Conference Transcript - EXEL 2026-06-03

Akash Jawari, Analyst — Jefferies

Well, good morning, everyone. I really do appreciate it. My name is Akash Jawari. I head our department biotech efforts on the research side here at Jefferies, and I have the pleasure of hosting the Exolexis management team, which, again, is a commercial stage company that is in several different tumor types and is a leader kind of in renal carcinoma, but then also has ambitions to really think about VEGF inhibition in a broader subset of diseases, and that's what they're explaining it's looking at with Zanza Andrew when I hand it off to you for some intro remarks and then we'll get started yeah thank you thank you for

Michael Morrissey, CEO

the invite always a great conference great set of meetings today you know always good to meet with investors just as a reminder we've making forward looking statements today so please see relevant disclosures in our regulatory filings for risks related to our business but would certainly agree with you. I mean, Exlexis is, you know, I don't know what generation of the company it is at this point, but we're kind of in that important transition point from going from our first franchise product in cabozantinib to our next franchise in zanzalitinib. And, you know, that's kind of the lens that we view, you know, the world of drug development, the world of oncology is kind of through this this franchise mode where not only are we investing kind of broadly in each molecule but within each tumor type for example we're also kind of broadening our our investment there so whether it's rcc we're going to continue to be the leaders in rcc or a newer area like colorectal cancer with zanza um not only kind of this later line setting with the seller 303 study but you know investing say in the 316 study in the earlier line and then layering on our pipeline as well you know say xb371 our tissue factor adc which we really view as a colorectal asset as well so it's kind of that that franchise mode um that we're really using to kind of define our 2026 and beyond um but you know happy to to get into a lot of the details there you know i i want to

Akash Jawari, Analyst — Jefferies

start with more of a conceptual question and you know it's interesting i still remember back in 2020 i think mike had put up like the four billion number on on cabo and you know obviously okay cabo didn't get there fine it still became a multi-billion dollar product there were a lot of successes but i think i you know i don't know if michael ever admit it but i do feel like you guys learned from kind of that second wave of drug development with cabo and you're applying a lot of those learnings to zanza and i think that's actually quite interesting right when i don't see a lot of studies like cosmic 303 right i i see a lot of studies where you're looking at adjuvant settings post maintenance settings areas where there's really defined clinical unmet need can you talk about kind of is that perception correct right and what learnings did you have from kind of that development you had with cabo that you're now applying to zanza that you feel

Michael Morrissey, CEO

like maybe investors are missing? Yeah, I mean, you know, I would certainly say kind of taking a step back, everything we do at Exlexis is kind of through what we call the Cabo lens, you know, learning what's been successful, learning, you know, what to do right, learning kind of areas that we should avoid in the future. But, you know, I would correct one thing, you know, we certainly continue to be excited about the growth profile for Cabo going forward. You know, so it's something that as we look ahead to, say, 2030, we're still certainly excited about it. But that Cabo lens is really a couple of different things. Cabo's been successful commercially because we've been able to define a new standard of care in the areas that we've developed it, you know, whether it's second-line RCC, first with the Meteor study, then, you know, as a monotherapy and first-line RCC, and then in combination with Nevo, the reason Cabo's used is because it helps patients live longer and helps patients live longer without their tumor progressing and all of the important decisions and drivers for utilization there. And so what that means is that we're in the business of running studies that we think have the potential to really define that new standard of care. The second piece is we're also in the business of running successful studies. We're not in the business of just running trials for the sake of doing it. And so we try and be particularly thoughtful around probability of success, trial design, statistical powering, understanding kind of appropriate comparators to really make sure that the data we're generating enables physicians and patients to really drive those treatment decisions. And so that kind of Cabo lens is really, when we apply it to Zanza, it's what are areas of unmet need and large market opportunities? What are studies that we can run to kind of help define and plant a flag in the ground for Zanza to be the new standard of care? And can we do it in a way that's capital efficient? You know, I'm sure Chris will talk about this later, but one of the models that we really liked with Cabo was, you know, working with clinical collaborators, you know, whether it's Bristol, Roche Genentech, or now Merck, kind of splitting costs, splitting risk, splitting expertise, splitting capability, and being efficient in how do you run pivotal studies. You know, we'll sell a lot of, you know, Bristol sells a lot of Nevo and RCC, we sell a lot of Cabo. Kind of that same dynamic with Zanza is certainly an approach we want to do going forward. And so kind of taking a step back as we think about that Zanza franchise approach, it's about all of those learnings and lessons in that Cabo lens and applying it to what we think is a best-in-class molecule in areas of high-end need where we can define a new

