Exelixis, Inc. Q1 FY2021 Earnings Call

Good day, ladies and gentlemen, and welcome to the Exelixis’ First Quarter 2021 Financial Results Conference Call. My name is Daphne, 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, Daphne, and thank you all for joining us for the Exelixis’ First Quarter 2021 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; and Gisela Schwab, our Chief Medical Officer, who will together review our corporate, financial, development, and commercial progress for the First Quarter 2021 ended March 31, 2021. 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 the first quarter of 2021 with a strong performance, where we saw significant revenue growth from the Cabo nivo first-line RCC launch and posted our highest quarterly net product revenue since the initial Cabo medics approval in 2016. Please see our press release that was issued an hour ago for our first-quarter financial results and an extensive list of key corporate accomplishments. We'll keep today's prepared remarks short so we can get to your important questions. Obviously, we're thrilled with the early performance of the Cabo nivo launch in first-line RCC, which we believe reflects the strengths and breadth of the efficacy, tolerability, and quality of life data from the checkmate 90 trial. We continue to build momentum with a combined 35% growth in revenue over the last two quarters 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 run rate in the U.S. if our launch assumptions and trajectory continue on their current course. Also in the first quarter, we advanced key 2021 discovery, development, and regulatory activities. We remain on track to report line results for the Cabo atezo doublet first-line HCC from Cosmic 312 and in metastatic CRPC from Cosmic 021 cohort six, and expect to file up to three new NDAs for Cabo across these indications pending positive results. Along with the filing for Cosmic 311, our early clinical pipeline also advanced nicely in the quarter with significant progress in the XL092 program, initiation of the phase one clinical trial of XL102, our novel CDK7 inhibitor, and the IND filing for XB002, which was accepted by the FDA in April. Our discovery and pre-clinical teams continue to make important progress towards the optimization and characterization of new development candidates for both small molecule and EDC programs, which we believe will provide the foundation for new clinical candidates in the near future. I'll close here by saying that the Exelixis team has hit the ground running in 2021 and is building on the urgency and focus from our recent progress to maximize our chance for success across the range of milestones ahead of us. I'm incredibly proud to say that we're coming out of COVID stronger than ever as we drive our business forward to help cancer patients live longer and recover stronger. So with that, I'll turn the call over to Chris, who will provide an update on our first quarter 2021 financial results.

Thanks, Mike. For the first quarter of 2021, the company reported total revenues of $270.2 million. Total revenues for the quarter included Cabosantinib franchise net product revenues of $227.2 million. Net product revenues in the first quarter of 2021 were impacted by higher demand for Cabometyx and a decrease in wholesale inventory. Cabometyx wholesale inventory decreased by approximately 300 units, and when combined with the higher demand resulted in a decrease in our inventory weeks on hand from approximately 3.1 weeks on hand in the fourth quarter of 2020 to approximately 2.3 weeks on hand in the first quarter of 2021. The first quarter of 2021 total revenues also included $43 million in collaboration revenues from Ipsen, Takeda, and Genentech. Total operating expenses for the first quarter of 2021 were $274.8 million compared to $245.8 million in the fourth quarter of 2020. SG&A expense was the primary driver of the increase in total operating expenses, which was primarily employee-related expenses, including an increase in stock-based compensation expense. Also impacting our total operating expenses for the first quarter of 2021 was approximately $24 million in licensing upfront and milestone fees. The benefit from income taxes for the first quarter of 2021 was $3.6 million compared to the benefit of $300,000 in the fourth quarter of 2020. The company reported GAAP net income of $1.6 million or $0.00 per share on a fully diluted basis for the first quarter of 2021. The company also reported non-GAAP net income of $28.5 million or $0.09 per share on a fully diluted basis. Non-GAAP net income excludes the impact of approximately $26.9 million of stock-based compensation expense, net of the related income tax effect. Cash and investments for the quarter ended March 31, 2021 was approximately $1.6 billion. And finally, according to our financial guidance for the full year of 2021, we are maintaining the financial guidance that we provided earlier this year. And with that, I'll turn the call over to P.J.

