2 2023, relative to Q2 2022. TRx volume for CABOMETYX grew 4% in Q2 compared to Q1 this year.

Additionally, new patient starts and demand remains strong in the second quarter. CABOMETYX continued to perform well in Q2 from both a marketplace and competitive perspective. CABOMETYX again led TKI market basket in TRx share at 39%.

As we have discussed previously, the first line RCC market is extremely competitive and we are pleased with the performance of CABOMETYX in combination with nivolumab in this setting. Q2 was a third full quarter in which CABOMETYX plus nivolumab was the number one prescribed TKI plus IO combination in first line RCC.

Uptake in first line RCC is broad across clinical risk groups and practice settings. Importantly, physicians continue to report a positive prescriber experience which is consistent with the balance of efficacy, safety and quality of life seen in the CheckMate - 9ER data.

These perceptions were reinforced at ASCO which was a very productive meeting for Exelixis and provided a great opportunity for us to continue to highlight and promote the 44 month long-term follow up CheckMate - 9ER data.

You may recall, the median overall survival for CABOMETYX plus nivolumab is 49.5 months, representing an improvement of 14 months over the comparator arm sunitinib, with a hazard ratio of 0.70.

The overall survival data are differentiatig relative to the TKI plus IO competitors and also compelling the prescribers who view these data is clinically meaningful. Furthermore, physicians believe that the data support their experience of using the combination in terms of efficacy, safety, tolerability and quality of life.

Prescribers believe that this balance of data and the low discontinuation rate of CABOMETYX plus nivolumab enable patients to stay on therapy longer to achieve these results. Additionally, the CONTACT-03 data presented at ASCO reinforces the body of evidence with regards to cabo monotherapy, given the strong results of the cabozantinib controller.

Collectively these data reinforce the leadership position that CABOMETYX has in the RCC marketplace. We believe these data position CABOMETYX for continued momentum in growth as our entire team works every day to ensure that appropriate patients have the opportunity to benefit from cabo. And with that, I'll turn the call over to Dana..

All right. Thanks, P.J. So during the last earnings call in May, I discussed our overall strategy for drug discovery which is designed to prioritize targets based on the strength of the science and to leverage internal discovery capabilities for both small molecules and biotherapeutics to address the highest priority targets.

Today, I'm going to go into a bit more detail regarding where we're at in terms of filing INDs for the current development compounds in the pipeline as well as progress towards the nomination of new development compound.

As a brief reminder, our biotherapeutics programs are focused primarily on antibody-drug conjugates as well as bispecific and monoclonal antibodies targeting innate immunity.

Our internal biotherapeutics discovery team leverages several strategic partnerships that supply antibodies and various types of specific linker payload technologies, all of which have contributed to a significant level of productivity over the past several years.

Our small molecule discovery programs are focused primarily on synthetic lethal targets which are attractive because they present clear patient selection strategies and drugging them typically results in a good therapeutic index.

But we're not limiting ourselves to this approach and in some cases, we're pursuing drug, the target dominant oncogenic drivers like in KRAS where patient selection is straightforward and opportunities towards achieving best-in-class are apparent. So here is the pipeline beyond cabozantinib with the preclinical assets highlighted at the bottom.

These four biotherapeutics were declared as development compounds last year and are progressing toward IND filing. Three of which are expected to be filed in 2024.

The first IND we expect to file for these will be for XB010, which is the next-generation antibody-drug conjugate that targets 5T4, a broadly expressed tumor antigen and delivers the cytotoxic anti- tubulin payload.

XB010 uses Catalent's site-specific conjugation and proprietary linker payload technology and as a result, shows improvement in TAK antibody-drug conjugate pharmacokinetic and reduction in free payload compared to the most advanced competitor.

XB010 also represents the first five therapeutics that we have had full responsibility for and oversight of all stages of chemistry manufacturing and control or CMC.

As I'm sure many of you are aware, the manufacturing process for antibody-drug conjugates is highly complex, and I'm happy to say that our internal CMC team which comprises highly experienced scientists and leaders from the likes of Genentech, Merck, Novartis and AstraZeneca, has expertly managed that process for XB010.

Our GLP-compliant toxicology study is underway and we are on track for delivering the GMP material next year which will enable us to file our IND for that program around mid-2024.

The second IND expected from these programs is for XB628, a first-in-class bispecific antibody that combined the known pharmacology of PDL1 inhibition with inhibition of NKG2A, a complimentary natural killer cell checkpoint.

XB628 is designed to simultaneously address both adaptive and innate immune checkpoint and to act as a natural killer cell engager, promoting the activity of cytotoxic T-Cells and the robust tumor cell activity of NK cells.

