Earnings Call Transcript - EXEL Q1 2023

Operator, Operator

Good day, ladies and gentlemen, and welcome to the Exelixis First Quarter 2023 Financial Results Conference Call. My name is Towanda, and I’ll be your operator for today. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to your host for today, Ms. Susan Hubbard, Executive Vice President of Public Affairs and Investor Relations. You may proceed.

Susan Hubbard, Executive Vice President of Public Affairs and Investor Relations

Thank you, Towanda, and thank you all for joining us for the Exelixis first quarter 2023 financial results conference call. Joining me on today’s call are Mike Morrissey, our President and CEO; Chris Senner, our Chief Financial Officer; Peter Haley, our Executive Vice President of Commercial; Dana Aftab, our Chief Scientific Officer; and Vicki Goodman, our Chief Medical Officer, who will review our progress with the first quarter 2023 that ended March 31, 2023. 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 now turn the call over to Mike.

Mike Morrissey, President and CEO

Hi. Thank you, Susan, and thanks to everyone for joining us on the call today. Exelixis had a strong first quarter across all components of our business. CABOMETYX maintained its status as the leading TKI for RCC in both the first-line I-O TKI market and the second-line monotherapy segment. We are advancing our discovery and development priorities to build the Exelixis product portfolio in a disciplined and thoughtful manner. I know it's a statement of the obvious, but I want to repeat it here: we're in the R&D business. The only way we drive growth for shareholders is to improve the standard of care for patients with cancer. It's impossible to disconnect the two. The more patients we help, the more value we create. Our singular focus in R&D is to advance a pipeline of clinically and commercially differentiated medicines for large populations of cancer patients with high unmet medical needs. We estimate CABOMETYX is used by tens of thousands of patients annually, and we seek to help many multiples of that number with the pipeline we're building today. Our success with Cabo isn't the end game; it's just the beginning. We are biology-centric and modality-agnostic for biologics and small molecules within a narrow therapeutic framework in oncology. With discipline in our integrated strategy spanning discovery, development, and commercial, we're focused on advancing drugs that will move the needle for cancer patients in meaningful indications to build value for shareholders. Molecules that work will be modestly interesting or aren't compelling from a commercial perspective; they never make it out of the gate. Our R&D strategy includes targets and compounds we advance, and as important, those we exclude, and overtly choose not to pursue for scientific, clinical, competitive, and commercial reasons. The success of our integrative strategy bridging R&D with commercial relative to our midsized biotech peers is highlighted by the historical data on biotech oncology launches since 2016. Approximately 35 launches in this timeframe, with drugs addressing many of the hottest targets in oncology, the mean and median 2022 global net product revenues were approximately $200 million and approximately $150 million, respectively, compared with the 2022 global net product revenue number for CABOMETYX of $1.9 billion. We pick the winner, while avoiding less productive avenues in the past, and have the insights and discipline to do so repeatedly in the future. With that, please see our press release issued an hour ago for our first quarter financial results and an extensive list of key corporate milestones achieved in the quarter. And I'll now turn the call over to Chris.

Chris Senner, Chief Financial Officer

Thanks, Mike. For the first quarter of 2023, the company reported total revenues of approximately $409 million, which included cabozantinib franchise net product revenues of $363.4 million. CABOMETYX net product revenues were $361.8 million and included approximately $90 million in clinical trial sales. Gross to net for the cabozantinib franchise in the first quarter of 2023 was 30.3%, which is higher than the growth that we experienced in the fourth quarter of 2022, but overall in line with our expectations. This increase in gross to net deductions in the first quarter of 2023 primarily related to higher Medicare Part D and PHS expenses. Historically, we have experienced higher Medicare Part D expenses in the first quarter of the year, due to many Part D patients moving to the normal at the start of the calendar year. Our CABOMETYX trade inventory decreased by approximately 900 units when compared to the fourth quarter of 2022 to approximately 2.1 weeks on hand. As I mentioned on our fourth quarter earnings conference call, we experienced the trade inventory builds in the fourth quarter of 2022 of approximately 750 units, and we observed most of that Q4 trade inventory build drawn down in the first two weeks of 2023. Total revenues also included approximately $45 million in collaboration revenues, including approximately $33 million of royalties earned from Takeda on their sales of cabozantinib. As a reminder, clinical trial sales have historically been choppy between quarters and we expect this to continue in future quarters. Our total operating expenses for the first quarter of 2023 were approximately $380 million, compared to $472 million in the fourth quarter of 2022. The decrease in total operating expenses sequentially was primarily driven by lower R&D expense in the first quarter of 2023. Provision for income taxes for the first quarter of 2023 was approximately $8.3 million compared to a benefit for income taxes of approximately $1.3 million for the fourth quarter of 2022. The company reported GAAP net income of approximately $40 million or $0.12 per share on a fully diluted basis for the first quarter of 2023. The company also reported non-GAAP net income of approximately $52.8 million or $0.16 per share on a fully diluted basis. Non-GAAP net income excludes the impact of approximately $13 million of stock-based compensation expense and net other related income tax effect. Cash and investments for the quarter ended March 31, 2023 was approximately $2.1 billion. This level of cash and investments, supported by our ongoing cash flow from operations, provides Exelixis with the flexibility to invest in internal discovery activities to pursue external business development opportunities to expand our pipeline and allows us to return capital to our shareholders through the $550 million share repurchase program we announced in March of this year. And finally, we are reiterating our full-year 2023 financial guidance, which is detailed on Slide 14 of our earnings presentation. I'll now turn the call over to P.J.