Akash Jawari, Analyst — Jefferies

standard of care i mean i i think maybe let's start with kind of um first line rcc and again you you mentioned you go where the puck's headed can you give us some perspective about really what your overall long-term strategy is in first line a like is there ambition to ultimately run that checkmate 9 er trial and what would that look like because you've alluded that you might go with you know maybe even partnerships outside of merck and then number two is you know what is the opportunity in the post pembro setting right and and how you know if you were to think about that commercial opportunity to what you have currently in first line rcc is there an argument to be made that actually the post pembro maintenance is a larger commercial opportunity yeah so you know i

Michael Morrissey, CEO

think both of those questions are somewhat related to kind of our course one of our core strategic principles is basically again through this franchise lens we want we're the leaders in RCC and we want to continue to be the leaders in RCC you know our our kind of view on it is if Cabo's the TKI of choice in RCC for the 2020s we want to run a series of trials to define ZANZ as the TKI of choice in the 2030s. And so, you know, you mentioned kind of our efforts so far. We have the three studies ongoing in RCC, and I think, you know, just to kind of answer your question on, you know, market opportunity, given rough guidance for a little over $2 billion in that space across those three studies. But, you know, the way we think about it is, you know, where you said, How is standard of care evolving over time? How is that patient's journey in kidney cancer evolving over time? As more patients are diagnosed earlier, as more patients who are diagnosed kind of in that more localized setting get adjuvant therapy, adjuvant PEMBRO, this question of what should they get afterwards starts to come up. And that's the LightSpark 033 study. We really want to define what that is. And then similarly, kind of as the treatment journey gets redefined for patients, in that later line setting, the combination of Zanza and Bell's, we're evaluating versus Bell's monotherapy. So both of those, we think we have, you know, reasonably high likelihoods of being successful, again, to kind of define the new standard of care. You know, on the question of frontline, you know, we think we kind of have half of that covered right now, that, you know, frontline but post-Pembrol adjuvant. That's like 15,000 patients? Yeah, you know, plus, minus. I think it depends on kind of how we see and how someone views the evolution of that utilization over time as well as the evolution of, you know, when patients are diagnosed. Does the advent of, you know, improved diagnostic modalities kind of change some of that time course of metastatic diagnosis versus prior? You know, so it's a multifunctional kind of dynamic. But when we think about that kind of de novo metastatic first line space, it's certainly an area that we want to invest in. But it's one that we want to be thoughtful about how we invest in because, you know, our own experience with Cosmic 313, as you mentioned, as well as the recent LightSpark 12 data, show that you have to be particularly thoughtful and careful about rational combinations. where does the biology suggest that what are those combinations that have the potential to shift the standard of care because say going back to cosmic 313 you know that was a successful study on pfs but as we looked at the opportunity and kind of the lack of survival data and again this patient journey dynamic in rcc where you know there are now multiple lines of therapy understanding the trade-offs between PFS benefit with additional tox without survival versus sequence therapies. That's just a dynamic that's relevant for every patient who has kidney cancer. And so, you know, Mike talked about it. Dana talked about it. One of the dynamics that we're certainly thinking about is we think ZANZ is a best-in-class TKI. We think it has the potential to be a backbone therapy. And, you know, its shorter half-life and all of its profile lend itself to kind of being that sort of backbone and the question becomes what are the sorts of mechanisms you know orthogonal mechanisms in particular that you can kind of come come at the the cancer from multiple different angles to try and really drive the most robust benefit because at the end of the day we don't want to run a study to generate similar data to what we've seen before we want to run a study to be successful so that's where we're being really thoughtful about um but you know i think as mike has said we tend to view zanza in terms of waves of development in that kind of next wave in rcc um you know we're excited to share i mean so look to to that point

Akash Jawari, Analyst — Jefferies

i guess the kind of nuanced question there is do you think it'll ultimately be a triplet regimen or a doublet regimen right because you know you'll talk to maybe some of your your peers in the space that are more you know on the hip to office right where they're like look we're not we want to go with a doublet regimen and ultimately we think that would be beneficial and merck ultimately went with the triplet and that was that was really the error but really that doublet combo is good enough to be better than let's say checkmate 90 are the leaps trials there's another view of like well no i mean you are going to need three different therapies here they need to all be combinable and they need to be you know tolerable so that you can actually get that duor but we're not comfortable with just, let's say, a HIF2 alpha, TKI combo, first line as better than Checkmate 9 ER. What's your team's internal thinking there, doublet or triplet, when you do ultimately go into that frontline setting?