We expect it to be active in tumors such as renal and lung that are sensitive to first-generation immune checkpoint inhibitors, targeting the PDL -- PD1 pathway alone. This program is targeted for IND filing in the second half of 2024.

The third program expected to reach IND filing is XB371, a next-generation tissue factor targeting antibody-drug conjugate that follows on from XB002. XB371 also uses Catalent's site-specific conjugation and linker payload technology and carries a Topoisomerase 1 inhibitor payload instead of the microtubule targeting payload on XB002.

This program is on track for an IND filing in late 2024. Finally, XB014 is a bispecific antibody that carries the same PD-L1 targeting arm present in XB628 that combines with inhibition of CD47, a complementary macrophage checkpoint.

This program is progressing more slowly than the others due to a potential safety signal we observed in non-GLP toxicology testing, which is required additional modeling and experimentation to determine if we have an acceptable, predicted safety margin to move forward with an IND filing.

In addition to these programs, we have multiple programs in discovery at earlier stages of maturity, both small molecules and biotherapeutics, from which we expect to nominate development compounds this year.

We are currently on track to reach our stated goal of up to five new development compound this year, which will potentially include new antibody drug conjugates, a monoclonal antibody targeting a novel immune checkpoint pathway and small molecule addressing synthetic lethal targets for well-defined patient populations with substantial unmet need.

All of these programs represent first or best-in-class approaches and have the potential to meaningfully contribute toward our mission of helping cancer patients recover stronger and live longer. And with that I'll turn the call over to Vicki..

Thanks, Dana. Today I will provide updates on the progress of our clinical stage pipeline, focusing on our most advanced program Zanzalintinib and XB002, as well as the cabozantinib registrational trial. XL102 continues in dose escalation and we are focused on reaching a go-no-go decision later this year.

As we continue to refine the strategic approach for each of our pipeline assets, we retain a strong focus on clinical trial execution to rapidly advance our pipeline molecules with the ultimate goal of improving outcomes for cancer patients.

I'll begin with Zanzalintinib, our next-generation tyrosine kinase inhibitor, which entered full development last year.

On our last earnings call, we shared top-line results for a fully enrolled cohort of 32 pre-treated clear cell renal cell carcinoma patients from STELLAR-001 demonstrating robust activity with responses in both cabo naive and cabo pre-treated patients.

These data provide evidence for the activity of Zanzalintinib in a cabo sensitive tumor type and provide additional support for leveraging cabo data to inform the Zanza development program. An abstract with the complete RCC dataset has been submitted to an upcoming medical conference and we'll share further details as they become available.

We have also completed enrollment on several other STELLAR-001 cohorts and looking forward to sharing the data as they mature.

In STELLAR-002, enrollment of the Zanza plus novo doublet expansion cohorts is ongoing and we have now completed enrollment on the dose escalation cohorts for the triplet combination of zanza plus nivo and relatlimab and established a recommended dose. This combination is now advancing into multiple solid tumor expansion cohorts.

Data from STELLAR-001 and STELLAR-002 will inform future registrational plans for zanza. Turning now to our Zanza Phase III studies. STELLAR-303 compares the combination of zanza with Atezolizumab versus Regorafenib in patients with non-MSI high, proficient MMR late-line colorectal cancer.

We are currently amending the trial based on emerging data, including data presented for the LEAP-017 trial of Pembrolizumab plus Zanzalintinib versus standard-of-care at ESMO GI last month, which suggests that colorectal cancer patients without liver metastases at baseline appear to derive more benefit from IO combinations including IO/TKI combination compared to subjects with liver mets at baseline.

Based on recent Phase III trial performed in similar settings, the prevalence of liver metastases appears to be around 63% to 74% of late-line metastatic CRC patients. In the amendment design, a total of approximately 874 patients will be enrolled regardless of RAS status and including patients with and without liver metastases.

Stratification factors, which already includes the presence or absence of liver mets will not change. The primary endpoint will be overall survival in patients without liver mets with the secondary endpoint of OS in-patients irrespective of the presence of liver mets, which will be statistically tested if the primary OS is positive.

This will preserve the possibility to demonstrate benefit in all comers, while increasing the probability of success by focusing the primary analysis on the patients most likely to benefit.

STELLAR-304, a Phase III trial comparing the combination of zanza and nivolumab to sunitinib in patients with certain non-clear cell RCC histologic subtypes who have not previously been treated for metastatic disease is also enrolling.

With these two Phase IIIs now underway, we are also on track for the initiation of additional Phase III trials this year.

We are pleased to announce our next planned registration-directed study, STELLAR-305, a Phase II/III, which will evaluate Zanzalintinib in combination with pembrolizumab versus pembrolizumab alone in patients with first-line PD-L1 positive recurrent or metastatic squamous cell carcinoma of the head and neck.