P.J. Haley, Executive Vice President of Commercial

Thanks, Chris. The first quarter of 2023 was a strong quarter for cabozantinib. Our team continues to execute at a high level, which has resulted in CABOMETYX continuing to be the number one prescribed TKI in RCC and second-line HCC. Importantly, CABOMETYX in combination with nivolumab is the number one TKI plus I-O combination in first-line renal cell carcinoma. Furthermore, the CheckMate -9ER 44-month long-term follow-up data presented at ASCO GU is resonating with prescribers and strengthening the position of CABOMETYX plus nivolumab in first-line RCC. Physicians find the 49.5 months median overall survival of CABOMETYX plus nivolumab to be compelling. In terms of the business, CABOMETYX TRx volume grew 12% year-over-year in Q1 2023 relative to Q1 2022. Looking at the TKI market basket of CABOMETYX in light of Sutan, Votrient and lymphedema, TRX volume in Q1 2023 was stable relative to Q4 2022. TRX volume for CABOMETYX was also stable in this time period. Additionally, new patient starts in demand remain strong in the first quarter. CABOMETYX continued to perform well in Q1 from both a marketplace and competitive perspective. CABOMETYX again led the TKI market basket in TRX share at 39%. As we have discussed previously, the first-line RCC market is extremely competitive, and we're pleased with the performance of CABOMETYX in combination with nivolumab in this setting. Q1 was the second full quarter in which CABOMETYX plus nivolumab was the number one prescribed TKI plus I-O combination in first-line RCC. Uptake in the first-line RCC setting is broad across clinical risk groups and practice settings. Importantly, prescriber experience to date continues to be positive, and physicians report that it is consistent with the balance of efficacy, safety, and quality of life seen in the CheckMate -9ER data. Long-term 44-month follow-up data from the 9ER study was presented at ASCO GU in February. The median overall survival for the CABOMETYX plus nivolumab arm is 49.5 months, representing an improvement of 14 months over the comparator arm sunitinib. These data are compelling to prescribers and are viewed as clinically meaningful, and the feedback on the data has been extremely positive. Furthermore, physicians believe that the data support their experience of using the combination in terms of efficacy, safety, tolerability, and quality of life. Prescribers believe that this balance of data and low discontinuation rate of CABOMETYX plus nivolumab enable patients to stay on therapy longer to achieve these results. We are pleased with the positive prescriber feedback on the 44-month 9ER data. These data reinforce the leadership position that CABOMETYX has in the marketplace as the number one prescribed TKI plus I-O in first-line RCC. We believe these data position CABOMETYX for continued momentum and growth as our entire team works every day to ensure appropriate patients have the opportunity to benefit from Cabo. And with that, I'll turn the call over to Dana.