Thank you, Chris. Today I will discuss the Cabometyx business with regards to Q1 2021, particularly in the context of the first approval for Cabometyx in combination with an immune checkpoint inhibitor. As you know, on January 22nd, Cabometyx received FDA approval for use in first-line RCC in combination with nivolumab. The team was fully prepared to hit the ground sprinting, and we were pleased with the execution of the launch, which is resulting in rapid and importantly broad uptake of Cabometyx. Cabometyx was the only TKI in Q1 among the TKI market basket to grow NRX market share, increasing from 32% in Q4 to 36%. According to IQVIA data, importantly, Cabometyx NRX volume grew 31% Q1 2021 over Q4 2020, driven primarily by uptake of the combination of Cabometyx and Nivo in the first-line setting. Additionally, Cabometyx TRX volume increased by 21% in Q1 relative to Q4 of 2020. We are also pleased adoption was broad across a number of key segments with strong uptake in favorable intermediate and poor clinical risk groups as the Checkmate 9ER data is resonating with physicians broadly as they think about patients who are appropriate for the regimen. Our market research shows that Cabometyx in combination with Nivo is taking share from all first-line competitors already at this early stage of the launch. Beyond these initial metrics, we won’t be providing other details for competitive reasons, specifically market share by line of therapy, which I'm sure you can appreciate. Uptake in the academic segment has been rapid, and we're seeing strong adoption in the community setting as well. We believe there is significant opportunity for continued growth in new patient market share, particularly in the community setting. Recently, we've begun to see many community accounts begin to reopen access to industry representatives given improving trends in the pandemic. While this is variable depending on the account and geography, our belief is that this will continue to improve facilitation of education and discussions of the 9ER data, which prescribers find compelling and important for their patients with RCC who have yet to receive a therapy. This trend coupled with our comprehensive launch plan for execution of both virtual and in-person tactics should continue to drive new patient market share in the community setting. In addition to the broad uptake of Cabometyx plus Nivo in the marketplace, perceptions of the 9ER data have been very positive. There's been a rapid increase in unaided awareness of the approval of this combination, as well as favorable impressions of the efficacy of the combination based on the endpoints of OS, PFS, and ORR across key subgroups, including IMDC risk categories. Importantly, the safety profile of the combination driven by the optimized Cabometyx combination starting dose of 40 milligrams daily is viewed favorably by prescribers. It is improving the overall perceptions of safety and tolerability of Cabometyx. Physicians also view the quality of life benefit demonstrated in the 9ER study as differentiating and important for their patients who may be on first-line therapy for extended lengths of time. The Exelixis team is continuing strong and focused execution on the launch. These efforts are aided by the recently published Cabometyx data at ASCO GU, including a presentation focused on quality of life. Furthermore, the publication of 9ER in the New England Journal of Medicine on March 3rd and the recent update of the NCCN guidelines on April 21st, which positioned Cabometyx as the only FDA-approved preferred category 1 regimen across all clinical risk groups should continue to support the broad uptake of the combination. Strong Q1 performance in Cabometyx, launched trajectory position the Cabometyx franchise to continue significant revenue growth in 2021 and beyond. We're thrilled with the opportunity that 9ER provides. Excellent. Looking forward, as we continue to build upon the foundation in RCC where Cabometyx is the number one prescribed TKI. Beyond 9ER, we are already working on plans to optimize potential future access of the Cabometyx 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 Cabometyx in combination with immune checkpoint inhibitors advances. Our team remains highly focused and motivated to compete every day to bring the benefit of Cabometyx to all eligible patients as we continue to build the franchise and maximize its clinical and commercial potential. And with that, I will turn the call over to Gisela.