The study will enroll approximately 500 patients and PFS and OS are dual primary endpoints. Pembrolizumab as a single agent received approval in this setting based on overall survival. However, fewer than one in five patients have an objective response.

With a 54% response rate seen for cabo in this setting, in an investigator-sponsored trial as well as the favorable emerging safety profile for Zanzalintinib, we believe this may provide an opportunity to improve outcomes versus single-agent pembro with a regimen that is tolerable for this population with multiple comorbidity.

Moving on to XB002, our first antibody drug conjugate, which targets tissue factor. We have now established a recommended dose, and we are carrying that dose along with a lower dose to fulfill FDA's Project Optimus requirements for dose optimization into expansion cohorts in multiple solid tumors, which are now open to enrollment.

I'm pleased to share that the first patient has now been dosed on one of those expansion cohorts. These signal detection cohorts will inform the drug safety and efficacy profile and allow us to pivot quickly into registration-directed trials.

Additionally, we continue to enroll on the dose escalation cohorts with nivolumab and bevacizumab combinations to determine a recommended dose for each combination to carry forward into expansion, and we will continue to seek out other promising combination approaches in sensitive tumor types.

For cabozantinib, we expect the readout of the progression-free survival primary endpoint for CONTACT-02, our Phase III study in combination with atezolizumab in metastatic castration-resistant prostate cancer this year. The second interim analysis for OS for COSMIC-313 is also on track for this year.

In summary, we continue to make progress advancing our pipeline molecules and believe that the emerging data for both Zanzalintinib and XB002 are encouraging.

We look forward to sharing the emerging data at upcoming medical conferences as they mature and continuing to expedite the development of these promising assets for the benefit of patients with cancer. With that I'll turn the call back over to Mike..

All right. Thanks, Vicki. As you heard on the call today, Exelixis is off to a great start in 2023. We're excited to have the momentum from our cabozantinib franchise drive increased growth across all components of the business as we at Exelixis work to help any more cancer patients as we discover and develop our pipeline of the future.

We look forward to sharing our latest pipeline results and plans at our R&D day in December. I'll close by thanking the Exelixis team for their collective efforts to support our discovery, development and commercial activities. The team is highly motivated to achieve our mission to help cancer patients recover stronger and live longer.

We drive our results every single day with urgency and purpose to build on a foundation of innovation and collaboration. We look forward to updating you on our progress in the future. Thank you for your continued support and interest in Exelixis and we're happy to now open the call for questions..

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

Hi, guys. Good afternoon and thanks for taking my question. First off, I want to congratulate the team on just another quarter of consistent revenue growth. Good to see that. I guess I got a bunch of questions for Vicki.

So Vicki, on your Phase I STELLAR-001 study, you've mentioned on the slides here that you completed enrollment for several dose escalation and expansion cohorts. I was wondering if you might be able to tell us which expansion cohorts have you completed enrollment so far. And then I've got a couple of follow-ups..

Yes. So -- yes. So as I mentioned in my remarks that we've completed enrollment on a number of cohorts. We'll be prepared to share more details on that as the data mature.

I think you've seen on our last earnings call that we shared the data for the Clear cell RCC cohort, which had not only completed enrollment, but also had adequate follow-up to make an assessment. So more to come on that..

Got it.

And then maybe at ESMO, sorry, at a medical meeting where you will be presenting data later this year, will they have multiple cohorts or just one cohort?.

Yes. Those data to clarify that point are specifically the clear cell RCC cohort, the 32 patients. We'll have updated data, including both efficacy and safety in that presentation..

Got it. Okay. And then, I guess, at the last earnings call, you mentioned that in that -- you mentioned the 34% and a 50% ORR. And since then, I was wondering, you had one patient who was unconfirmed the last time we spoke in May.

Did that patient end up becoming a confirmed PR? And any chance you might be able to tell us what in STELLAR-002 if the zanza, if the triplet that you study, is that exclusively zanza, nivo, rela or does it also include zanza, nivo and ipi as well?.

Yes. So again, we'll share the updated efficacy data in the presentation. So you'll get more details on an updated response rate as well as, again, the safety data.

As for STELLAR-002, we have ongoing expansion cohorts for zanza in combination with nivo, and we're now advancing the rela-triplet into different cohorts as they make sense in the different tumor types..

Got it. All right. Thanks a lot. I appreciate all the color..

You bet. Thank you, Asthika..

Thank you. Please standby for our next question. Our next question comes from the line of Jason Gerberry with Bank of America Securities. Your line is open..

Hey, thanks for taking my questions. Just two for me. Just wondering quickly if you could -- of your roughly 30% gross to net deductions on cabo, like roughly, is a big proportion of that the catastrophic coverage cost and donut hole cost? Just trying to get a sense directionally IRA implications around cabo pricing.