Dana Aftab, Chief Scientific Officer

Thanks, P.J. Okay, so Peter Lamb has discussed the pipeline in depth a number of times previously. So I'm not going to reiterate that today, but instead, I'll touch on some of the key features that underlie the pipeline. Our overall strategy is designed to reduce target biology risk in a number of ways. At first, we're not dependent on one mechanism of action, nor limiting our approach to a single aspect of tumor biology for pipeline success. Instead, we're prioritizing targets based on the strength of the science and their ability to address the complexity of tumor biology. Second, we are not limiting our modality to small molecules. We've now fully enabled both small molecule and biotherapeutics capabilities for our internal discovery efforts. Our small molecule discovery programs are focused primarily on synthetic lethal targets with clear patient selection strategies. And our biotherapeutics programs are focused on antibody drug conjugates or bispecifics in monoclonals focused primarily on innate immunity. Our clinical and preclinical pipeline takes a best-in-class approach that's informed by prior clinical data or proof-of-concept from earlier programs. This, in our view, greatly reduces target risk. So here's the pipeline beyond cognizant that the two most advanced programs are then the limpness and SP 002. Thank you, we'll be discussing these programs in much greater detail. So I'll only summarize the underlying strategies for them here. Both of these programs are built on prior clinical experience with molecules that have the same target profile and then obviously builds on our experience with cabozantinib. The target profile is essentially the same, but the pharmacokinetics have been optimized. The aim here is to have an easier to manage and potentially more combinable drug to allow us to explore the clinical white space where we have evidence that Cabo is active, but where we have not pursued registrational trials, and to also explore novel combinations in areas where Cabo is already approved. XB002 is our tissue factor targeting ADC that builds on the known profile of tisotumab vedotin or TIVDAK, which is approved for cervical cancer. XB002 combines the novel monoclonal antibody against tissue factor with next-generation linker payload technology that together result in a molecule with reduced risk of bleeding and increased stability of the intact ADC. The next programs I'd like to highlight are our two option agreements with our programs with Cybrexa and Sairopa. These option type arrangements are a capital efficient way to access clinical stage assets with a back-end loaded structure where we pay for success. The Cybrexa agreement gives us an option on a novel peptide drug conjugate currently in Phase 1. CBX-12 is a pH-sensitive peptide conjugated to exatecan, a topoisomerase I inhibitor. This novel mechanism of action is designed to enhance the delivery of exatecan to tumors. But unlike ADCs, this occurs in a tumor antigen-independent fashion. The Sairopa agreement gives us an option on a novel monoclonal antibody ADU-1805, which targets SERF-Alpha, the ligand for CD47. SERF-Alpha CD47 is a major myeloid checkpoint, and targeting SERF-Alpha directly overcomes some of the known issues with targeting CD47. These include the large PK sync and potential for anemia due to expression of CD47 on red blood cells. ADU-1805 was carefully designed to target all human alleles of SERF-Alpha to give it best-in-class potential. Finally, in preclinical development, we have several biotherapeutics in the pipeline, both ADCs and bispecifics. XB371 follows on from XB002 as also a tissue factor targeting ADC, but with the topoisomerase I inhibitor payload instead of the microtubule targeting payload on XB002. Tissue factor is expressed on a broad range of solid tumors, so having two different tissue factor targeting ADCs with different payloads allows us to match the tumor type with the mechanism of action of the payload to which the tumor is most likely to respond. XB010 is also a next-generation ADC, but this one targets 5T4, another broadly expressed tumor antigen. XB010 uses Catalent's site-specific conjugation and proprietary linker payload technology. The two bispecifics XB014 and XB628 combine the known pharmacology of PD-L1 inhibition with inhibition of a complementary innate immune checkpoint, either the myeloid CD47 checkpoint or the natural killer cell checkpoint NKG2A. In addition to these programs, we have multiple programs in discovery at earlier stages of maturity, both small molecules and biotherapeutics that will provide a source of development compounds and INDs going forward. Having multiple programs enables us to make decisions based on real-time data to only prioritize those with the best potential for advancing successfully through clinical development. In fact, we're on track to deliver several new development compounds this year, which will come from both our small molecule and biotherapeutics program. Our small molecule team reached critical mass last year when we were able to complete the introduction of several key capabilities, one of which is structural biology to help guide the optimization of lead compounds. Structural biology was one of the final components needed to get our small molecule discovery organization fully built out. I'm very pleased to say this group has been highly prolific. Despite being on the job for less than a year, they've already solved over 100 structures. As you can see in this slide, they've delivered a steady stream of high-resolution structures using both X-ray crystallography and cryogenic electron microscopy. These structures have been very helpful in guiding our medicinal chemistry efforts in our recent discovery programs, and in some cases, have resulted in significant evolution of lead series for driving potency and selectivity. Using this approach, we've also been able to optimize known liabilities of lead molecules as a way toward achieving best-in-class status for programs with advanced competition. Though you may remember that in our original discovery platform, we also had a strong structural balance group that solved over 1,000 structures of kinase inhibitor complexes, which helped drive dozens of discovery programs. That group had only X-ray crystallography to generate their structures, but with the introduction of cryo-EM in this field, we're now able to get these structures faster than ever. So that's it for my remarks, and I'll now turn the call over to Vicki.