Thank you, PJ. I'm pleased to provide an update on the development programs. 2021 is certainly off to a great start for Cabometyx with regulatory and development progress, as well as a growing clinical pipeline of programs, including XL092, XL102, and XB002. Starting with the COVID regulatory progress, after January 2021 approval by FDA for Cabometyx in combination with nivolumab for the first-line treatment of patients with advanced RCC, the combination achieved a positive CHMP opinion in the EU in February, and quickly thereafter in late March, the European Commission approved the combination for the first-line treatment of RCC patients in the EU after having reported exciting presentations in advanced RCC at ASCO GU. Cabometyx in combination with nivolumab includes checkmate 9ER as well as single-agent Cabometyx results, including from the pivotal study. We are now looking forward to the upcoming ASCO conference with further data presentations based on the checkmate 9ER and also single-agent results from Cosmic 311, a phase three trial in differentiated thyroid cancer. Turning to an update on our ongoing program for Cabometyx, we have continued our execution of the COSMIC 021, 311, 312, and 315 studies and are on track for milestones on these trials as previously shared, including three potential new NDAs. I will provide a brief summary of key highlights for the program for Cosmic 311 and radioiodine-refractory DTC patients who have received prior A GFR targeted therapy. We are working towards an NDA submission based on the strong results in a patient population with unmet medical needs. As announced previously, the trial met its primary endpoint of progression-free survival, showing highly significant improvements in progression-free survival versus placebo, and the FDA granted breakthrough therapy designation for the indication during the quarter based on these results. We are focused on an SNDA filing that we expect to complete in the second quarter. COSMIC 312, a phase three trial of Cabometyx versus Sorafenib for the first-line treatment of advanced HCC, completed enrollment globally and we anticipate top-line results of the event-driven PFS analysis and the concurrent interim analysis for overall survival in the second quarter of 2021. And if warranted by the data and results, we are expecting to file an NDA in the fourth quarter of 2021. For Cosmic 021, we look forward to the final analysis of objective response rates by the independent radiology committee of cohort six in metastatic CRPC in May 2021 and plan for regulatory submission of the results data. For Cosmic 313, comparing the triplet of Cabometyx, nivolumab, and ipilimumab versus nivolumab and ipilimumab in first-line RCC patients with intermediate or poor risk per IMDC, we completed patient enrollment in late March, and we are now looking forward to top-line results of the event-driven analysis for the study in 2022. For the ongoing contact to phase three program under our collaboration with Roche, we are actively enrolling patients globally across all three phase three trials in checkpoint inhibitors, pretreated non-small cell lung cancer and RCC patients, and in novel hormonal therapy-pretreated CRPC patients. In summary, the Cabometyx program continues to make significant progress, and we remain on track for data readouts in the next couple of months, as well as data providing potential supplemental NDA filings. Now turning to progress on our XL092 program and our new IND candidate, phase one programs for escalation trials. XL092 is our next generation MET, AXEL, and VEGFR2 inhibitor with a shorter pharmacokinetic half-life is advancing in phase one and we are in the midst of evaluating the combination with atezolizumab in a parallel phase 1B part of the study. Importantly, we have recently entered into a clinical collaboration agreement with Merck KGaA, under which we will evaluate XL092 in combination with avelumab in various urothelial cancer cohorts, including in the maintenance setting after prior first-line platinum-containing chemotherapy, as well as in the second-line setting in patients who have failed prior checkpoint inhibitor therapy. Further, we are discussing additional combination approaches with various checkpoint inhibitors and agents targeting novel mechanisms pre-clinically and clinically to continue to define opportunities for this important development program. We have a deep and solid foundation in tumor-directed kinase inhibitors, and extensive experience with combination therapy, and see many opportunities to build on and expand on the therapeutic settings as we plan for potential tumor indications and lines of therapy for XL092 combinations. Given this extensive experience, we view the XL092 development risk profile as potentially being greatly improved versus traditional early-stage programs. With that, we are driving the XL092 development plan forward, which includes a broad and comprehensive program across various tumor indications and lines of therapy. We intend to pursue the comprehensive evaluation of XL092 in combination with various established checkpoint inhibitors and potential new combinations, including promising new checkpoint inhibitors and tablets, as well as other combination partners with the goal to potentially start late-stage pivotal trials as early as 2021. We are focusing on advancing our phase 1B dose-ranging study 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. We are excited to report progress with our latest IND candidates in 2021, XL102, our CDK7 inhibitor; we have already started the phase one trial, and the cohort dose escalation phase is ongoing. We have also recently announced FDA's acceptance of the XB002 IND for our first biologic product candidate, an antibody-drug conjugate (ADC) targeting tissue factor. This has been rationally designed so that the binding site of the antibody does not interfere with the coagulation cascade. Based on this design and the available preclinical profile, we believe that XB002 may have the potential for a best-in-class ADC targeting tissue factor. We look forward to progress on the phase one studies for both compounds. The trials have been designed as efficient Joseph's collation trials with specific expansion cohorts to allow for early assessment of initial anti-tumor activity. Now, I look forward to updating you on progress in our clinical pipeline in the future. And with that, I'll hand the call back to Mike.

