Exelixis, Inc. Q4 FY2021 Earnings Call

Good day, ladies and gentlemen, and welcome to the Exelixis Fourth Quarter and Full Year 2021 Financial Results Conference Call. My name is Towanda, 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. You may begin.

Thank you, Towanda, and thank you all for joining us for the Exelixis fourth quarter 2021 and full year 2021 financial results conference call. Joining me on today's call are Mike Morrissey, our President and CEO; and Chris Senner, our Chief Financial Officer; P.J. Haley, our Executive Vice President of Commercial; Vicki Goodman, our Chief Medical Officer; and Peter Lamb, our Chief Scientific Officer, who will together review our progress for the fourth quarter 2021 ended December 31, 2021. During the call today, we will refer to financial measures not calculated according to Generally Accepted Accounting Principles. Please refer to today's press release, which is posted on our website for an explanation of our reasons for using such non-GAAP measures, as well as tables deriving these measures from our GAAP results. During the course of this presentation, we will be making forward-looking statements regarding future events and the future performance of the company. This includes statements about possible developments regarding 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 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 fourth quarter and full year 2021 across all components of our enterprise, as we continue to grow the cabozantinib business and advance a diversified and growing pipeline of clinical and discovery programs. We'll keep our prepared remarks short today, as we recently gave a detailed update to start 2022 at the JPMorgan Healthcare Conference in January. Key topics we'll focus on today include: first, the CABOMETYX business continues to grow and fuel the investment in advancing our portfolio of next-generation therapies for oncology. CABOMETYX maintained its status as the leading TKI for RCC and surpassed the $1 billion net product revenue threshold in the U.S. in 2021, with a 45% year-over-year growth compared to 2020. Second, we expect our development team, now led by Vicki Goodman, to grow in size, scope and stature in 2022 and beyond with the build-out of Exelixis East, complementing our extensive development, breadth and depth in Alameda. 2022 could be a year of significant portfolio growth with a focus on expanding potential indications for cabo with numerous expected top-line results and advancing our important pipeline molecules XL092, XB002 and XL102, including the initiation of the pivotal trial program for XL092. Third and finally, our drug discovery network of internal and collaborative efforts across both small molecule and biologic platforms continues to advance at a rapid pace, with a selection of up to five new development candidates expected in 2022. Business development activities remain a core component of this strategy. We expect to bring additional collaborations forward, including the potential for clinical assets where we have increased conviction from both a clinical and commercial perspective. With that, please see our press release issued an hour ago for our fourth quarter financial results and an extensive list of key corporate milestones achieved in the quarter. I'll now turn the call over to Chris, who will review our fourth quarter and full year 2021 financial results.

Thanks Mike. For the fourth quarter of 2021, the company reported total revenues of $451.1 million, which included cabozantinib franchise net product revenues of $302.7 million. CABOMETYX net product revenues were $295.1 million, which included approximately $8 million in clinical trial sales. Our trade inventory weeks on hand remained relatively flat when compared to the third quarter of 2021. Total revenues also included $148.5 million in collaboration revenues, primarily from Ipsen, Takeda, and Genentech. In the fourth quarter of 2021, Exelixis recorded a $100 million milestone payment due from Ipsen in connection with the achievement of $400 million in net sales in its related license territory over four consecutive quarters. Our total operating expenses for the fourth quarter of 2021 were $334.5 million compared to $276.8 million in the third quarter of 2021. R&D expense was the primary driver of the increase in total operating expenses, which was primarily related to higher licensing expenses. Provision for income taxes for the fourth quarter 2021 was $22.9 million compared to $15.1 million for the third quarter of 2021. The company reported GAAP net income of $95.2 million or $0.29 per share on a fully diluted basis for the fourth quarter of 2021. The company also reported non-GAAP net income of $113.3 million or $0.35 per share on a fully diluted basis. Non-GAAP net income excludes the impact of approximately $18.2 million of stock-based compensation expense net of the related income tax effect. Cash and investments for the quarter ended December 31, 2021, was approximately $1.9 billion. Turning to our full-year 2022 financial guidance, which was previewed at the JPMorgan Conference in January. We are now including total revenues guidance, which is expected to be in the range of $1.525 billion and $1.625 billion. The remaining full-year 2022 financial guidance items can be found on slide 12. With that, I'll turn the call over to P.J.