Vicki Goodman, Chief Medical Officer

Thanks, Dana. Today, I will provide updates on the progress of our clinical stage pipeline, focusing on our most advanced programs, Zanzalintinib and XB002, as well as the cabozantinib registrational trial. XL102 continues in dose escalation, and we are focused on reaching a go/no-go decision later this year. As we continue to refine the strategic approach for each of our pipeline assets, we retain a strong focus on clinical trial execution to rapidly advance our pipeline molecules with the ultimate goal of improving outcomes for cancer patients. I'll begin with Zanzalintinib, our next-generation tyrosine kinase inhibitor, which entered full development last year. At ESMO last September, we presented data from our dose escalation cohorts of STELLAR-001, which demonstrated that Zanza has a manageable safety profile with no unexpected toxicities. Additionally, we presented preliminary evidence of activity in renal cell carcinoma, including activity in patients who had previously been exposed to cabozantinib. We have since completed enrollment of an expansion cohort in clear cell RCC patients with 32 patients enrolled at the starting dose of 100 milligrams and now have preliminary efficacy data for the full cohort. These patients had received multiple prior therapies, including checkpoint combinations, with roughly half having received prior cabozantinib. With a median follow-up of 7 months, the overall response rate in the full cohort is 34%. Responses were seen in patients previously treated with cabozantinib as well as cabo-naive patients, where the overall response rate was 50%. Additionally, there is one unconfirmed partial response in the cabo-naive population for whom we are awaiting the results of a confirmatory scan. We also continue to be encouraged by the emerging safety profile. The complete data set, including both efficacy and safety, is planned for submission to an upcoming medical conference likely later this year. These data provide evidence for the activity of Zanzalintinib in a cabo-sensitive tumor type and provide additional support for leveraging Cabo data to inform the Zanza development program. We are continuing to enroll additional expansion cohorts in multiple solid tumors across both STELLAR-001 and 002, as well as on dose escalation cohorts for the combination of Zanza with nivolumab, the nivolumab-relatlimab combination. Data from these studies will inform future registrational plans for Zanza, and we look forward to sharing these data as they mature. Turning to our Zanza Phase 3 study, we initiated the first study, STELLAR-303, comparing the combination of Zanza with atezolizumab versus regorafenib in patients with non-MSI-high mismatch repair proficient late-line metastatic colorectal cancer with a primary endpoint of overall survival in the RAS wild-type population. The hypothesis for this trial was based on promising cabozantinib data from two studies in similar settings, COSMIC-021, and Exelixis-sponsored signal detection trial in combination with atezolizumab and CAMILLA, an investigator-sponsored trial with Cabo combined with durvalumab. Response rates in the RAS wild-type metastatic CRC population in these studies were 25% and 50%, respectively, suggesting robust activity relative to the current standard of care. Additionally, we announced the opening of STELLAR-304 late last year, a Phase 3 trial comparing the combination of Zanza and nivolumab to sunitinib in patients with certain non-clear cell RCC histologic subtypes who have not previously been treated for metastatic disease. Data to support this trial came from two Cabo studies, one as monotherapy and the other in combination with nivolumab. In an NCI-sponsored randomized Phase 2 trial, cabozantinib showed a longer PFS compared to sunitinib in patients with the papillary subtype of non-clear cell RCC, and response rates were 23% for Cabo and 4% for sunitinib. Promising activity of Cabo in combination with nivolumab was seen in an investigator-sponsored Phase 2 study where the response rate in patients with non-clear cell RCC was 47.5%. With these two Phase 3s now underway, we are also on track for the initiation of additional Phase 3 trials this year. We have selected the indications for the next two Phase 3 studies, and we'll share details of the trial design later this year. Moving on to XB002, our first antibody drug conjugate, which targets tissue factor. We believe that this ADC has important areas of potential differentiation versus competitor molecules: First, the antibody was designed to avoid interfering with the coagulation cascade, which results in potential for lower bleeding risk. Second, the stability of the linker leads to a reduction in circulating free payload, which may result in fewer off-target or statin-related toxicities, including neurotoxicity. We continue to be encouraged by both the PK, which demonstrates low levels of circulating free payload, as well as the emerging safety profile. We are nearing declaration of a recommended dose for monotherapy and look forward to expeditiously enrolling multiple solid tumor expansion cohorts as well as presenting additional data as they mature. These signal detection cohorts will inform the drug's safety and efficacy profile and allow us to pivot quickly into registration-directed trials. Additionally, we continue to enroll on the dose escalation cohorts for the nivolumab and bevacizumab combination to determine a recommended dose for each combination to carry forward into expansion, and we will continue to seek out other promising combination approaches in sensitive tumor types. For cabozantinib, we look forward to the readout of the progression-free survival primary endpoint for CONTACT-02, our Phase 3 study in combination with atezolizumab in metastatic castrate-resistant prostate cancer in the second half of this year. We announced in March that CONTACT-03, the Phase 3 trial evaluating cabozantinib in combination with atezolizumab versus cabozantinib alone in patients with previously treated advanced renal cell carcinoma, did not meet the primary endpoint of progression-free survival and, along with our partner and study sponsor Roche, we look forward to presenting the data at ASCO. Importantly, the CONTACT-03 study provides the largest data set to date on the performance of single-agent cabozantinib in RCC patients who have previously received checkpoint inhibitor-based therapy. In summary, we continue to make progress advancing our pipeline molecules and believe that the emerging data for both Zanzalintinib and XB002 are encouraging. We look forward to sharing the emerging data at upcoming medical conferences as they mature and continuing to expedite the development of these promising assets for the benefit of patients with cancer. And with that, I'll turn the call back over to Mike.