All right, thanks Gisela. As you heard on the call today, we're off to a great start in 2021. Just last week, we marked the fifth anniversary of the first regulatory approval and launch of Cabometyx in the U.S. That milestone is based on best-in-class data for Cabometyx in the phase 3 METEOR trial in second-line RCC. It signifies how far Exelixis has come along the path to becoming the company it is today. Over the last five years, we've expanded the opportunity for Cabometyx to treat patients with thyroid, renal, and liver cancer, and have helped tens of thousands of patients in the U.S. and a similar number globally with our partners, Ipsen and Takeda. We're so excited about the potential of our work, including the ongoing Cabometyx pivotal trials, the growing clinical development program for XL092, and our diverse and rapidly maturing early-stage pipeline. As we advance in our mission to help cancer patients live longer and recover stronger. I'll close today by thanking everyone in Exelixis for their efforts in the first quarter and their individual and collective commitment, dedication, and resilience under what were obviously extremely challenging conditions during COVID. As I mentioned in my intro, we're exiting a global pandemic stronger than when it started 14 months ago, and that's a true testament to the quality of the people we have working day in and day out as we discover, develop, and commercialize the next generation of our medicines for cancer patients in need of better and more effective therapies. We look forward to updating you on our progress in the future, and thank you for your continued support and interest in Exelixis. We're happy to now open the call for questions, and Daphne, please proceed. Thank you.

Your first question comes from Asthika Goonewardene with Truist Securities. Please go ahead.

Hi guys, and Daphne, thanks for getting my name almost right there. I got a couple of questions regarding the strong Cabo rebound that we saw. PJ, I was wondering if you could maybe share with us which of the first-line competitors you feel that Cabo nivo may be gaining more share than some of the others. And then I got a couple of questions for Gisela.

Yeah. Thanks for the question, Asthika, and yeah, we're extremely pleased with the beginnings of the launch. You know, what I guess I'll say is we're, as I mentioned in my prepared remarks, extremely pleased with the rapid broad uptake across not only competitive segments but clinical risk categories: favorable, intermediate, and poor. I won’t go into a lot more detail with respect to that in the numbers. But what I will say is, as we look at the quarter we were approved, as I mentioned to you in late January, so we basically had two full months on the market, February and March. If we look at our new patient market share in those two months, we're very pleased to see a market share in the mid-teens at that point and vectoring in a good direction exiting the quarter. So, we're very pleased with that.

I was considering this, and my video team has indicated that some of the tumor types included in your plan for XB002 are covered, but not all. Could you explain, based on tissue factor expression and the increased dosing you can achieve with XB002, where you believe you might have an advantage over the competition? Thanks.

Thank you for the question. I think as I mentioned, we see an opportunity for XB002 in its rational design, in that the antibody does not bind in a way that could interfere with the coagulation cascade, which should hopefully translate into a favorable safety profile. Number one. Number two, tissue factor is pretty broadly expressed, and we intend to evaluate the compound across a variety of tumor types, assisting of course expression profiles in the patient population and drive the program forward accordingly as we collect clinical data. So I think we have a broad opportunity and intend to pursue it aggressively.

Yeah. Ask maybe Peter could provide some color commentary here too.

Yeah. Just to add on to what Gisela said, in addition to the normal epitope for the antibody, which has the advantage that she outlined, it does contain any kind of next generation warhead linker construct, which we believe has some advantages over the first-generation construct. This is one that Zenworks has advanced and developed. And then from an expression point of view, it appears fairly broadly expressed, obviously we have clinical proof of concept, or there is clinical proof of concept with cervical cancer. We presented some data late last year in pancreatic, head and neck, and gastric cancer. There are several indications that we haven't explored preclinically yet, so the opportunity is broad.

Your next question comes from the line of Jason Gerberry with Bank of America.

Hey guys, thanks for taking my question. One, just a housekeeping. So when you do update Cosmic 312, I'm wondering if we're actually going to get hazard ratios like we did with the 9ER update? I believe there was an issue of materiality and a need to disclose that because it was so important to the business. Whereas I wonder with HCC, if that's the same situation. And then the second question, just on the second paragraph, a challenge to Cabo from Teva, it looks like they're certifying on some of the later expiring patents of how the formulation and method of use. These aren't patents that are being disputed in the NDA case. So just wondering, if the reason why is because you chose not to enforce those patents or the reason I ask is it seems like more IP is getting added to the NDA case, and so just wondering, because it seems like the Street's assuming that this product is going to go off a cliff in 2026. Thanks.