Thank you, Chris. 2021 was a transformative year for the cabozantinib franchise, primarily driven by the approval of CABOMETYX in combination with nivolumab in first-line RCC in January of 2021. CABOMETYX reached a significant milestone in 2021, surpassing $1 billion of U.S. net product revenue. The team continues to execute at a high level, and this has resulted in CABOMETYX becoming the number one prescribed TKI in RCC. Furthermore, CABOMETYX total prescriptions, or TRx, have now grown for five consecutive quarters. Additionally, the launch of CABOMETYX in differentiated thyroid cancer, or DTC, which received FDA approval in September, is off to a strong start. Taken together, the strength of the business and the momentum of 2021 position CABOMETYX well for growth in 2022. Prescription trends remained strong in Q4, both for NRx and TRx. Year-over-year growth in Q4 was 40% for NRx and 50% for TRx. As the launch progresses, the success of CABOMETYX in combination with nivolumab is changing the mix of patients on CABOMETYX in RCC. Given the clinical data from the CheckMate 9ER study, we anticipate these first-line combination patients will receive therapy for approximately 1.5 years or more, thus driving a significantly longer treatment duration for CABOMETYX. We are encouraged by the fact that our data shows a doubling of the amount of new patient starts at the 40-milligram dose in 2021 relative to 2020. This is further indication that the combination uptake in the first-line setting is robust. Turning to the TKI market basket of CABOMETYX, INLYTA, Sutent, Votrient, and LENVIMA, CABOMETYX TRx market share increased every quarter in 2021, with market share in the fourth quarter reaching 35%. This growth is driven by combination usage in the first-line RCC setting. As we have discussed previously, the first-line RCC market is highly competitive, and we are pleased with the performance of CABOMETYX in combination with nivolumab in this setting. Furthermore, we have not seen significant competitive impact on our market share. Uptake in the first line is broad across clinical risk groups and practice settings, and prescriber experience to date has been positive. We believe all of this taken together with the momentum in the business positions CABOMETYX for continued growth in 2022. Turning to other settings, we are pleased that the CABOMETYX second-line RCC business remained strong and stable in Q4. In HCC, our market share was stable in Q4 and CABOMETYX continues to be the most prescribed TKI in the second-line setting for patients treated with immunotherapy in the first line. With regards to second-line DTC, we are pleased with the launch. And in Q4, we saw a strong trend of new patient starts in this indication, which exceeded our expectations. There were previously no therapies approved for this patient population with significant unmet medical need, and we believe we are quickly becoming the standard of care in this setting. We are proud that this fifth indication for CABOMETYX adds to the body of data in the label and enables Exelixis to help more patients with severe cancer. Looking beyond the five current U.S. indications for cabozantinib, we're planning for numerous life-cycle expansion opportunities as they begin to have top-line data readouts in 2022. We look forward to having the opportunity, pending data and approval to bring CABOMETYX to more patients in need of therapies. 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 potential. And with that, I'll turn the call over to Vicki.

Thanks, P.J. Good afternoon. It's great to be here today, now 1.5 months after I joined Exelixis as Chief Medical Officer. I'd like to take a moment to introduce myself. I am a medical oncologist and hematologist with nearly 18 years of experience in oncology drug development, both in government at the Food and Drug Administration and subsequently in industry. Prior to joining Exelixis in early January, I spent 15 years in roles with increasing responsibility at three global pharma companies, most recently at Merck, where I was Therapeutic Area Head for late-stage oncology. During my industry career, I have developed both small-molecule drugs, including kinase inhibitors, and biologics, including immuno-oncology agents and antibody drug conjugates across all phases of drug development, from IND filings in Phase 1s to designing and implementing registrational studies leading to successful first approvals as well as additional major indications. Today, I will cover our progress towards our organizational expansion to the East Coast, Exelixis East, as well as progress on our pipeline and upcoming milestones for 2022. As we announced in early January, we intend to develop a presence on the East Coast, specifically in the Philadelphia area, as we seek to access talent on both coasts to support our expanding development organization. I'm happy to report that we have now identified short-term move and ready office space in King of Prussia, Pennsylvania, in the western suburbs of Philadelphia and a convenient and accessible location for much of the Greater Philadelphia and Central New Jersey biopharma talent base. We have also added the King of Prussia location as an option for the majority of open roles within the development and medical affairs organization and intend to initiate recruitment efforts immediately. Turning now to an update on our pipeline, beginning with our cabozantinib registrational trials. We are on track for three Phase 3 readouts this year. COSMIC-313, evaluating cabozantinib in combination with nivolumab and ipilimumab in intermediate and poor-risk renal cell carcinoma is expected in the first half of the year. An interim primary endpoint readout for CONTACT-01 and readout of the progression-free survival primary endpoint for CONTACT-03 in combination with atezolizumab in PD-1 experienced non-small cell lung cancer and renal cell carcinoma, respectively, are expected in the second half of 2022. Additionally, the final readout for overall survival in COSMIC-312 in hepatocellular carcinoma will occur later this quarter, and we anticipate regulatory filings shortly thereafter, if appropriate. CONTACT-02, our Phase 3 study, in combination with atezolizumab in metastatic castrate-resistant prostate cancer is expected to complete enrollment this year. We continue to make progress on our pipeline molecules. XL092, our next-generation MET, AXL, MER and VEGFR tyrosine kinase inhibitor is being explored in combination with several checkpoint inhibitors and IO combinations and is progressing towards registrational studies. We recently initiated dosing on a nivolumab-based immuno-oncology combination study in genitourinary malignancies and continue to explore additional potential combination opportunities with novel agents. Our first planned Phase 3 in third-line microsatellite stable colorectal cancer will be initiated in the second quarter of this year. Data supporting this study comes from two studies of cabozantinib in colorectal cancer, which were presented at ASCO GI in January, and demonstrated promising activity in comparison to historical controls of regorafenib, the current standard of care. XB002, our first antibody drug conjugate, which targets tissue factor, without interfering with the coagulation pathway in preclinical models, is in dose escalation. Thus far, it has been well-tolerated with no bleeding events observed. A Phase I study of XL102, our oral CDK7 inhibitor, is expected to move into both single-agent and combination expansion cohorts after completion of ongoing dose escalation and determination of the Phase II dose. Finally, XL114 has an approved IND and is currently in study initiation with the first site activation expected this quarter. We expect to present Phase I clinical updates for XL092, XB002, and XL102 at medical conferences in the second half of this year. I'm excited to be working with the very talented Exelixis team as we continue to progress our pipeline. Our current early clinical pipeline, as well as ongoing small molecule and biotherapeutic discovery efforts targeting novel mechanisms, position us well to continue to address areas of unmet need to improve the lives of patients with cancer. With that, I'll turn it over to Peter for a discovery update.