Michael Morrissey, CEO

I guess the answer, candidly, is it depends on what those are. The reason I mentioned the orthogonal mechanisms before is if you think about the HIF space and VEGF TKIs, we We think that the secret sauce, special sauce for Zanza is that it's kind of this whole other neighborhood of met, axil, myrrh, the TAM kinases, et cetera. That's kind of why we think it's different. But at the end of the day, one of its core efficacy drivers in RCC is kind of that VEGFR kinase inhibition. Well, HIF and VEGF are kind of on the same axis, so you're kind of doubling down there. And so from a cancer biology perspective, it certainly makes sense to want to bring in an alternative mechanism to make sure that you're kind of attacking the tumor from as many different angles as possible. So your question of whether it's a doublet or a triplet, it's, you know, I would say somewhat semantic because take, for example, XB628, R, PD-L1, NKG2A by specific. You know, a theoretical combination of that brings in adaptive immune system, innate immune system, and then kind of the kinase inhibition piece. So that's probably a doublet, but it's incorporating multiple mechanisms of action as well. So that's kind of an example of the sort of thinking that we have around, let's let the biology make the decision, drive the decision. Let's let the data drive that decision and really understand, you know, how do we really again run a study to right shift that survival curve right shift that pfs curve um all while doing so in kind of a way that's not adding you know additional talks for these patients because again you know in rcc patients are living longer and longer and we're certainly you know it's the best part of our job to be part of that um but you have to understand that clinical benefit risk

Akash Jawari, Analyst — Jefferies

trade-off as well understood i mean i couldn't agree with you more but then the tricky question becomes well okay if it's maybe like there's three options here in my mind you have something where it's a next gen io approach you have t-cell engagers um and then you have adcs right i don't think i've seen anything early on right now whether it's in a pharma pipeline or in a smid cap pipeline where I'm like this is a step order improvement but maybe I'm wrong here because I'm yeah like when you think about those three modalities when adding on to Zanza where do you feel like there is this kind of natural synergy in first line RCC and maybe what what am I and maybe what are investors missing about how you know this market's actually evolving over

Michael Morrissey, CEO

time on the pipeline so yeah i mean i i think kind of the the latter question is really um we're the leaders in rcc and we're going to continue to be the leaders in rcc and invest appropriately to do so um that cabo lens dynamic that i mentioned before is also that um we want to make sure we're appropriate stewards of shareholder capital And so we're going to run the right study. We want to run positive ROI studies that have a high probability of success, that have that opportunity to be commercially successful. Whether it's one of those modalities or others, that's kind of TBD. I think I probably am a bit more optimistic on what's out there, especially what's out there in potential combination with ZANSA. one of the challenges that i think the industry has and you know certainly folks like you have is trying to extrapolate the potential for later line data for modality x into an earlier patient population i certainly think that we have the ability kind of through the xalexis lens to kind of understand some of those risks a little bit differently um you know so we're excited We're having a lot of conversations right now about what those combinations could look like. But I think it suffices to say kind of the two key points are we're going to make appropriate investments. And we're going to make sure that we're really having a thoughtful, strong opportunity in kind of that front line space.

Akash Jawari, Analyst — Jefferies

And are there any targets that you think you might call out, whether it's emerging in China or otherwise, i know like there's enn p3 uh bispecific data that's that's getting generated there's next gen adcs out there i mean anything that you think is particularly interesting yes but i won't call them out all right worth asking um okay understood now um when we think about lightspark 01 and uh obviously uh merc is gonna have a regimen that will let's say it look it looks um supportive of uh displacing combo in a second line setting over a period of time but i also find it notable that merc right after that data is also running the exact same trial with you with zanza um but now displacing bells um how do you think about like what does merc see with zanza um especially in that kind of second line setting where they feel like maybe there's room left on the table from the light light spark oh one data to actually improve the standard of care for patients and how how do you expect to show that case with i know you have a phase three trial that recently

Michael Morrissey, CEO

started there yeah i mean you know i think honest answers um don't really want to put words in in merc's mouth um but from our perspective i think we certainly view zanza as a best-in-class tki And the totality of data generated for, you know, any of those combinations would suggest that tolerability is really important. Combineability, dose selection is really important. And so can the combination of ZANSA as a best-in-class TKI and Bell's as a highly efficacious kind of, you know, very good HIF inhibitor, can that have the potential to generate strong data, both from an efficacy perspective but also from a safety and tolerability perspective? because, again, how you combine, how you, you know, double down on kind of that VEGF axis is really important. And so understanding the differences, say, between LEN and ZANSA is particularly important. But again, I think it's, you know, also in part on how kind of patients will be treated in the future. So that's just, you know, as I mentioned before, That's one of the key considerations that when we, you know, have conversations with our now partner, you know, that's where a lot of that begins.