Yeah. Thanks for the questions. It's Mike. I'll try to address both of them. So on the first question about the Cosmic 312 data press release, when that finally hits top-line results, our practice is to normally put in some level of data, and I wouldn't want to speculate on what that would be today, but at some level of data to provide a framework for the relative activity because it's so material to us. I'd argue that 312 is probably as important as 9ER is relative to the size of that market and the opportunity there in terms of a relatively nascent opportunity compared to where we know it is currently. So we'll certainly, I think continue that practice, and the details will be defined when we get that data. And we understand what we've got. In terms of the second end up from Teva, I think you covered the facts pretty well. As we mentioned in our filings and our press release, they came in with that paragraph four letter, again, they're only challenging three Orange Book listed patents that expire in 2031 or later. So this is relatively new news to us. I wouldn't want to speculate on what they're thinking, what they're doing, or how we're thinking about it ourselves, or how we might proceed. It's something that we're certainly not surprised by and reform, as we've said before, we expect these types of challenges to come in when you've got great compounds with great data and growing revenues. We have strong data, strong IP, and a great team who are pursuing this very, very aggressively, and we have every intention to continue to defend our patent estate vigorously through all the legal challenge channels that we've got. We will provide updates as necessary.

Your next question comes from the line of Amy Leon for Akash. Thanks so much for taking our questions. So the first question on RCC, it seems like your current guide is baking in around 13 months of durability on treatment. Do you see any sort of upside to this number? Could PFS get better with longer follow-up, and how will Cosmic 313 impact this? And then I have another one in HCC.

Yeah. Hi Amy. This is PJ. Thanks for the question. You know, I won't comment specifically on how we are thinking about modeling duration, but I think if you look at the PFS in the study, certainly very strong in patients in these clinical studies of the combinations and certainly the 9ER study, patients are on therapy for a year and a half or potentially longer. It's important to remember that as the data in these studies matures and gets presented, sometimes the median duration, the mean or average duration continues to increase over time.

Great. Thanks so much for the color. And then on HCC, given that we're not seeing much of a differentiation on safety and efficacy with the early Cabo and nivo combo data from Checkmate 04, what's the internal expectation on how Cosmic 312 will stack up against INBRAVE or LEAP 002? And what would you consider as competitive data internally? Mike?

Thanks for the question. I think it's really challenging to do any kind of cross-trial comparisons between a global pivotal trial on two different molecules compared to what we had with a doublet and a triplet that were different from INBRAVE. Not only that, it was smaller, it was really non-randomized with control and had a mix of first and second-line patients. I wouldn’t draw the same conclusions you are around how similar that data might be for all kinds of reasons. So we're excited about the opportunity. Certainly, when you look at how we designed and enrolled 312 relative to INBRAVE, populations are very similar. The only difference is Cabo versus bevacizumab. You can look at the single-agent activity for those two agents across various tumor types and come to your own conclusions about how Cabo might fare out there relative to Bev. So, at the end of the day, you've got to run the trial, get the data, and look at the p-values and the hazard ratios, and we'll go off that to really judge our conclusions as we go forward.

Next question comes from the line of Peter Lawson with Barclays. Peter?

Thanks for taking our questions. I know you're still waiting to do the analysis there, but when can we potentially see the data and what are you looking for in that data set to sort of not only support approval but helps you provide a competitive offering in prostate cancer? And then I have a follow-up.

So regarding Cosmic 021, we are certainly very pleased with the progress made in the study. It's a large phase 1B trial that's been enrolling really well. We are excited about the data, and as we look at data, we're seeing various cohorts mature very nicely. We would expect to begin presenting results across various cohorts in late this year and next. With regards to moving forward then in CRPC, likewise here, we expect to obtain the independent radiology review for cohort six in the next few weeks, in the mid-year timeframe. And without diverging of course earlier on as well, there's a lot going on in the next couple of months with plans for NDA filing for Cosmic 311 and also HCC top-line readout in the second quarter as well. CRPC results for cohort six will be in the mix there too, so certainly a lot of important milestones coming up. We would expect to announce important data as we have them and obtain them, which goes for this cohort as well, and look forward to presenting data at scientific conferences and in peer-reviewed journals.

That's really helpful. And just on your XL092, can we see data from the phase 1B studies?

Yeah. So XL092 is making good progress. As I mentioned earlier, the phase one study in phase 1B evaluation is moving along. I think as I mentioned also a little bit earlier, we're building on a lot of experience and the successful development of cabozantinib and with that we feel that the program is importantly de-risked. As we expect from our Cabometyx experience, we're beginning to see preliminary promising antitumor activity in heavily pretreated phase one patients. We have already presented the pharmacokinetic data, and we're seeing the safety profile that is consistent with our expectations and knowledge of the pathway. So with that, I think we are very focused on driving the program forward and introducing further combinations as mentioned on the call. We expect to drive forward the development program towards the start of pivotal studies in 2021 and data providing.