Thank you, Vicki. I am pleased to provide a quick overview of the Exelixis preclinical pipeline. We have multiple programs ongoing, both internally and with our collaborators, with over 10 programs in process with the aim of advancing up to five compounds into preclinical development in 2022. As you'll see in the pipeline slide, the preclinical pipeline is a balanced mix of small molecules and biotherapeutics, which reflects how we see the clinical pipeline evolving in the future. As Vicki just commented, XB002 is advancing through Phase I, and we're encouraged by both the preclinical and clinical profile we've seen to date. Tissue factor is broadly overexpressed in a wide variety of solid tumors and preclinically, we observed compelling efficacy in multiple PDX models. The PK data we've obtained so far from the Phase I trial also show high levels of intact ADC with low levels of free payload, indicating that it is a stable molecule. Hence, we believe that the underlying antibody is an excellent starting point for ADC development. The recent deal that we did with Iconic allows us to develop additional ADCs based on the same antibody, and we've started work to link it to additional payloads, particularly DNA damaging payloads such as T count. Ultimately, this will allow us to match different tissue factor targeting ADCs to different tumor types depending upon the sensitivity of each tumor type to different MOAs of the payload. A quick comment about XB010. This is our most recent development compound and is our first internally generated ADC that has been funded through our network of collaborators. XB010 targets the oncofetal antigen which is overexpressed in multiple solid tumors, including non-small cell lung, breast, head and neck, and gastric carcinomas and utilizes Catalent Smart Pag site-specific conjugation technology and proprietary linker coupled to MMAE. This gives a homogeneous ADC with a controlled drug-antibody ratio and a highly stable linker, which reduces free circulating payload. Our approach with XB010 is consistent with the philosophy behind XB002, which is to advance next-generation ADCs, incorporating contemporary ADC technologies directed against well-documented targets. XB010 has now moved into preclinical development and could yield an IND in 2023. We're anticipating publishing preclinical data later this year at a major meeting or in a suitable journal. And with that, I'll turn the call back over to Mike.

All right. Thanks, Peter. As you heard on the call today, our team continued to execute across all facets of our business in the fourth quarter of 2021, with significant progress across our pipeline, clinical development and commercial activities. As we enter 2022, we're excited about the potential for the multiple growth drivers ahead of us, to move the business forward and most importantly, put Exelixis in a position to help many more cancer patients. With our employees now back in the office working together side by side, I want to thank the Exelixis team for their individual and collective efforts in navigating the many significant challenges during the pandemic, including the recent Omicron surge. As I highlighted during my recent JPM presentation, we have the vision, drive, and growing resources to become a multi-product enterprise and to begin to expand our operations to serve cancer patients on a global scale, with our planned Exelixis East Coast presence as the first step in that journey. We look forward to updating you on our progress in the future. Thank you for your continued support and interest in Exelixis. We're happy to now open the call for questions.

Thank you. Our first question comes from Jason Gerberry with Bank of America. Your line is open.

Hi. Good evening, everyone. This is Chi on for Jason. Thanks for taking our questions. Maybe just the first question is on COSMIC-313, on the data expected first half. How should investors think about the level of detail from the top-line results? Do you think 9ER top-line result is a pretty good indicator for the level of initial disclosure Exel will provide in 313? And then I have a couple of follow-ups after that. Thanks.

Hey, Vicki, do you want to take that one?

Sure. Happy to. So I would anticipate that in terms of the top-line results in a press release, it will be consistent with our prior practice, and then we will hold the full top-line report for our medical meeting later this year.

Got it. And on XB002 initial data in the second half of this year, the company has highlighted safety and bleeding as a potential differentiating feature for this drug. So I'm curious, do you believe the data in the second half, the initial disclosure will offer sufficient exposure or duration of treatment to fully characterize that aspect of 002 profile?

Yes. So we’re excited about the opportunity with XB002, in particular, because from a preclinical perspective, we've seen that it doesn't interfere with the binding of tissue factor to the coagulation pathway. And so, we don't believe it will interfere with the extrinsic coagulation pathway. We remain in dose escalation at this point. As I mentioned in my remarks, we have not yet seen any bleeding events, and we will plan, of course, to disclose the safety profile that we've seen when we presented at a medical meeting later this year.

Got it. And just last one from me, I'm curious on the patent litigation front. Maybe, what's the status on the Teva case, given the recent litigation stay? Is this a situation where parties are looking to consolidate the new patents and logo? What's going on with the MSN case? Any color you can provide there to the extent you can, that would be helpful.

Yes, hey it's Mike. Thanks for the question. I think Jason, and I'm sure you are involved here have been tracking the core docket pretty closely. You've written on that, others have. So, that's been fun to read. You guys have covered, I think, the facts per the docket pretty well. I really want to avoid opining on what's happening beyond what's in the docket, the facts that are there for all to see, and we'll continue to speak when appropriate as more information emerges from the court.

Thanks so much.

Thank you, Chi.

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

Hey guys. Thanks for taking my questions. I just had one for P.J. and one for Peter. The first one is nice to see the CABOMETYX market share among TKIs grow. Can you break out at this point what your share is in the first-line and in second-line RCC, respectively?