And then just on the Teva settlement that you guys announced, it looks like a very positive and favorable deal for you guys. Wondering if there's anything in that, that precludes you from giving MSM, you're -- the lead challenger, slightly better terms? Thanks..

Yes, Jason, thanks for the questions. Chris can help with the gross to net, and I'll speak to the Teva settlement..

All right. Jason, it's Chris. From a gross to net perspective, we do -- as we've talked about before, we do see higher gross to net.

The donut hole piece is not necessarily catastrophic, but the donut hole piece has a big impact in Q1, particularly when we have those patients that roll over from the prior year to the current year, and they roll through -- many of them roll through the donut hole when we -- because of just being on cabo as they roll over the year.

So a lot of its donut hole and not necessarily on the catastrophic side of things..

And then on the question regarding Teva, as probably won't be a surprise to you, I'm somewhat low to comment on -- in much detail on that settlement. So I would say into relatability to other settlements or other things we might do in the future, we're certainly very pleased to have the action date that we got in the Teva settlement of January 1st.

2031. And I think that's consistent with some of the messaging we've been sending over time. And obviously, we're going to continue to be very aggressive about protecting our IP going forward. So but as you would imagine, can't really say much about how the two would interact..

Had to try..

Thanks, Jason..

Thank you. Please standby for our next question. Our next question comes from the line of Michael Schmidt with Guggenheim. Your line is open..

Hey, guys, thanks for taking my questions. I had one on the upcoming CONTACT-02 study data.

Could you remind us what the bar is for second -- for PFS for a second hormone therapy in this population? And you obviously have dual endpoints PFS and OS, is there potential opportunity to file just based on PFS or would you need both endpoints in order to file for this indication? And then I had a bigger picture follow-up..

Yes, thanks for the question, Michael. So in terms of the bar, again these are patients with metastatic castration-resistant prostate cancer who have already received first non-hormonal therapy.

So they tend not to have actually quite short PFS on their second line NHC which has given in advance of chemotherapy, so somewhere on the order of about 2.5 to 4 months PFS.

In terms of would we file on PFS alone or OS? What I would say is, we're going to evaluate the totality of the data, as they come in, in terms of the overall benefit risk profile that we see and if appropriate, we'll have those conversations with the regulatory authorities..

Great, thanks. And then thanks for the additional detail on your R&D efforts and pipeline activities. So obviously you're focusing more now on advancing internal programs into clinical development.

To what degree does that affect your business development strategy? Is that still a priority at this point given your strong balance sheet? Or are you shifting more towards investing into the internal pipeline capabilities? Thanks so much..

Yeah, Michael, it's Mike. Yeah, no, that's a great question and thanks for that. We specifically added a bullet in my intro around BD and our interest and the priority we have in continuing our business development activities to access new clinical assets. So that's a priority for us. Again, we're agnostic to where high conviction assets come from.

I wish to make a lot of progress on our internal R&D efforts, but there's still some molecules out there that we like a lot, that we're pursuing. So that's still an important part of our process. And again, no guarantee will be able to complete those transactions, but it's certainly a main focus for us right now..

Great. Thanks so much..

Thanks, Michael..

Thank you. Please standby for our next question. Our next question comes from the line of Andy Hsieh with William Blair. Your line is open..

Thanks for taking our questions. I got a couple here. So, Vicki, thanks for the update regarding the STELLAR-303 study. I'm just curious about this emerging observation about liver mets. Is that dependent on the RAS status, whether it's mutated or wild type? Just kind of curious about that two variable at a two-by-two metrics..

Yes, thanks for the question. So the current STELLAR-303 design did have as a primary endpoint, the overall survival in RAS wild type patients, so to just maybe clarify a little bit of detail there, under the amended design, we will be enrolling patients without regard to RAS status. We will be analyzing the data without regard to RAS status.

The change that we're making is really to improve the probability of success of the trial based on emerging data.

So the LEAP-17 data were presented approximately a month ago, prior to that, there were some single-ARM dataset where IO combination including IO/TKI combination, such as regorafenib and nivolumab has been looked at in terms of response rate.

And what we've seen in small datasets and retrospectively with the patients without liver mets had higher response rates than patients with liver mets. So what has changed in the LEAP17 data, as we now have a Phase III trial which read out negative for overall survival despite some improvement in response rate and progression-free survival.

The OS hazard ratio was 0.83 in the overall population, but the biggest predictor of whether or not there was benefit in the OS -- in the subgroup analysis was in patients with or without liver mets, so that the patients without liver mets had a hazard ratio for overall survival 0.65 while those with liver mets, it was 0.91.