Your next question comes from the line of Andy Hsieh with William Blair.

Great. Thanks for taking my questions and congratulations on that for a quarter to PJ. I think for all the commentaries on the initial trajectory of the Cabo launch, so I am interested in knowing, you know, taking a macro view. You mentioned that the TKI market grew 19%. I do remember you mentioned about kind of the shrinking market during the rest of the COVID-19 pandemic. Can you provide us with some commentary outlook you're seeing relative to kind of the diagnosis rate patient pool and where we are in the pandemic?

Yeah. Andy Hsieh, PJ here, thanks for the question. I'm certainly happy to provide a little more commentary there. As you mentioned, we did see in Q1 according to the IQVIA data that NRX for the market basket, as we define it, grew by 19%. Cabometyx grew by 31% quarter over quarter. I'm very pleased with that. As I mentioned, it was driven by the combination launch. I do think with regards to what we're seeing and hearing anecdotally from our customers is that things are improving in terms of COVID-19. While it is regional, it’s varied and things do change, we’re generally seeing improvement and I would expect that as we continue deeper into the year, things should return to a semblance of normalcy.

Okay. All right. That's helpful. Thank you. And also for the FCA outcome last week, any potential implications for the second-line HCC market dynamics? I think the panelists recommended pulling off the label but retaining KEYTRUDA's label in that study?

Yeah. Thanks for the question again, Andy, it's PJ. You know, certainly something we're tracking very closely with regards to all of those. You know, I won’t speculate on what the FDA will do there, but what I would say with regards to Opdivo or even generally monotherapy in HCC, which is primarily in that second-line setting, that’s been approved for about a year now and building that first-line combination market has become standard of care. We’ve seen that shift of IO utilization from second-line monotherapy going to the first-line while that hasn’t completed yet. That shift has been well underway and happening, which opens up more room for single-agent TKI utilization in the second line. So I think if anything, depending on how that plays out, it could potentially accelerate that a little bit, but the market is shifting as is, and obviously we’ll see how 312 reads out soon and there will be more potential for that market to change. We're seeing and expect to see more patients coming into that, to speak, first-line funnel with more and more therapeutic options that are going to be helpful for patients available.

Thanks, PJ. And maybe one kind of strict question for Mike or Peter. I was just wondering about the Exelixis foundation and kind of the new really gained biologics, think outside the box. So basically beyond the traditional framework of an antibody-link payload contract for ADC.

Thanks, Andy. That's a great question for Peter, so I'm going to pass it over to him.

Thanks. I think it's a great question, Andy. I think your view of it is essentially correct. If you look at the history of ADCs, we've had, what, 20 years of ADC discovery and development at this point? The vast majority of the payloads that people have used have fallen into, you know, broadly three or four classes of mechanisms of action, and it's predominantly been microtubule destabilizing agents of one kind or another, or DNA damaging type agents, topoisomerase type inhibitors. I think there's a lot of interest in trying to develop novel payloads. We're starting to see it a little bit. Obviously, there are a number of folks working on immune stimulatory payloads of various classes. If you point out with our kind of 20-plus year history in medicinal chemistry, it hasn’t escaped our notice that this might be an attractive area to explore further. There is a lot of opportunity. I think it would dovetail very well with the collaborations that we established late last year to access site-specific conjugation technologies and the ongoing efforts we have to assemble a library of antibodies and binders that would target attractive targets for ADCs. So stay tuned on that point, and we look forward to updating everyone broadly on what we're doing in ADCs going forward.

Your next question comes from the line of Yaron Werber with Cowen.

Hey, this is Kevin for Yaron. Thanks for taking my question. This is a follow-up to one of the previous questions about Cabo. You guys are obviously making great progress quarter over quarter in first-line renal cell. Could you share what fraction of all NRX is going to Cabo in Q1 compared to Q4? And, what little color maybe on what's the feedback you're getting from physicians or payers as to why they may be sticking with other options besides Cabo and Nivo in certain cases as opposed to embracing them? Thanks.