Yes, this is P.J., Michael. Thanks for the question. So, with regard to that, what I'll do is just kind of reiterate what we said previously. In terms of the second-line share starting there, we have the majority of share certainly in the post-IO setting. I think we said previously, that's around two-thirds or so of the patients who received IO therapy in the first line previously. And then for our first-line market share, we haven't disclosed specific numbers recently, and there's certainly some out there that you could look at. What I would say is we've had significant momentum. And as I kind of mentioned in the prepared remarks, that's really what's been driving our growth as the rest of the business has been stable. So, as you look at our TKI market share increasing over the year of 2021 from 30% to 35%, that's essentially almost all being driven by first-line uptake. So, we're very pleased with that as the messaging and the data are resonating extremely well with oncologists, the balance of data in terms of our overall survival, our toxicity profile, as well as the quality of life data resonating well with physicians. And we're actually really excited. This weekend here in San Francisco, we've got the ASCO GU meeting and it's going to be live. So, really looking forward to our presence there, which will be significant and meeting with many of the KOLs in person, which will really be fantastic as we obviously haven't had as much opportunity to do that in the pandemic. So, we're very pleased with our position. As I mentioned, I think we have really great momentum heading into 2022.

Yes, thank you. I have a question for Peter regarding some early-stage activities, particularly the Storm Therapeutics collaboration. Could you share what aspects of that company's technology are exciting and provide any additional insights on the first target? I'm curious to hear more about it. Thank you.

Yes, absolutely. I'd be happy to speak to that. Generally speaking, the Storm collaboration fits in with our overall approach and philosophy regarding small molecule discovery. Obviously, we have a very significant and growing internal small molecule discovery effort. But we're happy to kind of complement that with outside partnerships and collaborations as makes sense in terms of providing complementary expertise or insight, and still very much fits into our strategy. The leading target, which took us to Storm is adenosine deaminase or ADAR1. I'd say, if you look at a lot of the publicly available CRISPR-based or SH based target discovery that's been done in oncology over the last couple of years, ADAR1 is a target that's come out as a very strong hit in a number of those screens. So to be clear I would call it a very hot target in oncology right now. That's probably up to about 30% of tumors or so that are probably dependent upon ongoing ADAR1 activity to help restrain what essentially becomes an interferon-mediated cell death. So that's some of the basic priority behind it. So it's been on our radar screen for a while, as an interesting target. We're not experts in methyltransferases per se. Storm's whole platform is a methyltransferase and kind of RNA epigenetics platform. And they've done a fair amount of work both on that platform generally, but also on ADAR1 specifically in terms of putting together the assays necessary to prosecute an effective lead optimization scheme, which as an aside, I will just say is nontrivial to put together. They've also made good progress on kind of enabling a structural biology approach to the target. So our view was it would very much jump-start a program in the area to work with them rather than us trying to rebuild all that internally. So it's early days for the collaboration. We're certainly excited to be in it and have it off and running. So I hope we'll be able to update on progress at some point in the future.

Super interesting. Thank you. Appreciate it.

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

Great. Thanks for taking my question. So I have three, two really quick ones. So one is maybe for Chris, just from a modeling standpoint, how should we think about DTC contribution in the grand scheme of things? Second one, maybe P.J., I think sometimes you kind of talked about with these waves of times you see contraction, normalization of the RCC market. I'm just wondering what the current status you’ve seen during the quarter? And also maybe your, maybe a little bit in Q1. And lastly maybe for Vicki. In terms of just thinking about XL092, and I think Mike has said this previously about potentially positioning that in HCC. And given the learnings from COSMIC-312, I'm just wondering if there is a way to set a minimum for hepatitis B-driven HCC and also and/or a maximum for hepatitis C-driven patients in the potentially future trial just to really maximize the probability of success? Thank you.

Great. Andy, thanks for the question. This is P.J. I'll take the first two. Starting with DTC, we are pleased with the launch. In Q4, we saw more patients starting therapy than we anticipated, which is gratifying. There is significant unmet need, and we believe we are off to a fast start towards becoming a standard of care in that setting. The progression-free survival in the 311 trial is around 11 months, indicating a nice duration of therapy. We estimate that the peak opportunity for DTC is about $100 million. Regarding your second question about the market outlook, one way to assess it is by analyzing the prescription data from IQVIA over time. Although the pandemic caused some fluctuations, we stabilized in the second half of last year. We observed market expansion in terms of TKIs during the last few quarters of last year. I expect that as IO/TKIs become more established as a frontline therapy, and with the growth of combinations overall, we could see up to 80% of patients receiving combination therapy. As these combinations become more common, I anticipate longer durations of therapy, which will drive growth in the TKI market. This aligns with the ongoing growth in therapy duration for 9ER, which should continue to benefit CABOMETYX in 2022 and potentially beyond. Now I'll turn it over to Vicki for the third question.

Yeah. Thank you. So we're excited about the opportunity for XL092 in many different tumor types, including HCC and other tumors where cabozantinib has demonstrated activity. To the point that you made, we have seen that different etiologies of liver disease and HCC may respond differently to different therapies, including checkpoint inhibitors and VEGF directed therapies. And we'll be taking all of those learnings into account as we build the development program for XL092 in hepatocellular carcinoma.

Got it. That’s very helpful. Thank you so much.

Yeah. Thanks Andy.

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

Congrats on the results, and thank you for taking the questions. Can you talk about how much runway you see for CABO plus NIVO growth in the first-line RCC setting? And any feedback you're getting from clinicians on how CABO plus NIVO compares to LENVATINIB plus Pembro in a real-world setting? And then maybe just a follow-up on 092, with the initiation of a pivotal study in CRC, are you planning to initiate additional pivotal studies this year for 092? And how would you prioritize the various opportunities for 092 in your clinical development plans? Thank you.