Mike Morrissey, President and CEO

All right. Thanks, Vicki. As you heard on the call today, the Exelixis team is off to a great start in 2023. We're excited to have the momentum from our cabozantinib franchise translate to the critical growth drivers across all components of the business as we, at Exelixis, work to help many more cancer patients in the future. We expect continued progress across our pipeline in 2023 and look forward to sharing our latest results and plans at an R&D Day later in the year. So I'll close by thanking the entire Exelixis team for their individual and collective efforts to support our range of discovery, development, and commercial activities. The team is highly motivated to achieve our mission to help cancer patients recover stronger and live longer. We drive for results every single day as we remain nimble and innovative across all components of the business and build on a culture of engagement and collaboration. We look forward to updating you on our progress in the future. Thank you for your continued support and interest in Exelixis, and we're now happy to open the call for questions.

Operator, Operator

Our first question comes from Asthika Goonewardene with Truist. Your line is open.

Asthika Goonewardene, Analyst

I was wondering about Zanzalintinib. You presented the first clinical data for it at ESMO this year, and it seems that the submission deadline for abstracts for ESMO 2023 is tomorrow. Could you let us know if you submitted an abstract or an update on the Zanza combo Phase 1 dose expansion to ESMO, or if you plan to do so before the deadline tomorrow? Thank you.

Mike Morrissey, President and CEO

All right. Thank you. Vicki, do you want to take that one?

Vicki Goodman, Chief Medical Officer

Sure. As I mentioned, we have now enrolled the full cohort and have sufficient follow-up in the clear cell RCC cohort to report response rates. We look forward to presenting this data at an upcoming medical conference later this year. I won't specify which conference at this point, but we believe we have a robust data set to present and look forward to sharing these results in more detail in the future.

Operator, Operator

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

Unidentified Analyst, Analyst

Hey, this is Paul on behalf of Michael. Thank you for taking our questions. We have some inquiries about the Phase 1 study for XB002, particularly regarding the cohort expansion. Are you planning to prioritize any specific tumor types where you've observed early clinical activity from the initial results? Does advancing this program into full development indicate that there may be one or more Phase 2 initiations soon? Additionally, you've introduced a tumor-agnostic cohort in the trial. Could you discuss the enrollment criteria for that and your plans for a tumor-agnostic approach? Thank you.

Mike Morrissey, President and CEO

Vicki, go ahead.

Vicki Goodman, Chief Medical Officer

Yes. So in terms of XB002, as I mentioned, we are nearing a dose to carry forward into expansion cohorts. We are looking forward to very quickly pivoting into those expansion cohorts, rapidly enrolling them, looking for signals, right? I think when we determine a signal that we're able to move forward with, that will be the pivot into full development. In terms of tumor types, obviously, we enrolled a very broad variety of tumor types in dose escalation. And so expansion is really going to be focused on determining signals in discrete populations. Of course, it will be informed by a competitor molecule and the profile that they've seen. But we are very encouraged by the data and the competitive profile. And so we think that we have a great opportunity here to be a best-in-class molecule. I would say with respect to the tumor-agnostic, this is really an opportunity for us to look for evidence of activity, perhaps in less common tumor types that do express tissue factor and get a better understanding of the potential impact of tissue factor expression on response rates.

Operator, Operator

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

Andy Hsieh, Analyst

Great. Thanks for taking my questions. So you highlighted in the prepared remarks and PR about CONTACT-03 at ASCO. And I'm just wondering about the kind of potential read-through, especially the non-clear cell populations to STELLAR-304. And maybe if you don't mind, you can squeeze a quick one. About cryo-EM and x-ray crystallography, these capabilities from a philosophical perspective, R&D philosophical perspective, does that allow you to expand beyond trying to find binding package like TKI into something that is more unique like an allosteric inhibitor? Thanks for taking my questions.

Mike Morrissey, President and CEO

Hey, Andy. It's Mike. Yes, thanks for your questions. Why don't we start with that last one with Dana, and then we'll go back to Vicki for CONTACT-03. Dana, go ahead?