Yeah, thanks for the question. This is PJ. So I guess first I'll start with the numbers and the data. You know, what we had in Q4 was an NRX market share in the market basket of 32%. In Q1, the NRX market share for Cabometyx was 36%, and the volume growth for Cabometyx in Q1 over Q4 was 31%. The way I think about that is we're really pleased with the start there. Particularly since our approval came in late January, and we're seeing actually minimal pushback on the payer side. So it’s great sourcing and great adoption of policies broadly from a payer perspective. I think the physician perceptions, as I mentioned, are really good, and we’re really pleased with that level of education. I think we have continued opportunity to educate in the community, particularly as things open up more with regards to the pandemic. The more we get to get in front of physicians with our data, I think we'll continue to make progress. They’re certainly optimistic.

Thank you. Our next question comes from the line of Michael Schmidt with Guggenheim.

Hey guys, thanks for taking my questions. Congrats on the great first quarter. I actually had a couple of pipeline questions as well. First, perhaps on XL092 mechanistic question here. It's pretty obvious that the shorter half-life of this molecule relative to Cabometyx will probably make it easier to deal with and manage the toxicity profile. Could you just help us understand how that mechanistically could translate into a potential improved efficacy benefit relative to your experience with Cabometyx? And then I had a second question.

Yeah, why don’t we let Peter take a crack at that, and maybe he can provide some color commentary. Go ahead, Peter.

I think the goal is to, as you correctly stated, maintain the overall target profile of Cabozantinib, hitting all the same major targets with the same ratios so that we could build off the extensive experience that we have with Cabozantinib clinically, this is a single agent and in combination, but would use the offline. Make some appropriate chemical modifications aimed at doing this last and happily that has played out well in the clinic. The aim, as you stated, is to provide a way to manage the dosing and side management of side effects as fast as possible. The shorter half-life certainly helps you do that. Overall, anytime you can optimize your dose and dosage for individual patients, you maximize the chance of providing them with clinical benefit.

Great. Thank you. Any thoughts there?

I agree with everything Peter said, and perhaps just to add, of course it's about continued dosing and ensuring patients benefit from the established dosing for the duration as long as patients derive benefit. Another point to consider is the potential for combination stability, and here I think fast dose adjustment might come in handy given the shorter half-life as another consideration.

Great, thanks. And then just one on XL102. We’ve noticed a lot more interest now in cell cycle targets, for example, such as CDK2, CDK1, and others P53, etc. Just remind us where CDK7 sets in here and whether that's a target that is expected to be broadly active or whether the inhibition of CDK7 would be preferentially pursued in a certain genetic context or a biomarker-positive patient population. Thanks so much.

Yeah, yeah. Happy to take that one. You're absolutely right. This has been another uptick in interest in CDKs broadly, and I would say CDK7 specifically fits upstream of the classical cell cycle CDKs, which you’d see for example, CDK2 and is responsible for activating those Kinases. It also plays a major role in orchestrating the cell cycle. There is also an opportunity here regarding regulating the initiation of transcription due to its activity in phosphorolation of transcription factors. So it plays multiple roles, but primarily impacts the cell cycle. The profile of CDK7 inhibitors, including our own in vitro and in vivo, is broadly active as you might expect because it works on the cell cycle. Many of the indications being contemplated tend to focus on tumors that have genetic lesions that impact the activity of CDK genes such as RB deletion, for example, or amplifications in various cycling genes. Another obvious place for it would be in tumors that become resistant to CDK4/6 inhibitors, as CDK7 is upstream of those. So there’s a lot of potential pathways for a CDK7 inhibitor, and that's driving a lot of new interest.

Your next question comes from the line of Jay Olson with Oppenheimer.

Hey, congrats on all the progress. Thanks for taking the questions. If CONTACT 01 is successful, could you comment on the potential to move Cabo plus atezo or maybe XL092 plus atezo into first-line non-small cell lung cancer? And would that depend on PD-1 expression levels or some other biomarker-driven approach?

Sure. Thank you. CONTACT 01, as you know, is in the previously treated patient population who have received prior checkpoint inhibitors, and that Phase 3 study is ongoing with already presented data from the COSMIC 312 study, and we're seeing encouraging activity for the combination of Cabometyx in this setting and ICI pretreated patients. As we're thinking about earlier lines of therapy and perhaps also combinations, there could be relevance for XL092 as we go forward. We are certainly very interested in the combination of atezolizumab in this space. Additionally, Roche is conducting intriguing studies with novel combinations in non-small cell lung cancer, incorporating potential PD-1/PD-L1 biomarkers for utilization in therapy.

Thank you. That’s very helpful. If I could maybe sneak in another question: has XL109 shown any preclinical data that shows potential synergy between any of your early-stage ADC or small molecules?