Thank you for the question. This is P.J. I'll address the first part. While I won't specify growth numbers, our guidance indicates that we expect strong demand growth and prescription increases for CABOMETYX in 2022. The main driver of this growth will be the use of CABOMETYX in combination with nivolumab as a first-line treatment. Since it's only been a year on the market, we anticipate continued growth in therapy duration. We also believe there are opportunities to bring more new patients onto the therapy. The positive feedback from prescribers, gathered through market research and advisory boards, reflects a favorable view of the balance between efficacy and safety. This is likely to further enhance our utilization going forward. Now, I'll pass it to Vicki for the second question.

Thanks, P.J. So we're looking to build a robust pivotal trial program for XL092. We're looking at various combination regimens, including novel mechanisms of action beyond the first few that we're evaluating currently in STELLAR-001 and 002. COSMIC-021, a signal-finding study of cabozantinib, will help inform our plans for 092. As I mentioned earlier, they have a very similar kinase profile. So we believe that there's an opportunity to develop 092 in places where we've seen activity with cabozantinib, including from various cohorts of COSMIC-021. And so those cohorts, as they read out, will help inform our plans for moving into pivotal trials with 092 beyond the CRC trial that we've already announced.

Okay, great. Thank you very much.

Thanks Jay.

Thank you. Our next question comes from the line of Mike King with H.C. Wainwright. Your line is open.

Hey guys. Thanks for taking the question. I just wanted maybe to follow up on Jay's question about use in first-line RCC. Do you have more color on the proportion of CABO use that is in conjunction with a checkpoint? And I'm just curious if those are what I'd say, add-on therapy or the regimen starting with as a triple?

Yes, Mike, this is P.J. So I guess what I would say is that in the first-line setting, previously, we've had the CABOSUN sort of data in our label, which was monotherapy. When we got approved for combination usage a little over a year ago with CABOMETYX in combination with nivolumab in the first line, we really have seen the majority of utilization of CABOMETYX in the first line shift to that doublet given the strength of the data and oncologists have been highly receptive of that. So really, that's what we're seeing primarily in the first-line setting with regards to CABOMETYX utilization of the doublet. I think as we think forward to 313, should that be a positive study in terms of CABO/NIVO and IPI, I think that just might potentially expand the market opportunity for CABOMETYX in that first-line setting. There's certainly a lot of patients that do receive the combination of NIVO/IPI now in the first line. So I think if there's an opportunity to add CABOMETYX with an appropriate risk-benefit profile to those patients, we can get more and more patients should that study be positive. So hopefully that helps frame that for you.

Great. I appreciate that. And maybe one for Vicki. On CONTACT-01, I'm just wondering how we ought to think about the combo of CABO and atezo. Hasn't been a development of anti-VEGF in non-small cell in a while. Just thinking about how that might provide some upside that really hasn't been widely discussed here.

Yes. Thank you for the question. So, right, CONTACT-01 is a combination of cabozantinib with atezolizumab versus docetaxel, which remains a standard of care in non-small cell lung cancer after treatment with a checkpoint inhibitor, plus or minus chemotherapy. It's really an underserved area with a lot of unmet need. The primary endpoint here is overall survival, and we're expecting a readout of an interim analysis on overall survival sometime later this year. Again, docetaxel is an old therapy with not particularly good outcomes. And so we really believe this is an area of high unmet need and an opportunity to demonstrate further benefit for these patients. So we're looking forward to that readout later this year.

Thanks so much. Appreciate it.

You bet, Mike. Thank you.

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

Thanks very much. This is Gabe asking on behalf of Yaron. I have questions about the pipeline. First, what data can we expect for the CDK7 program XL102 in the second half of the year? Will there be data from multiple dose cohorts? Do you anticipate seeing monotherapy activity with objective responses? Additionally, regarding XL092 in colorectal cancer, Vicki touched on it briefly, but could you provide more detail, especially any early data that gives you confidence to proceed with the third-line pivotal study compared to regorafenib? Thank you.

Sure, thank you for the question. I'll begin with XL102. Currently, we are in the dose escalation phase for XL102, and we expect to present the dose escalation cohorts at a medical conference later this year. This data will still be in the early stages, and we anticipate providing further clinical updates on that molecule in 2023. As for the Phase 3 study planned for XL092 in colorectal cancer, this is aimed at patients with third-line microsatellite stable metastatic colorectal cancer who have not responded to previous therapies. We will confirm their RAS mutation status and randomly assign them to receive either XL092 with atezolizumab or regorafenib. The data supporting this study are derived from two presentations at ASCO GI. One was a cohort from the COSMIC-021 study, and the other was an investigator-sponsored trial called the Camila study. In the COSMIC-021 colorectal cancer cohort, the overall response rate was 10%, but we observed a 25% response rate in RAS wild type patients when combined with atezolizumab, consisting of those without known MSI high or DMMR, which is similar to the population we aim to study in our upcoming trial. For the Camila study, the overall response rate in the entire population was 28%, yet RAS wild type patients showed a better response at 50%, using a durvalumab combination in microsatellite stable patients. Based on these findings, we believe the RAS wild type patient population is where we are most likely to see benefits, and our primary overall survival endpoint will focus on this group while also evaluating the overall population. For reference, the typical response rate for regorafenib is about 2%.

Great. Thank you.

Thank you. Our next question comes from Akash Tewari with Jefferies. Your line is open.