Akash Jawari, Analyst — Jefferies

Just closing the loop on second line. I mean, my sense is it's maybe like a three to 600, or somewhere in that range. Let's say it's about 500 million in second line RCC for Cabo. But your team's been kind of, A, I know you guys have never admitted that, so that's me. but number two you've kind of said like look as use in first like second line goes down there's potential uptake in first line and patients doctors are really thinking about stratifying different therapies so when you think about the absolute impact on the light sparkle on data as that regimen gets onto the market as we think about to the end of the decade do you think there will be any impact on absolute cabo sales or no you're going to see this natural switch of as second-line use declines in a subset of patients, there's going to be offsetting increase in first-line usage.

Michael Morrissey, CEO

Yeah, I mean, you know, without kind of getting into guidance on guidance, kind of long-term outlook, I think that's probably directionally consistent. I mean, the most simplistic way to think about it is if a physician has come to the conclusion that LEN-PEM is probably their go-to treatment of choice in second-line, what it probably means is they would no longer use LEN-PEM or LEN-BELL's second line. They would no longer use LEN-PEM in the first line because you wouldn't LEN twice. And so what that means, functionally speaking, is for those patients who are likely to get an IOTKI, Cabo Nivo becomes kind of that frontline modality of choice. And if you think about, you know, generally speaking over the last three to five years that dynamic of trying to drive every additional market share point in frontline RCC that's been our primary focus anyway because the frontline market just factually speaking tends to have longer duration longer time on drug so tends to drive incrementally higher revenue kind of first line versus second line you know still TBD a little bit early to see kind of how all of these new combinations get adopted in the market whether you know share is coming from you know single agent TKIs or you know lan ev which is another you know regiment that's used right now so there's kind of a lot of moving pieces but you know directly speaking that's probably a reasonable way to think about

Akash Jawari, Analyst — Jefferies

it at least right now understood now can you touch a bit on I know there was data at asco presented with um cabo um actually running some something similar to what you're running in non-clear cell against anitnib in first line um a can you talk about um you know your early thoughts on on that that data set obviously was faced to an academic run um and then so a how do you think a clinician will look at that data and then number two how do you you know what's your level of confidence i know you have a phase three and non-clear cell that's reading out later this year about whether your drug will differentiate there or what's kind of this the magnitude of improvement you're expecting over student yeah i mean it's a it's a good example

Michael Morrissey, CEO

of one of the unique dynamics around the non-clear cell space in that um you know honestly when we first started thinking about it i was surprised that there had never been a phase three done in that setting yeah and you know I the way that I kind of conceptualize it is utilization in part is essentially driven by this idea of which small unrandomized phase one two do I trust more as a physician and a patient because we all know the caveats and limitations of these smaller studies you You know, patient selection, you know, frankly, investigators are really good at identifying and selecting certain patients for these trials, which is a dynamic that you don't see and really can't do in large randomized phase three studies. And so it's, you know, group over here of utilization being all over the map because it's defined by a bunch of different, you know, ISTs or single arm studies. And then 304 being the opportunity to kind of plant a flag in the ground and say, this is the standard of care potentially in the non-clear cell space. And so they're kind of two different things. And so I think the way that we look at it, and certainly our market research is emerging in that direction, is that physicians will be comfortable using what drug or what combination has level one evidence of showing an advantage over a standard of care. It's just that non-clear cell, for a variety of kind of historic reasons, utilization is driven by inference and driven by the fact that, you know, all kidney cancer drugs are approved for both clear cell and non-clear cell.

Akash Jawari, Analyst — Jefferies

Right. Understood. Now, stepping back in, Andrew, this is a conversation you and I have had about how much you think buy side and sell side analysts of the zan's indications you have eight trials announced um how many of them are actually in people's models i think it's probably two or three and then uh relative to the trials that you actually have ongoing for the you know for us who haven't modeled those other five indications right um what are your favorite children right what are those markets where again it fits that profile of really clear on that need point and shoot so you have high confidence that zanza will get established into standard of care the number two you think the commercial opportunities are really underappreciated