Yeah, that's a great question. That kind of work is actually in progress right now, so I can’t comment on it yet, but stay tuned.

The next question comes from the line of Kennen MacKay with RBC Capital Markets.

Hey, thanks for squeezing me in and congrats on the quarter. Sort of a qualitative question on the frontline market here. I'm wondering where you're gaining more traction, whether it's academic or community settings, and then some of the feedback we've had is from some physicians that what they appreciate most about the combination is its potential to induce super-fast and deep CRs or responses. Wanted to hear if that was something that the team has been hearing as well or, you know, whether it's just such a broad market to I would say. Thanks. Thank you guys again.

Yeah. Hi Kennen, it's PJ. Thanks for the question. As I mentioned, the uptake has been really broad, and the feedback that we've received is that the data really is resonating across sort of a variety of clinical subsets, so to speak, or if you want to be as specific as defining it as the IMDC risk categories: favorable, intermediate, and poor. This early stage, we're seeing it broadly, and I wouldn't really say differentially based on the early data. That said, physicians are beginning to see the data from the 9ER study, and that's a place that's thought of to be used in those types of patients, which are certainly gratifying. We've also gotten NCCN category 1 recommendations across all those risk groups. That will continue to provide momentum for us, particularly in that favorable setting.

Your next question comes from the line of Paul Choi with Goldman Sachs.

Hi, good afternoon, everyone. Let me also offer my congratulations on the quarter. My first question is for Gisela with regards to the CONTACT 1 and 2 programs. I know you indicated that both those studies are enrolling, but could you indicate whether there’s some early initial data from early enrolled patients, which may be possible by later this year? Then I had a follow-up on the commercial or financial side for Chris.

Thanks. Yes, CONTACT 1 and 2, and for that matter, all of these Phase 3 studies are involving patients globally, and we're pleased with the progress in the studies for sure. The data is not expected to be available this year. These are relatively sizable, large Phase 3 studies, and of course the endpoints are time-to-event endpoints depending on the study. So that will take a little bit longer, not expected before 2022.

Okay, thank you for clarifying that. And then as a one for Chris, I think last quarter, you highlighted a seven and a half million inventory benefit. I was wondering if you could quantify for us for this quarter as well. And then, you know, just given a strong start to the year, you left guidance unchanged. So I was just curious what the thinking was behind not raising the low end of the revenue guidance. Thank you very much.

All right. Hey, Paul, thanks for the question. So on the inventory side, I mean, we didn't quantify it this time, but it's about 300 units in the $6 million range at our wholesale acquisition costs and about four and a half million from a net detriment perspective for this quarter. From a guidance perspective, we were very pleased with where we started the year and continue to be. It was about two months in the quarter from a performance perspective, and it's a very dynamic market with a lot of competition. We plan to continue to monitor it and revisit it in future quarters.

And your last question comes from the line of Stephen Willey with Stiefel.

Good afternoon, guys. Thanks for squeezing me in, and congratulations on the quarter. Just a couple of quick prostate questions. So I guess at the time of the COHORT 6 disclosure or presentation, will we see some of the additional cohort data that’s been embedded within this COSMIC 021 trial design, in terms of I think there’s a single-agent atezo and a single-agent Cabo cohort? Just wondering if you plan to present that in conjunction with a COHORT 6 disclosure.

It’s Mike. It’s probably a little bit too early to opine upon or speculate on how we’ll roll all that out. We understand the importance of the data relative to both keeping investors up-to-date on what’s happening but also in relative to a filing. We’ll get that done, and then we’ll roll out data at the appropriate time.

In any discussions with the FDA, do you think that the label will be restricted to patients who have measurable disease at the start, or is there a possibility of obtaining broader language that would permit the treatment of patients with bone-only disease as well? Thank you.

Yeah, I wouldn’t want to speculate on the outcome of those discussions that we have, and I wouldn’t want to talk about the discussions either. It’s probably safe to say that labels usually align with populations that we’re studying. So I think about it from that point of view. I think that’s probably the safest way to go. But we’ll again, when we get that far, we’re thinking about releasing that information we’ll be happy to share that with you at the appropriate time.

At this time, there are no further questions, and I will turn the call over to today's host, Susan Hubbard. Thank you.

Yeah, thank you, Daphne. And thanks everybody for joining us today. Certainly happy to take your follow-up calls with any additional questions you may have after we conclude. Thanks again.

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