This is Amy on for Akash. Thanks so much for taking our questions. Just wanted to contextualize your 2022 cabo revenue guidance of $1.375 billion at midpoint. With your prior expectations of cabo achieving a $1.5 billion run rate by the end of this year. Are you still comfortable with this run rate? Additionally, have you seen any seasonality in route cabo demand in channel inventory? And is there any color you can provide on real-world median duration of treatment for cabo in RCC? Thanks so much.

Thank you for the question, Amy. Regarding inventory, I mentioned earlier that it has remained relatively stable from Q3 to Q4 and has been flat throughout the year. However, in terms of weeks on hand, it has been increasing in line with demand as the year progressed. The first question pertains to seasonality, which is indeed a factor in inventory. As for the $1.5 billion run rate, yes, if you consider our guidance, we are on track to reach that run rate as we conclude the year.

Great. This is P.J. responding to the question about the duration of therapy with CABOMETYX in the first-line setting. We have been in the market for a year, and in the trial, we observed progression-free survival of about a year and a half or more. It's still early to assess the significant duration we anticipate from 9ER, but we believe it will drive substantial growth for us. We are certainly satisfied with our observations so far.

Great. Thank you so much.

Thank you, Amy.

Thank you. Our next question comes from the line of Do Kim with Piper Sandler. Your line is open.

Hi. Thanks for taking my questions. First, on CONTACT-01. I was hoping you could frame for us the expected median survival for the control arm and maybe provide what your expectation or the hazard ratio that the study is powered to show?

Yes. So there really aren't great data in this setting of second-line. So as standard of care has changed, there isn't great data. Docetaxel is used because it was the second-line therapy following platinum therapy in the past and has continued to be a second-line therapy in patients who received generally speaking, an I/O and platinum combination. So I can speak to the fact that for patients who had lung cancer in the past, metastatic lung cancer, the median survivals were less than a year in the first-line and obviously, substantially shorter than that in the second-line. And we're shooting really for a substantial clinical effect here with respect to the atezo CABO combination. And so again, we'll see the first data from an interim analysis of overall survival later this year.

Okay. Thanks. And I have another question on seasonality for CABO sales. As we look to 2022, should we start seeing your typical first-quarter seasonality due to reimbursement factors? Looking back at the sales for CABO, you seem to go through any potential impact. Is this something we should start considering now, or do you manage the gross to net to offset those factors?

Hey Do, it's Mike. It's probably not a good idea for us to provide Q1 guidance while we're still in Q1, so please wait for the numbers when we have the Q1 call in May. We feel very positive about how the brand is performing. The timing with ASCO GU during this call is somewhat fortunate, and we have considerable support from both the academic and community arenas. Based on the data and our strong team, we believe we will continue to educate physicians on the benefits of this combination, but for Q1, please stay tuned.

Understood. And last question for XL114, how are you thinking about the opportunity for MALT-1 inhibitor? Is it primarily overcoming T-cell lymphomas that have BTK inhibitor resistance, or are you expecting to see the drug perform better than a BTK inhibitor in aggressive NHL?

Yes. It's Peter, let me take that one. I think you correctly identified BTK resistance is a significant setting for 114. The mechanism of action is clearly downstream of BTK in terms of inhibiting activation of the CAR BCL MALT-1 CONTACT, an area of interest. There are also subsets of lymphoma, B-cell lymphoma specifically, where BTK inhibitors are not active, where there are other mutations in the pathway, including in MALT1 itself, where we believe 114 could have activity where BTK inhibitors wouldn't. So those are two kind of early-stage or initial-stage opportunities that could be examined.

Great. Thank you. Thanks for taking my question, and congrats on the quarter.

Thank you Do.

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

Great. Thank you. Thanks for taking the questions. On XL102, CTK7 inhibitor, what should we think about as success? And what should we be looking for in that data in the later this year?

Yeah, Peter, it's Mike. It's probably premature to give you that level of guidance. It's early in the year, and we'll have a pretty fulsome update when we do present that later in the year. Peter, if you would like and can go through the basic biology there and give you a sense on how we think 102 is different. But again, it's probably early to start opining upon what we might see in our presentation months and months from now.

Sure, yes. So, I think if you look at the sort of history of CDK in limited development, we're at a pretty interesting stage right now, one way and another, people have been trying to advance CDK inhibitors for probably 20 years. If you look at the CDK family, they really fall, broadly speaking, into two buckets. There are those CDKs that are primarily involved in cell cycle regulation. CDKs 1 and 2, CDK4/6, where obviously we have clinical proof-of-concept for that mechanism. And then CDK7 also clearly falls into that group. It's upstream of both CDK4/6 and 1, 2, and very clearly has a role in controlling entry into various phases of the cell cycle. So there are a lot of interesting opportunities for the CDK7 inhibitor. CDK4/6 inhibitor resistance being just one of those other tumor types, such as triple-negative breast or ovarian and other possible opportunities. Then I would just add in addition to its CDK regulatory role, CDK7 also directly enhances transcription from both AR and ER, so then at least opportunities in combination in RNA or dependent tumors as well. In terms of the profile of a CDK7 inhibitor, we obviously have our view of what's an ideal profile and XL102 fits that. We think some of the important characteristics of first need to be highly selective and XL102 is. Second, I think this is a mechanism of action where you're really going to want to have maximal dosing flexibility to give you the best chance of optimizing the therapeutic index. XL102 is a covalent inhibitor, but at least in preclinical models, cleared out of the plasma out of the circulation very rapidly. So you don't have a lot of it hanging around in the circulation, but you do have a prolonged pharmacodynamic duration of action based on the covalent mechanism. Maybe I'll just finish by segueing into a related program. The second bucket of CDKs is not that much involved in it felt like a regulation, but they are involved in regulating transcription and various subsets of genes, and that would include CDK9, but also CDK12 and 13. CDK12, 13 is we have a program ongoing pre-clinically with Origin, nothing in the clinic yet for a CDK12 inhibitor. I think it's very interesting based on a lot of biology, but one part of which is that CDK12 is very much involved in regulating the transcription of DNA damage response genes, things like RAD51, BRCA analytical tool. So there's also potential directions in which to take a CDK12 inhibitor. And hopefully, if things go well, we'll be advancing one into preclinical development in the CDK12 inhibitor.