Dana Aftab, Chief Scientific Officer

Sure. Yes, that was a great question. And in fact, yes, indeed, getting those structures, especially getting them so quickly gives us an opportunity to go for non-orthosteric binding approaches. So we are actually doing that with some programs right now. So the data coming in from those structural studies and coming in so quickly with such high resolution has really enabled some fantastic progress in drug discovery, honestly, that we haven't been able to see in a long time. So we're really excited about it. Vicki?

Vicki Goodman, Chief Medical Officer

Yes. So with respect to CONTACT-03, I think it's important to keep in mind this study looked at patients with previously treated RCC across both clear cell and non-clear cell. These patients had already all received prior I-O, in addition potentially to TKIs. So that's been proven thus far to be a very difficult area for drug development. I will point out that, again, I think the Cabo control arm will be interesting to look at in terms of the performance there versus what we've seen historically. And if we go back and think about Cabo development in a later line of therapy going back to METEOR, where we saw a response rate of about 20% in PFS of about 7.5 months to then Cantada, where, again, Cabo was a control arm in a Phase 3. In that case, some, but not all patients have received prior checkpoint inhibitors, and the median PFS was about 9.3 months. So compared to a checkpoint naive population, it does seem that there has been some improvement in Cabo performance in that second line. So I would recommend taking a look at the CONTACT-03 data closely in terms of Cabo performance. In terms of the STELLAR-304, this is a first-line population I outlined in my prepared remarks, the basis, the reason to believe here in terms of the prior Cabo data, which has shown activity in non-clear cell RCC. So we do have confidence that the activity we're seeing with Zanza in terms of RCC in a sensitive tumor type similar to Cabo gives us confidence in the design of STELLAR-304.

Operator, Operator

Thank you. Please stand by for our next question. Our next question comes from the line of Chi Fong with Bank of America. Your line is open.

Chi Fong, Analyst

This is Chi on behalf of Jason Gerberry from Bank of America. I have a question regarding the early pipeline. It's interesting that you've emphasized a more molecule-focused approach recently. In our previous discussions about the pipeline, companies typically focused on antibody biologic therapies, with less emphasis on small molecules and targeted oncology. I want to clarify if I am misunderstanding your approach and if you are indeed not considering anything related to targeted oncology. Additionally, has there been a shift in how the company views pipeline development compared to the past? Thank you.

Mike Morrissey, President and CEO

Yes. So that's a great question. So synthetic lethal approaches are really a way to understand more completely how tractable a target is in a specific population of patients. We like the approach as do many others because it essentially comes along with an automatic patient selection strategy. So you can liken this to cabozantinib in VHL defective tumors. VHL defects create a form of synthetic lethality to these types of kinase inhibitors that we are developing with cabozantinib and Zanzalintinib. So there's really no change in our strategy. We just have tools that enable us to get a better handle on patient population. And as Mike mentioned earlier, we really are pursuing a biology-centric modality-agnostic approach. So we choose our small molecules versus biotherapeutics based on the target and the biology to allow us to really explore targets that we think will bring the most benefit to patients.

Operator, Operator

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

Jay Olson, Analyst

Okay. Congrats on the progress, and thanks for taking the questions. For Zanza, can you just talk about the timeline and two diverse types that you're prioritizing for the next wave of Phase 3 programs? And how do you intend to trade off the balance between indications where you've already seen activity for Cabo versus going after new combinations? Thank you.

Mike Morrissey, President and CEO

Thanks, Jay. Vicki, you want to take that one?

Vicki Goodman, Chief Medical Officer

Yes, we are on track to start additional Phase 3 trials this year. We have identified two areas based on our assessment of unmet needs, available data, our ability to differentiate, and the potential market size. We will provide updates on these indications later this year at the right time, but we are currently working on the protocol developments ahead of launching those trials this year.

Operator, Operator

Thank you. Please standby for our next question. Our next question comes from the line of Gregory Renza with RBC Capital Markets. Your line is open.

Unidentified Analyst, Analyst

Hi, this is on behalf of Greg. I have a question regarding the share repurchase program. Is it currently active, or was it utilized in the first quarter or in April? Do you plan to start using it now after the first-quarter earnings? Thank you.

Mike Morrissey, President and CEO

Thank you for the question. When we announced the program, we were in a closed trading window, so we haven't been able to purchase shares. However, we remain committed to the $550 million share repurchase program that we announced in March.

Operator, Operator

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

Silvan Tuerkcan, Analyst

Yes, thank you very much for taking my question and congrats on the quarter. Just one question that one after you haven't talked about the PK7 inhibitor, XL102. Do we still expect data by the end of the year? And could you kind of outline what would lead to go/no-go decision here? What's the bar that you're looking for? Thank you.

Mike Morrissey, President and CEO

Yes. Thanks for the question. Vicki, do you want to take that?