Michael Morrissey, CEO

yeah i i mean you know the it's an honest answer and saying i think we've been particularly thoughtful around each of the studies um you know our goal for 2026 and and beyond is to really show that Zanz is a franchise molecule and we're certainly excited about 303 and the launch and kind of priority 1a as a company but it's really kind of setting the foundation for Zanz as an opportunity and so we think about it as a franchise and collectively across all of those studies where individually we think they're all reasonably sized if not very large market opportunities with high probabilities of success and so honestly my view is look at each one of them individually and have a conversation have an understanding do whatever work you need to do to understand is this study likely to succeed and if it succeeds what is the commercial opportunity here an example of that say like stellar 316 so that's another area where we're essentially defining a new standard of care because right now, with the advent of Natera's Cignatera test, there's this new patient population that, you know, if they're ctDNA positive, now finds themselves at very high risk of relapse. Until that kind of new diagnostic modality was available, that dynamic didn't really exist. And so we're looking at either Zanza monotherapy, therapy, Zan's in combination with subcupembro against watch and wait, placebo. And so that's an indication where we've already shown a survival benefit in a much later heavily pretreated population that we know is sensitive to this sort of therapeutic modality. And so it's an example where we're defining a new patient population. There are a lot of these patients who really do need a therapeutic intervention because, you know right now they're being told that there's a really high risk of their cancer recurring but there's nothing you can do about it and so that kind of anxiety that kind of unmet need is is is very palpable and so it's the sort of thing where you know simplistically again anytime you can randomize a large global or large randomized study against placebo it's probably and the size

Akash Jawari, Analyst — Jefferies

of that that you know commercial opportunity let's say relative to rcc and in first line

Michael Morrissey, CEO

how should we think about that um you know i i think at the highest level we've said there's you know 12 000 plus minus patients um how that number evolves over time is kind of that availability and utilization of the signatera test uh improves similarly if there is a therapeutic intervention is there a higher likelihood of you know one people getting tested but two people getting treated you know it's a reasonably sized market and then kind of the end of the day the math is pretty simple it's number of patients times share times price times yeah so um chris

Akash Jawari, Analyst — Jefferies

for you to to kind of wrap it up um you know it's funny uh your stock has tripled not funny that's you know credit to what you've done but it's interesting a lot of investors are like i don't get it why are they still buying back their shares and you know normally when a company buys back their shares the the obvious announcement is we think we're undervalued right um but you're also at this point as you approach the cabo loe where there is this question of like well what's the allocation between external bd buying back our own shares and then also pursuing other kind of merc partnerships where you can really um you know divvy up the capital costs what's the right balance for you now that you've already you know you've gotten to this new level in terms of valuation and investor expectations should we continue to expect consist you know this level of share buybacks on a con on a go forward basis or this is more of like a temporary dynamic yeah

Chris Senner, CFO

so i mean from a capital allocation perspective we look at it not mutually exclusive in any way in three buckets right r d expense that we we have every year potential bd m a and then share share buyback and like i said they're not mutually exclusive so you know we've committed to spending a billion dollars or less in R&D for the time being you know we continue to look at assets from a BD M&A perspective we haven't as our record has shown we haven't found any that many things that we really like but we're continuing to look and then we've been buying back shares for the last you know three years almost since since you know first approval in March of 23 and and you know you kind of touched on the undervalued part right right when you look at the you know how the analysts are modeling it and how this the street generally is modeling Zanza which is our next you know potential franchise molecule you know they're not a lot of the indications in there there's the the ability to continue to develop Zanza in a way that'll drive sales in the 2030s as Andrew talked about the TKI the 2030s we think we continue to think we're undervalued and you know that's that's one of the reasons and I know exactly guidance but

Akash Jawari, Analyst — Jefferies

I will stick this question in you think you're undervalued and you guys have given long-term perspectives on Zanza. This is a question you get, you know, you're a partner with Bristol. Bristol gets this comment of like, is there a trough? Is there growth? It seems to me like a lot of the Zanza phase 3 start to read out before the end of the decade. And you're going to start to get uptake. Is there a possibility you have just straight growth through the Cabo LOE? Is that how investors should be thinking about this?

Chris Senner, CFO

Yeah, like you said, I'm not going to give guidance on that. But, you know, I think, you know, we're very excited about the opportunity that it brings and the the potential at the end of this decade the beginning of the next decade that sansa allows us to grow through that that loe for cabo so but maybe this any potential of like

Akash Jawari, Analyst — Jefferies

you know jp morgan from a few years ago where you call your shot and give kind of a four or five year commercial outlook on on sansa and the uptake um is there appetite internally to do that anytime

Chris Senner, CFO

in the near future that's a that's a tough question that answer I mean it's it depends right it depends on you know we did that because we did that back in 2020 because we we weren't getting a lot of credit for nine ER or the potential of nine ER and then the other indications we're we're developing and if we see that situation again and you know we'll we'll evaluate everything

Akash Jawari, Analyst — Jefferies

okay I understand thank you so much I really do appreciate it thank you