So we believe that the totality of the data is now and our steering committee and other key opinion leaders, we've spoken to also agree that the weight of the evidence supports moving into a non-liver mets population as our primary endpoint.

And so this is what we plan to do, again, with the primary analysis focusing on patients without liver mets and a secondary analysis in all comers which would include patients with liver mets and that ITC and again regardless of RAS status.

And again, this is an opportunity for us based on emerging data from external to the trial, and external to our own programs, it really increased the probability of success of the study and make sure that the patients are most likely to benefit from therapy and have an opportunity to do so..

Got it. That's very helpful. Regarding the tissue factor agnostic opportunity, I'm just curious about how you think about potentially a regulatory strategy there.

And also, how big is that tissue factor positive solid tumor opportunity?.

Yeah. So at this point, I think it's too early to talk about our regulatory paths there. This is really an exploratory cohort that gives us an opportunity to look at tumor types that we're not studying in specific tumor directed cohort.

Based on tissue factor expression, it may help us identify other signals for tumor types outside of the ones that we are currently studying. It also may give us some indication on whether tissue factor expression, which we're looking at across the board in this -- in all patients on study, appears to be predictive for response..

Great.

And maybe lastly on CBX-12, curious about your view on the data presented at ASCO and remind us what are some conditions for opt-in?.

Yeah, so CBX-12 is continuing in dose escalation. We're certainly encouraged to see responses that have been emerging, the data and the optin decision really, we will have to wait and see in expansion cohorts once we've confirmed the activity and the safety profile of the assets..

Okay, great, thank you so much..

Yeah, thank you, Andy..

Thank you. Please standby for our next question. Our next question comes from the line of Jay Olson with Oppenheimer. Your line is open..

Oh, hey, congrats on the quarter. And thank you for taking the questions.

Based on the strong cabo sales, can you just comment on the rationale for keeping the original guidance and what your expectation is for the growth rate for cabo in the second half and maybe just some thoughts on market share at 39%, they had a strong quarter-over-quarter growth, maybe any color on the competitive landscape for TKIs in the RCC market? And then I had a pipeline follow-on, if I could..

Right. Jay, thanks. Why don't we start with the second part of that question first. P.J. can talk about the market dynamics in the RCC space, and then Chris can briefly comment on guidance..

Yeah, thanks for the question. So with regards to the market, as I mentioned, we are now the market leaders in first line TKI plus IO combinations for the third quarter in a row. So a lot of strength there and in the TRx market, in the market basket we're 39% share. And that market increased quarter-over quarter. So I think we have strong momentum.

As I mentioned, we're seeing growth in both demand and new patient starts and I think what we're really seeing is that the our data, particularly the long-term follow-up data from CheckMate -9ER, now at 44 months follow-up and the strong balance of data, but particularly the overall survival data -- we were 14 months in the combination beyond sunitinib which is really differentiating from the combination, continues to really drive positive perceptions for the data.

So we feel good about our sort of continued momentum and opportunity for growth in the marketplace.

Chris?.

Thanks, P.J. So from a guidance perspective, as you just heard from P.J., we had a strong quarter.

We continue to have strong growth and based on that strong growth that we've seen in the first half of the year, we think we're confident that cabo has the ability to grow into the second half of the year and that's why we reiterated the guidance range we did today..

Okay, great, thank you. And if I could squeeze in a pipeline question, congrats on the CBX-12 data at ASCO.

Can you just comment on whether or not you'll be starting a Q3W dosing cohort and how far away do you think you are from recommending a Phase II dose?.

Yeah, so, thanks for the question. We are moving into every three weekly dosing actually, Cybrexa has that cohort ongoing now. Ultimately in terms of selection of a dose, I think there are multiple factors here in terms of doses, different schedule, and we have to consider the requirements of FDA's Project Optimus and dose optimization.

So we're in discussions now with Cybrexa on exactly what that might look like, but making sure that we have a solid foundation for selecting a dose to go forward with..

Great. Thanks for taking the questions..

Of course, Jay. Thank you..

Thank you. Please stand by for our next question. Our next question comes from the line of Silvan Tuerkcan with JMP Securities. Your line is open..

Thank you for taking my questions and congrats on the great quarter. I have a question about, if you can please outline the scenarios for COSMIC-313 with the data upcoming in the second half of the year? What are kind of the scenarios and how do we get from this data to supplemental NDA? And then I have a follow-up question..

Yeah, so COSMIC-313, of course, we reported top-line results for the progression-free survival endpoints just about a year ago in which we showed an improvement in progression-free survival for the combination of cabozantinib with nivolumab and ipilimumab versus nivo and Ipi alone in-patients with poor and intermediate-risk renal cell carcinoma.