Vicki Goodman, Chief Medical Officer

Sure. Yes. So as I mentioned, we are focused on dose escalation and making a go/no-go decision later this year. That will be based on the data at the end of the day. So both the safety profile, evidence of activity as well as PK and PD data. And in terms of data presentation, again, when we have a robust data set to present, we'll certainly do so as those data are mature.

Operator, Operator

Thank you. Please standby for our next question. Our next question comes from the line of Akash Tewari with Jefferies. Your line is open.

Unidentified Analyst, Analyst

Our question is regarding R&D spending. Do you have an idea of what percentage of revenues the activist shareholders expect for R&D spending compared to what the management team is aiming for? Also, what is the current status of your R&D spending this year, particularly for the Cabo trials and next-generation Cabo and T2 Factor ADC?

Mike Morrissey, President and CEO

Thanks for the question. There's a lot there. I really don't want to get into the details about the R&D spend. We give guidance on that at the beginning of the year. We reaffirmed that guidance this year. As you've heard in our prepared remarks, we have a very deep and robust R&D pipeline that's focused on improving the standard of care for patients, that budget and all aspects of the efforts here at Exelixis are obviously reviewed by the Board in very robust discussions that will continue as we go forward, and we are excited to be moving forward with the plans and the data that we've talked about today and will in the future. Thank you.

Operator, Operator

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

Yaron Werber, Analyst

Thank you for taking my question. I have a couple of interrelated questions. First, can you provide some insight into your pipeline, which ranges from Phase 3 to preclinical? Do you still have the capacity to bring in more compounds, or will the focus be primarily on advancing the current projects and moving the preclinical programs into the clinic? Secondly, could you share your thoughts regarding your decision not to nominate an additional board member, which has temporarily resolved some of the proxy battle? Thank you.

Mike Morrissey, President and CEO

Yes, Yaron, it's Mike. Thanks for the question. In regard to the first question, we are focused on prioritizing the best assets with the best data and the conviction that we have behind that in terms of how we invest in moving molecules forward internally versus externally, small molecules versus biologics. Obviously, we've got a track record of success there, which led to us focusing on Cabo back in the day and the success that led to that in terms of the broad label and again, approximately $1.9 billion in global revenue that we had last year. So we know how to be disciplined. We know how to prioritize that requires data and a sense of the commercial opportunity and the competition and all the different factors that drive into that. And that obviously will continue going forward. We are always looking for good assets on the outside that will continue. We have a very high bar for partnering and/or acquiring assets. As you know, our scientific conviction is much more prescient and much more critical to us in the short term in terms of the value equation in terms of where things are trading a year ago versus now. We have to have conviction in assets externally or internally to get behind them with the financial muscle that we've got and certainly expertise in development as well as commercial. So it's all about conviction and probability of success in our view on how that looks. So that will continue. We're on the lookout for good drugs. And certainly, as Dana mentioned, we like deals like Cybrexa and Sairopa because those are back-end loaded; we pay for success. And if we see more of those in the near term, then our plan is to be able to transact there to, again, build value for patients and shareholders. In terms of your other question, I refer you back to the press release we had on Sunday. I don't want to go beyond that. We have an open spot on the Board. We've agreed not amongst ourselves as a company and as the Board did not contest the election and we're moving forward. So that's that.

Operator, Operator

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

Michael King, Analyst

Thanks for taking the questions, guys. I'm not sure you want to get into this level of detail, but I had some questions on the spend. In the first quarter, you guys exceeded the Street consensus by about $20 million. And if you use a level in the first quarter as the basin grow it modestly to the end of the year, you're above the high end of our spend guidance would suggest that you're going to have to dial down the growth and spending on SG&A. And then on R&D spend, in the past, you've had a pretty big bolus in the fourth quarter. I'm just wondering from a maybe an order of magnitude basis, if that kind of increase over the previous quarters is going to moderate a bit because again, you'll come in over the high end of your spend. So just wanted to see if I can get some color on that.

Mike Morrissey, President and CEO

Yes, Chris, go ahead.

Chris Senner, Chief Financial Officer

Yes, Mike. So I guess a couple of things there from an R&D spend perspective. Last quarter, we had about $100 million or more of licensing expenses that came into play during the fourth quarter. We had significantly less than that in the first quarter this year. I mean if you look at the annualization of our first quarter spend, it's slightly below our current R&D guidance from an R&D perspective, but we still feel confident in where we are there. And then from an SG&A perspective, we did have some one-time things, which I won't go into. But even at 131, annualize that, that's at the 549 range. So we are still kind of at the lower end of the guidance. So it's within the guidance. And we did have some one-time things during the quarter, which as one-time things they will repeat themselves. So we still feel confident in the guidance that we have.