Got you. Thank you. And the CDK7 inhibitor, do you think it could have single-agent activity or really requires a combination?

Well, I can tell you, it's certainly preclinically, what we've seen is that we've seen robust single-agent activity in a number of different models. As Vicki commented with XL102, we're fairly early in the dose escalation at this point in time. So certainly, there's a rationale both as a single agent and in combination, but time will tell with respect to the development of clinical data.

Got you. Thank you. Just a final question around first-line HCC. The filing for 312, is that dependent upon OS being significant? And is HCC an area where 092 could move?

Yes. So for 312, we'll be seeing the final OS analysis later this quarter. And we'll be evaluating the totality of the data and in consideration of the evolving treatment landscape before deciding whether or not it's appropriate to file. And yes, to answer your other question, we do see potential for 092 in hepatocellular carcinoma as we do in other tumor types where cabozantinib has demonstrated activity and we'll be thinking about development plans for 092 in that tumor as well.

Perfect. Thanks so much.

Thank you, Peter.

Thank you. Our next question comes from the line of Kennen MacKay with RBC Capital Markets. Your line is open.

Thanks for taking the question. For Mike or maybe Vicki, how quickly do you think the COSMIC-313 data can be turned around into an sNDA, if it's successful? If that is in the first half, is that something that could happen later this year? And then maybe for P.J., with three Category 1 NCCN recommendations for frontline treatment of favorable risk ICC and four for poor and intermediate risk, what have been the drivers of physician preference for 1 regimen over another? And echoing on that, is there anything in the longitudinal CheckMate 9ER data at ASCO GU this weekend that you think could impact physician choice here? Thanks.

Vicki, do you want to take that one?

303? Yes, sure. Happy to. Right. So we are expecting to see the COSMIC-313 progression-free survival primary endpoint readout in the first half of this year. We're obviously working with a partner on this study, Bristol-Myers Squibb, and we would be very motivated to work very closely with them and get that filing, as soon as possible, data-dependent.

Great. And it's P.J. Kennen, with regards to your question about physician preference. Certainly, it's a competitive market, and we’ve seen the data with regards to NIVO at BLA. As far as predicting it, given, as you point out, the nature of the market, I wouldn't endeavor to do that. As I think about that though in terms of a potential positive 313 study, I think that just really gives us a lot of opportunity to add TKI, which is a mainstay of RCC treatment for 15 years now to a potential IO doublet, which obviously has a solid place in the treatment regimen. So, I think, yes, I think from a more dynamic perspective, that's things going forward.

Thanks, Kennen.

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

Thanks for taking the question. Most of my questions have been asked. So maybe one on partnerships since you mentioned that you expect to bring additional clinical partnerships forward. Can you talk about your strategy going forward in terms of collaborations for additional technologies? Is it more to be more opportunistic with new platforms and technologies, or are there certain capabilities and technologies that you want to remain more focused on? Thanks.

Peter?

Yes, as I mentioned earlier, we are actively exploring opportunities in the discovery preclinical space, looking broadly at both biotherapeutics and small molecules. We're assessing platforms that could complement our current capabilities and expand our ability to address various targets or target classes. We are open to pursuing these opportunities as they align with our needs and those of our partners. Additionally, we continue to evaluate individual assets, particularly those that are late preclinical or early clinical. However, it is important that we have strong conviction in the assets we pursue, ensuring they can support a successful clinical development campaign. In essence, we are following the principle of finding the right molecule at the right time and the right price.

Thank you.

Thank you, Jeff.

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

Great. Thank you for the questions. You described the first-line RCC marketplace as being a very competitive dynamic. Two questions; and it certainly has been where the regimens that have taken primacy have shifted. The use of the IO doublet NIVO in combination with IPI. What would you say is the outlook for what the share of use could be in the first-line setting over the coming years? I think you previously said it's about 20%, 25%. Is that likely to be stable? Is that likely to be any greater or less?

Yes, Chris, it's P.J. It certainly is a competitive market, and that's what we've seen in the data with regards to NIVO at BLA. As far as predicting it, given, as you point out, the competitive nature of the market, I wouldn't endeavor to do that. As I think about that though in terms of a potential positive 313 study, I think that just really gives us a lot of opportunity. To add TKI, which is a mainstay of RCC treatment for 15 years now, to a potential IO doublet, which obviously has a solid place in the treatment regimen. So, I think, yes, I think from more a dynamic perspective, that's things going forward.

Got it. And then a question for Vicki perhaps. Vicki, I know you come from a lot of experience working at some of the leading players in oncology, Merck, Bristol as well as the FDA. We've been observing more broadly across the industry some interesting decisions by the FDA, perhaps over the last couple of weeks, where we're seeing this question of timelines for acceleration of approval be factored in with this question of unmet need. And I'm asking this question in the context of how you're thinking about the development strategy for 092 as it follows in. Is that factoring into your thinking at all as you decide how to prioritize the next steps for 092? I know that you've talked about advancing into CRC, but there are other realms as well.