At that time, the OS data were immature and in conversations with FDA, they made it clear that they wanted to see overall survival data prior to considering any filing.

So with respect to 313, this is the next interim analysis of overall survival and data dependent, if the data seem to support a favorable benefit risk and we could -- can consider a filing. We have that discussion with FDA..

Is there a way that you could file only on a subset of patients that the -- I recall that was a differential in benefit between the low-risk versus medium-to-high-risk patients?.

Yeah. I really can't speculate on that. And again based on the data, we'll have the conversation about filing potential with FDA..

Great. Well, thank you so much for taking my question..

Of course, Silvan. Thank you..

Thank you. Please standby for our next question. Our next question comes from the line of Etzer Darout with BMO Capital Markets. Your line is open..

Great. Thanks for taking my question. A couple from me, both from sort of the pipeline. First on STELLAR-303, wondered if you could talk at all about the performance of regorafenib in patients with or without liver mets and whether or not that impacts sort of the performance of the control group at all.

And then for planned STELLAR-005 study, I am assuming this will be maybe like IKNOTE-048 with the PD-L1 scores of CPS greater than 1 and then I guess, is that what the primary analysis would be based on the CPS greater than 1 population. Thank you..

Yes, sure. So I'll take the 303 question first. I mean regorafenib, response rates are very low, around 2% kind of across-the-board. So we don't really see much differentiation there between liver mets and non-liver mets from a response perspective.

Again, I think when we look at the data for the various IO combos, it's becoming increasingly clear that from an IO perspective, the benefit appears to be in the non-liver mets patients. And again, that's where we think we have the greatest probability of a successful outcome. There really is an unmet need in both patient populations.

So, we are enrolling regardless of liver mets to give us an opportunity to be able to show benefit if it's there in both patients with and without liver mets. Again, a big unmet need here with poor options in terms of standard-of-care. So, in terms of 305, pembro is again approved in that setting.

So we'll be studying the population in which pembro was approved. They demonstrated an overall survival benefit relative to standard-of-care, which led to the approval, as you pointed out in CPS greater than or equal to one. And -- however, the response rates here are quite low.

So we believe there really is opportunity, again, to add benefit here and with Zanza's safety profile, we believe that we're well-placed to do that, again, based on the activity that we did see with cabo in combination with pembro and those data were presented last year at ASCO with the response rate of 54%, so..

Great. Thank you..

You're welcome..

Thank you. Please standby for our next question. Our next question comes from the line of Derek Archila with Wells Fargo. Your line is open..

Hey, everyone. Thanks for taking the questions. Just two from us.

So to piggyback on an earlier question on CONTACT-02, maybe you can just help frame the market opportunity you see for cabo-atezo combo in the pre-chemo setting in prostate? And then the second question, with the recent changes to the Board, are there any plans to kind of review the current cost base to identify any efficiencies? And if so, when -- would that be communicated? Thank you..

Thanks for the questions.

PJ, you want to take the first one about CONTACT-02?.

Yeah. I mean, I think a couple of things with regards to the market. Certainly, should we have positive data and approval to be a market, we're excited about. You know prostate cancer is obviously very large market and even in that kind of second line plus metastatic CRPC setting, there's well north of 50,000 patients.

In that setting -- and I guess what I'd say more broadly is, market research and conversations with KOLs, couple of things. There is significant unmet medical need in this setting, just generally speaking and there is also a strong desire to delaying chemo.

So, I think a combination of a checkpoint inhibitor and the TKI would be extremely well-received based on the feedback we've gotten in that setting. So we're certainly optimistic about the potential opportunity..

In the context -- it's Mike, In the context of Board deliberations, etcetera around our strategy and our tactics, Boards have been together now for a couple of months.

We've met individually, small groups, committees, full Board, really pleased with the tenure, the tone, the collaboration, the focus on what we're doing both strategically and tactically as a company, again, focused on building value for patients and therefore building value for shareholders.

As you can tell by the content on today's call, we are all in on pushing forward our R&D agenda to be able to really enable the full pipeline towards pivotal trials and eventually commercialization if we have traction there clinically in generating differentiating data. And we're real excited about our future and where we're going. So stay tuned.

Obviously, there's a lot going on with us, and we're very excited about that. And we think we've got a lot of room to maneuver relative to the strength of the balance sheet and the cabo commercial opportunity and just the depth you heard from Dana and Vicki today within R&D..

Got it. Sounds great. Thanks. Congrats on the quarter..

Yeah, thank you very much..

Thank you. Please standby for our next question. Our next question comes from the line of Joe Catanzaro with Piper Sandler. Your line is open..

Hey, everybody, thanks so much for taking my questions here. Just two on the pipeline side of things. First one on XB002 dosing. So TIVDAK approved on every three-week dosing. But since done some work with the schedule that generated some interesting data outside of cervical.