Operator, Operator

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

Chris Shibutani, Analyst

Great. Thank you very much. Mike, you've had such a significant tenure in the industry and certainly have been generating much by shepherding particularly Cabo through challenges of becoming a leading product in the oncology space. As you bring to bear your experience and think about the future, I think a lot of investors and therapeutics think about now into the back end of the decade, will there be certain pressure points like the IRA and whatnot and the differences with small molecules and thinking about how to design the strategy to sort of sustain that kind of leadership. I think one of the things that I'd be curious to understand is how you think about in particular, the voices that could be important to you with the Board. There is that one opening seat and there were public salvos that went back and forth in terms of the right constituencies and what kind of activity, voices, et cetera. What is your vision for what kind of sort of complementary skill sets and experiences would make sense for your Board to help best guide the company to continue to go forth as challenges just continue to be very competitive external dynamics through the back end of the decade. And again, just speaking to the wealth of experience that you've had would be very eager to sort of get a sense for what your vision is there. Thank you.

Mike Morrissey, President and CEO

Thank you for that. I'm not entirely clear on the question, but let me address what I believe you're asking. As I previously mentioned in response to Yaron's question, regarding the proxy issues, we discussed this in our press release on Sunday. We will not oppose the election as it is currently planned. Whatever will happen, will happen. We have a very strong board, and I expect that strength to continue. We have a solid process in place within the company that includes productive dialogue with the Board, fostering discussions and debates that enhance our chances for success as we aim to build shareholder value by aiding more cancer patients. We're genuinely excited about our future. As Vicki shared today, Zanza is showing strong momentum; XB002 is quickly approaching its expansion cohorts, and we have numerous opportunities from both internal and external sources. Since 2015, we have structured the company to operate like a business, generating free cash flow to support top-line growth through advancements in our pipeline. We are very optimistic about our current position. We have many opportunities ahead, our team is strong and motivated, and we look forward to benefiting our shareholders while helping a broader range of cancer patients than we have in the past.

Operator, Operator

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

Peter Lawson, Analyst

Great. Thanks for taking my question. Chris, just as we think about the underlying script growth, kind of any guidance there and kind of expectations for the kind of the level of discounts, allowances, and how that trends through the rest of the year?

Chris Senner, Chief Financial Officer

Yes, Peter, thanks for the question. So we did see around 30% gross to net in the first quarter. Like I said in the prepared remarks, we did see higher Medicare Part D, patients who are going through the donut hole and also PHS expenses. When I talked at the fourth quarter call back in February, I was thinking that the year is going to be in the 31% range for gross to net. And we still feel like that's the appropriate range for right now, but it's still early in the year. So that's where we are from a gross-net perspective.

Operator, Operator

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

Stephen Willey, Analyst

Yes. Thanks for taking the questions. So just on STELLAR-303 in colorectal, I don't think there's been much in the way of clinical benefit demonstrated in patients with liver metastases with any IO regimen. And I think both the Phase 2s you referenced had a pretty high incidence rate of liver metastases, I think somewhere around 80%. So I guess I'm just curious what you think the inclusion of tezo is adding in this liver med patient population. Thanks.

Vicki Goodman, Chief Medical Officer

Yes, sure. So I think coming back to STELLAR-303, this is a Phase 3 study looking at the combination of Zanza with atezolizumab versus regorafenib in late-line colorectal cancer patients, right? I think these patients have very limited treatment options. The rationale, as I said, is supported by two essentially Phase 2 kind of single-arm trials. One was a cohort on COSMIC-021 and the other was an IST. They were very similar patient populations in terms of this sort of late line previously heavily treated. As you mentioned, liver metastases are very common in colorectal cancer. So they were certainly represented in both of these trials. Given that they're single-arm trials, I would say that what we are seeing, however, is that there's a clear signal of response rates outside of what we would expect from traditional standard of care on the order of 50% from the CAMILLA IST and 25%. Now that's in the overall population, of course. We do believe it is the combination based on other data looking at contribution of components, obviously, that will be something that we have to address with the regulatory agencies at the time we file should the trial be successful. But we do feel like we are well-positioned potentially to improve upon the standard of care in this particularly high unmet need patient population.

Operator, Operator

Thank you. Due to the interest of time, I would now like to turn the call back over to today's host, Susan Hubbard. Ms. Hubbard?

Susan Hubbard, Executive Vice President of Public Affairs and Investor Relations

Yes. Thank you, Towanda. Thank you all for joining us today. We certainly welcome any call or questions you have either by phone or over e-mail, and we'll be happy to get back to you. Thanks again.

Operator, Operator

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