Yes. So, as we're thinking about development plans, we're obviously looking at multiple factors. I think clinical unmet need is a big focus area, where we believe we have the opportunity to transform the care of patients with cancer. And of course, at the same time, as we're thinking about this, we are watching the regulatory landscape and thinking about how that may impact our development plans. So, we're closely watching the FDA trends, of course, taking that into account as we're developing our plans, realizing, of course, that we intend to develop our therapies globally, right? So, we have to look at the regulatory climate around the world. But really, we're focused on areas where we believe that our experimental medicines may demonstrate benefit for patients with cancer.

Got it. And then lastly, just one housekeeping in terms of the CABO revenue line. Just thinking back to over the past summer, where the clinical trial fails, and you also did a breakout within the $295 million that $8 million were for clinical trial sales. Can you give us a sense for what your visibility into clinical trial sales in 2022? Is there anything in particular about quarters that can hit or miss or make things maybe unique one-off events? Thanks.

Yes, Chris, it's Chris. So I'd say we don't have very good visibility. It's obviously up to those that are running the trial to place the purchase order with us. So, generally, those timings will find out a few weeks, few months in advance. And so we don't have good visibility throughout the year, but it's not included in our guidance number.

Got it. And lastly, if I could squeeze one more in. Mike, congratulations. You had a new add to the Board at the end of the year. I was intrigued to see it was someone from outside of healthcare in the tech sector. Tell us about how you were thinking about overall composition of the Board. You've had some folks who've been around for a very long time, Lance and Stelios and whatnot. And you made an addition here. How should we be interpreting that thinking at the Board level?

For sure. So, we're very pleased to have Jackie Wright join the Board from Microsoft. She is just an amazing resource to us from a broad IT and digital technology perspective. And as I'm sure we've talked about at a high level previously, part of our corporate growth and part of our really expansion into digital is a key component to how we want to go, not only bicostly but also globally going forward. So to have her engaged is just a tremendous resource for us. We're going to learn a lot from her and look forward to engaging with her on all aspects of both her view of how to really digitize healthcare but also then helping our business become much more efficient digitally as well.

Great. Thank you for all the questions.

Sure. Thank you, Chris.

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

Yes. Thanks for squeezing me in. Just a question on 092 and then actually, I just have a quick follow-up. But with respect to 092, so I know the STELLAR-303 study was obviously predicated on the notion that you had this surrogate data with CABO. But I guess when I look at the GU development strategy with Bristol, we have NIVO/CABO plus I think IPI/NIVO/CABO data in both RCC and bladder. We have atezocabo data in prostate. Obviously, no IL-2 data yet, but just trying to better understand how the GU strategy is, I guess, going a bit deeper on the expansion cohort side as opposed to going into a Phase III like you did with STELLAR.

Vicki, you want us to take a shot at that and maybe I can provide some color commentary afterwards.

Yes, sure. Happy to. Right. So we're looking at multiple potential combinations for XL092. I think as I said earlier, we may, in order to advance the program quickly, look also at data coming out of the COSMIC-021 trial, which is cabozantinib, right to move forward in a limited number of settings, colorectal cancer being one of them. And again, you may see additional Phase IIIs launched from there down the road. But we believe that I/O checkpoint inhibitors and I/O combos are important for the combination of 092 and that study STELLAR-002, which recently initiated enrollment, will be important to evaluating the potential of 092 in combination with those agents.

Yes, maybe I can just add, Steve, that we're in the business of raising the bar in terms of standard of care for patients. Everything we do is focused on that. So less about generating new to data, but it's more about going to the next level. And I think things like 313 are a good example of that, first company, first trial going against I/O, I/O as the control arm. And certainly, with 092, we have the opportunity to do that across broad indications, across narrow indications as we develop that program. So I would look at the stellar STELLAR-001, STELLAR-002 as the first wave of that signal searching, signal validating type efforts while we're launching the pivotal trial program. We have a variety of other discussions ongoing with other combination partners, other combination owners, if you will, people with different I/O and other types of molecules that we and they want to combine with 092. So the program is advancing really in a multidimensional way. I think what you're seeing here is just the beginning.

Okay. That’s helpful. And then just one quick follow-up on STELLAR. So I know Camilla was an investigator-sponsored trial. But I know that study used modified RECIST criteria. And I've seen it used before in liver cancer, but I guess I haven't seen it used before in colorectal. And so just wondering if you guys know why a modified RECIST response was used in this instance. Did patients all have liver mets or something? I'm just trying to figure that out. Thanks.

Yeah. I don't know, Steve. Vicki, do you have anything you can say there?

Not really. I don't know specifically, but what I would say is that having the two data sets, including our own internal data set from COSMIC-021, both trending in the same direction in terms of better overall response rate than we would expect with historic controls. And although they're both single arm, the PFS and OS medians were also encouraging relative to what has been seen historically for regorafenib.

Okay. Thanks for taking the question.

Yeah. Thanks Steve.

Thank you. At this time, there are no further questions in the queue. So I would now like to turn the call back over to today's host, Susan Hubbard. Ms. Hubbard?

Great. Yeah, great. Thank you, Towanda, and thank you all for joining us today. We certainly welcome your follow-up calls with any additional questions you may have.

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