So wondering how much you consider the schedule with -- which you move forward with 002? And then second question, just wondering if you have any updated thoughts on your efforts in the SIRPalpha -CD47 space in light of the recent magrolimab failure? Thanks..

Thanks for the question. Vicki can handle the question for XB002 and then we'll pivot over to Dana for discussion around some of our CD47 efforts.

Vicki?.

Yeah, so in terms of XB002, the dose that we're taking forward into expansion cohorts is 2.25 mg/kg with a lower dose of 1.7 mg/kg in the -- into expansion in order again to meet the requirements of Project Optimus. We will be doing PK modeling to better understand exposure response across the board.

I will note with respect to the TIVDAK dosing, we've looked at our PK profile carefully. And what we're seeing there I think is very encouraging. So two kind of key points.

One is, in terms of the level of free payload, which contributes to off-target toxicity, but not to the efficacy, we're seeing substantially lower levels of free auristatin compared to TIVDAK at approved dose. And that seems to be playing out in the safety profile as well.

So in our chosen higher dose of 2.25, we have about five-fold lower level to payload relative to TIVDAK.

In terms of the overall impact ADC, correspondingly, we're seeing a higher exposure and really compared to TIVDAK at 2 mg/kg, in our case in doses that 1.5 milligram per kilogram and above, we're seeing higher exposures of Intact ADC and at the selected dose of 2.25, it's threefold higher than TIVDAK at the approved dose.

So we're quite confident that we have a solid dose to move forward with in terms of both of our doses and really now it's about exploring the efficacy and safety profile, but the Intact ADC really should be driving the response while the low levels of free payload may help contribute to a differentiated safety profile..

And this is Dana. Thanks for the question on CD47. So as you mentioned, Gilead announced very recently that a Phase III trial of magrolimab or magro which targets CD47 within a Phase 3 trial and it's logic malignancy and patients with high-risk MDS. And that trial was stopped due to futility.

They didn't make any other announcements on their other programs which -- they have many to proceeding in a lot large array of indications. So we still have a strong belief in the CD47 pathway.

Our most advanced agents as I mentioned on the call in the prepared remarks is XB014, which we feel is an important next-generation approach that was really designed based on known clinical profile of first-generation CD47 targeting agents like magro.

And it also includes a strong preclinical rationale for combining inhibition of PD-1/PD-L1, which as you know, a key adaptive immune checkpoint with inhibition of the CD47 SIRP alpha pathway, which is a key innate immune checkpoint.

We feel this is still a compelling mechanism of action in solid tumors, and we also believe that investing carefully in agents that can target this pathway from multiple angles, is prudent, including with ADU-1805, in Sairopa, which as you're aware, is also a next-generation approach, targeting multiple wheels of SIRP alpha, a very potently and selectively.

So we're still solid on our strategy to target this pathway..

Okay. Great, thanks so much for taking my questions..

Of course. Thank you..

Thank you. Please standby for our next question. Our next question comes from the line of Jeff Hung with Morgan Stanley. Your line is open ..

Thank you for taking my questions. Could you provide an update on the ADU-1805 Phase 1 study and when we might see initial data? And then I have a follow-up..

Dana or Vicki?.

I'll go it. Yes, so that is ongoing in dose-escalation. We're working closely with the Sairopa team on that. It's too early to discuss when we will have a data presentation..

Okay. And then on XB371, the payload differs from XB002, but given that they share the same key targeting, is the goal to mitigate risk for adverse events, while maintaining selectivity? And then, do you expect 371 to behave similarly to 002 in terms of levels of Intact ADC or free payload? Thanks..

Dana Aftab:.

Y:.

Great, thank you..

Okay. Thank you, Jeff..

Thank you. Please standby for our next question. Our next question comes from the line of Peter Lawson with Barclays. Your line is open..

Hi, good afternoon. This is Alex on for Peter. Thanks for taking our questions. Just one, just given your cash position, your plans for BD and internal investments, do you see potential to increase your share buyback program potentially? Thank you..

Alex this is Chris. Thanks for the question. So right now, we are committed to the $550 million share repurchase program, we got authorized in March.

And as we -- time goes on, we'll continue to evaluate how we allocate capital across the multiple areas of the business, including potential share repurchase, but also R&D and development and also commercialization.

Thank you..

Take the next question, operator..

Please standby for our next question. Our next question comes from the line of Stephen Willey with Stifel. Your line is open..

Yeah, good afternoon. Thanks for squeezing me in.

Just going back to 303, could -- can you just speak to the proportion of enrollment that was completed prior to making the protocol amendments? And I guess, will there now be any attempt to preferentially enrolled patients, just to get a better representation of either RAS status and/or liver mets? And then, I guess does the increase in sample size also contemplate a change in your underlying control arm assumption? I know the nine plus months control arm that emerge, that I believe which I think included both regorafenib one TAS-102 was a bit higher than what many folks kind of thought would be the case.

Thanks..

Yes, so in terms of 303 enrollment, that's been going well. We're still in -- still have a number of sites to activate. So we're confident that once we have those sites up and running, we'll be able to enroll even the additional roughly 50% increase in patients relatively quickly.

All of the patients that have already been enrolled, they are certainly relevant to the patient population. So we don't have any concerns there about any kind of skewing the patient population. The increase is driven by the fact again coming back to the incidents of patients with liver metastases being quite high.

So in order to have a representative, patient population that looks somewhere near the incident of liver mets, we have to enroll a substantial fraction of patients with liver mets in addition to those without. So again, the primary analysis will be in that smaller population.

But again, to show a benefit in a smaller population, while preserving the possibility of showing a benefit in the overall population, we have to enroll somewhat higher number, but again, we think we can make-up some time given how well we've been recruiting to the study..

Great. Thanks for taking the question..

You bet, Steve..

Thank you. Please standby for our next question. Our next question comes from the line of Chris Shibutani with Goldman Sachs. Your line is open..

Great, thank you. Can I just clarify on 303 with the answer to Stephen's question.

Does the amendment have any implications or effect on potential timelines? And then just more broadly, I guess you have the R&D Day planned in December, but could you just give us a sense for your plans for disclosing additional data across the zenza program and across the Phase III studies.

This is pretty much going to wait for December Analyst Day or help us out a little bit when we can get more data. It seems there lot of the responses are, we'll have to wait-and see..

Okay. So you want to take the first part of the preferred that question. I will take the second..

Yeah. I mean, so we've increased the sample size by 50%, so of course, we do expect that it will take longer to enroll.

Again, the patients that we've already enrolled are remained relevant to the patient population under study, and we've had a robust recruitment, again, but still some sites that we're still bringing on-board, lots of investigator enthusiasm. So we think that we can ultimately make-up some time there..

Yeah, Chris, in terms of the R&D Day agenda and content, I don't want to get too far ahead of ourselves. That's in December. It's barely August. So we've got some time to figure that out. Obviously, we're committed as we have historically, to presenting mature data when it's available across not only the cabo spectrum, but the entire pipeline.

So we're on-track to do that this year with zanza and certainly it's the -- we have the opportunity with mature data later in the year, we'll find a way to get that out and certainly that will be the case as this data matures, which it -- somebody has designed its own course relative to how that data matures, but when appropriate.

So, appreciate your patience. You understand you have been in this business for a long-time, so you understand that some of these things just take a longer than you'd like.

But I think we're very comfortable with the depth of R&D that we've gotten across discovery and development and collaborations and other stuff that we're working on right now that will have a very fulsome morning in New York, the sheer, the latest and greatest data with -- when we are there..

Yeah.

Next question?.

Thank you. Please standby for the next question. Our next question comes from the line of Yaron Werber with TD Cowen. Your line is open..

Great, thanks for taking the question. I got a couple of questions. Maybe, Chris, for you first, on the tax-rate. The tax-rate has been terrifically low in the first-half and you're maintaining your guidance.

Can you just clarify, are you expecting the tax-rate to increase in the second-half? Any specific items, you can kind of call-out for us? And then secondly, on STELLAR-303, just can you give us a little bit of a sense of the powering now with the new sort of focus on patients without liver mets, with the expanded study? I imagine the power is very-high.

So what's the delta or treatment effect that you're looking for? Thank you..

Hey, Yaron, it's Chris. So yeah, you're right. Our tax-rate is for the first-half of the year has been below our guidance range. But there's a lot of things that go into that when you look at the entirety of the year and there are some expenses that may or may not happen in the second-half of the year. So we're maintaining our guidance for that reason..

Okay, thanks..

And with respect to STELLAR-303, in terms of the power for overall survival, we're looking for a clinically meaningful effect in both the non-liver mets population as well as in the IGT..

And what do you consider to be clinically meaningful? I don't know if you can expand a little bit..

Without getting into the statistics, I would just say, again, when we think about interactions that we have with regulatory agencies, as well as with payers and what they're looking for in terms of overall survival benefits, you can also look to the LEAP-17 data and see the difference in the OS hazard ratios, as I mentioned earlier for what they saw in the non-liver mets population..

Thank you. Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to your host Susan Hubbard for closing remarks..

Great, thanks Tawanda, and thank you all for joining us today. We welcome your follow-up calls with any additional questions you may have that we were unable to address during today's call..

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect..