Earnings Call Transcript - EXEL Q2 2022

Operator, Operator

Good day, ladies and gentlemen, and welcome to the Exelixis Second Quarter 2022 Financial Results Conference Call. My name is Sarah, 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. Please proceed.

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

Thank you, Sarah, and thank you all for joining us for the Exelixis Second Quarter 2022 Financial Results Conference Call. Joining me on today's call are Mike Morrissey, our President and CEO; Chris Senner, our Chief Financial Officer; P.J. Haley, our Executive Vice President of Commercial; Vicki Goodman, our Chief Medical Officer; and Peter Lamb, our Chief Scientific Officer, who will together review our progress for the second quarter 2022 ended June 30, 2022. 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. Now with that, I will turn the call over to Mike.

Michael Morrissey, President and CEO

All right. Thank you, Susan, and thanks to everyone for joining us on the call today. Exelixis had a strong second quarter 2022 across all components of our business. We saw continued growth of the cabozantinib franchise, both in the U.S. and globally, while advancing a diversified pipeline of clinical and discovery programs to build the Exelixis product portfolio of the future. Key highlights from Q2 include: first, we saw a strong performance of the cabozantinib business with significant growth in demand and revenue in the U.S. CABOMETYX maintained its status as the leading TKI for RCC. The cabo franchise grew 22% year-over-year compared to Q2 2021, marking its seventh consecutive quarter of growth. Importantly, global cabozantinib franchise net product revenues generated by Exelixis and its partners were almost $500 million in Q2 2022; second, our emerging bicoastal development team is focused on advancing the Exelixis development pipeline to potential new cabo indications and our growing pipeline of clinical compounds, including XL092, XB002, XL102, and XL114. Important developments during the quarter include positive top-line results for COSMIC-313 and the initiation of the pivotal trial program for XL092 with STELLAR-303; third, our discovery activities focused both on small molecule and biologic programs continue to advance with two new collaborations to support our biologics discovery activities. With that, please see our press release issued an hour ago for our second quarter financial results and an extensive list of corporate milestones achieved in the quarter. I'll now turn the call over to Chris.

Christopher Senner, Chief Financial Officer

Thanks, Mike. For the second quarter of 2022, the company reported total revenues of approximately $419 million, which included cabozantinib franchise net product revenues of $347 million. CABOMETYX net product revenues were $339.2 million and included approximately $17 million in clinical trial sales. Gross to net for the cabozantinib franchise in the second quarter of 2022 was 28.2%, which is lower than the gross to net we experienced in the first quarter of 2022. This decrease in gross to net deductions in the second quarter of 2022 is primarily related to lower Medicare Part D and co-pay assistance expenses. Our trade inventory weeks on hand remained relatively flat when compared to the first quarter of 2022. Total revenues also included approximately $72 million in collaboration revenues and includes approximately $26 million of milestone revenues earned from Ipsen. Following the approval of the differentiated thyroid cancer indication in Europe and Canada. Our total operating expenses for the second quarter of 2022 were approximately $336 million compared to $273 million in the first quarter of 2022. R&D expense was the primary driver of the increase in total operating expenses, which was primarily related to the $25 million upfront payment for the option and license agreement we entered into in June with BioInvent International. Provision for income taxes for the second quarter of 2022 was approximately $18 million compared to approximately $17 million for the first quarter of 2022. The company reported GAAP net income of approximately $71 million or $0.22 per share on a fully diluted basis for the second quarter 2022. The company also reported non-GAAP net income of approximately $90 million or $0.28 per share on a fully diluted basis. Non-GAAP net income excludes the impact of approximately $19 million of stock-based compensation expense net of the related income tax effect. Cash and investments for the second quarter ended June 30, 2022, was approximately $2 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 and also allows us to pursue external business development opportunities to expand our pipeline. And finally, we are reiterating our full year 2022 financial guidance, which is detailed on Slide 12 of our earnings presentation. And with that, I'll turn the call over to P.J.

Patrick Haley, Executive Vice President of Commercial

Thank you, Chris. The second quarter of 2022 was a strong quarter for cabozantinib as we continued to build on the significant momentum of the franchise. The team continues to execute at a high level, which has resulted in CABOMETYX continuing to be the number one prescribed TKI in RCC. Furthermore, CABOMETYX total prescriptions, or TRx, have now grown for seven consecutive quarters. Demand growth is being driven primarily by the long duration of therapy for patients on CABOMETYX in combination with nivolumab in the first-line setting. Prescription trends remained strong in Q2 2022. Year-over-year, TRx growth in Q2 2022 was 29% relative to Q2 2021. Given the clinical data from the CheckMate 9ER study, we anticipate these first-line combination patients to receive therapy for approximately 1.5 years on average, thus driving a significantly longer treatment duration for CABOMETYX. We're encouraged by the fact that in our data, we see a near doubling of the amount of new patient starts at the 40-milligram dose in Q2 2022 since the CheckMate 9ER launch in January 2021. It's 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's TRx market share has increased every quarter since Q1 2021 and share in Q2 2022 was 37%. As we've discussed previously, the first-line RCC market is very competitive, and we are pleased with the performance of CABOMETYX in combination with nivolumab in this setting. Furthermore, we're still not seeing any 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 continues to be very positive. We believe all of this taken together with the momentum in the business positions CABOMETYX for continued growth in the second half of 2022. Turning to other settings. We are pleased that the CABOMETYX second-line RCC business remained strong and was stable in Q2, while growth continued in the first-line setting. In HCC, our business grew in Q2 and CABOMETYX continues to be the most prescribed TKI in the second-line setting for patients treated with immunotherapy containing regimens in the first line. With regards to second-line DTC, we continue to be pleased with the launch, and this indication continues to provide growth for the brand. Looking beyond the six current U.S. indications for cabozantinib, we are planning for the numerous life cycle expansion opportunities as they begin to have top-line data readouts in the second half of this year. We look forward to having the opportunity, pending data and approval to bring CABOMETYX to many more patients in need of additional treatment options. 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 serve patients. And with that, I'll turn the call over to Vicki.

Vicki Goodman, Chief Medical Officer

Thanks, P.J. Good afternoon. Today, I will provide a brief update on the progress of our clinical stage pipeline as well as our East Coast expansion in the Greater Philadelphia region. I'll begin with an update on our cabozantinib registrational trial. In early July, we reported positive top-line results for COSMIC-313, evaluating cabozantinib in combination with nivolumab and ipilimumab in intermediate and poor risk renal cell carcinoma. In the primary analysis of progression-free survival, cabozantinib in combination with nivolumab and ipilimumab significantly reduced the risk of disease progression or death compared to the combination of nivolumab and ipilimumab, with a hazard ratio of 0.73 and a p-value of 0.01. A prespecified interim analysis for the secondary endpoint of overall survival did not demonstrate a significant benefit for the cabozantinib arm compared to the nivolumab and ipilimumab control arm, and therefore, the trial will continue to the next analysis of overall survival. The safety profile observed in the trial was reflective of the known safety profiles for each single agent as well as the combination regimen used in this study, and no new safety signals were identified. We intend to discuss the results with the FDA to determine next steps towards a potential regulatory submission. I would now like to share a brief update on CONTACT-01. The Phase III pivotal study evaluating cabozantinib in combination with atezolizumab versus docetaxel in patients with metastatic non-small cell lung cancer who have been previously treated with an immune checkpoint inhibitor and platinum-containing chemotherapy. The independent data monitoring committee for the study conducted a preplanned interim analysis and recommended that the study remain blinded and continue to the final analysis for overall survival, which is expected to occur before the end of 2022. We are also expecting a readout of the progression-free survival endpoint for CONTACT-03 of cabozantinib in combination with atezolizumab in PD-1 experienced renal cell carcinoma in the second half of this year. For CONTACT-02, our Phase III study in combination with atezolizumab in metastatic castrate-resistant prostate cancer, we are now projecting that enrollment will be completed in the first half of next year. We continue to make progress on our pipeline molecules. In June, we initiated the first Phase III study of XL092, our next-generation tyrosine kinase inhibitor, in non-MSI-high colorectal cancer. XL092 is also being explored in combination with several checkpoint inhibitors and IO combinations, and additional registrational studies are planned. We also continue to explore additional potential combination opportunities with novel agents and have made progress with several partners to bring novel combinations into the clinic. XB002, our first antibody drug conjugate, which targets tissue factor without interfering with the coagulation pathway in preclinical models, continues in dose escalation. Thus far, it has been well tolerated with no bleeding events observed. We expect to move into the multi-cohort dose expansion phase later this year. Dose escalation has also been initiated for the combination of XB002 with nivolumab. 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 a Phase II dose. Turning now to our plans for upcoming data presentations. An abstract for the COSMIC-313 top line data has been submitted to a major medical conference, and we are awaiting a decision from that conference about acceptance of that abstract. In addition, an abstract for the XL092 Phase I study was accepted for a poster at the upcoming European Society of Medical Oncology meeting. The poster will include data from the monotherapy and atezolizumab combination dose escalation cohorts in heavily pretreated solid tumors and will focus primarily on the safety and pharmacokinetics which led to a recommended Phase II dose. Preliminary activity across multiple doses and tumor types will also be presented. We also expect to provide Phase I clinical updates for XB002 and XL102 later this year. Finally, with regard to our Philadelphia area campus, we expect to move this month into our intermediate-term space in King of Prussia, which can hold approximately 140 office-based employees. Taking advantage of the broad talent base in the Greater Philadelphia area, we are now hiring for roles both inside and outside of development, including two executive-level roles to build out a leadership presence on both coasts. We have also identified a long-term build-to-suit space of over 200,000 square feet of mixed office and lab space close to our intermediate-term offices in King of Prussia. I'm pleased by the progress we are making to create a bi-coastal presence across two biotechnology hubs operating as one team, focused on the singular mission of developing medicines to improve the lives of patients with cancer. With that, I'll turn it over to Peter for a discovery update.

Peter Lamb, Chief Scientific Officer

Thank you, Vicki. I'll provide an update on developments in the Exelixis preclinical pipeline. We are building a broad pipeline derived from both internal and collaboration efforts with over 10 programs in progress, giving us the possibility of advancing up to 5 compounds into preclinical development in 2022, with additional programs on track for 2023. Late last year, we advanced XB010, a novel ADC targeting 5T4 into preclinical development, and we have now advanced our first bispecific XB014 targeting PD-L1 and CD47 into preclinical development as well. As you can see on the pipeline slide, the preclinical pipeline is a balanced mix of small molecules and biotherapeutics, which is reflective of how we see our clinical pipeline evolving in the future. We are continuing to accelerate the expansion of our pipeline, both through growing internal capabilities and through business development activities. We have significant efforts on the business development front aimed at providing us access to novel targets, capabilities and technologies that complement and accelerate our ongoing biotherapeutics and small molecule strategies. We recently concluded two deals that exemplified this approach. First, we are pleased to have entered into a collaboration with BioInvent to identify novel targets and antibodies using their platform. BioInvent has significant antibody discovery and immuno-oncology expertise, and their platform uses primary human tumor material as a starting point for parallel tumor-specific target identification and antibody discovery. Under the agreement, we can select three targets to license upon identification of development candidates against those targets. At that point, we're responsible for all future development and have advanced the antibodies as stand-alone or use them to make ADCs or bispecifics. This is an investment in our longer-term biotherapeutics platform and is aimed at allowing us to broaden the target space we are addressing. We're continuing to look for additional partnerships that will add further biological novelty to our pipeline. We've also recently announced a deal with Ryvu for access to their proprietary STING agonists, which we intend to use to construct novel immunostimulatory ADCs, expanding our portfolio of payloads beyond cytotoxics. We believe that this provides an exciting opportunity for tumor-targeted stimulation of innate immunity with potential for being combined with a variety of antitumor and immune checkpoint therapies. We're continuing to look for additional opportunities to expand our access to antibodies and payloads to support future pipeline growth. Finally, we're actively assessing late preclinical and early clinical assets with the aim of identifying multiple opportunities to invest in. Failure rates for oncology drugs remain high, and as such, we currently prefer a strategy of making multiple investments before clinical proof of concept rather than making more substantial investments based on inadequate or inconclusive data. We look forward to providing additional updates on these business development discussions as they come to fruition. I'll now turn the call back over to Mike.

Michael Morrissey, President and CEO

All right. Thanks, Peter. As you heard on the call today, the EXEL team continued to execute across all components of our business in the second quarter with significant progress across our pipeline, clinical development and commercial activities. As we enter the second half of 2022, we're excited about the potential for the multiple growth drivers ahead of us, as we continue to move the business forward and most importantly, enable Exelixis to help many more cancer patients. I'll close by thanking the Exelixis team for their individual and collective efforts to support our broad range of discovery, development and commercial activities, both here in Alameda and in our growing Exelixis East presence. We have the vision, determination, and resources to become a multiproduct enterprise and expand our reach to serve cancer patients across the globe. 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

Your first question comes from the line of Asthika Goonewardene with Truist.

Unidentified Analyst, Analyst

First of all, congrats on the quarter. I have a few questions regarding XL102. Are you still planning to proceed with the expansion cohorts in HR-positive breast cancer, and when can we expect enrollment to begin? Secondly, about gross to net, it appears that your discounts have remained steady quarter-over-quarter while gross product revenues increased. How do you anticipate that changing in the second half? Are there any updates to your previous expectations? Lastly, I noticed in the 10-Q that Teva has filed an ANDA amendment. Are you considering filing a lawsuit against them? Would this be a separate case, or would it be included in the current lawsuit against Teva?

Michael Morrissey, President and CEO

Yes. Thanks for the questions. Why don't we start with Vicki on the first one? Chris can take the second one, and I'll answer the third one.

Vicki Goodman, Chief Medical Officer

Sure. So with respect to XL102, as I mentioned, we're currently in the dose escalation phase. And once we reach a recommended Phase II dose, we'd be able to move on into dose expansion. So it will take some time to complete the escalation as well as evaluate that data. Our plans for dose expansion have not changed at this point.

Christopher Senner, Chief Financial Officer

Yes. Thanks, Mike. In the first quarter of this year, our gross to net percentage was 30.8%, but it decreased to 28.2% this quarter. This change was mainly due to Medicare Part D and reduced co-pay assistance for commercial patients. As mentioned in the last quarter's call, we anticipate that the gross to net for the year will be around 29% based on our current outlook.

Michael Morrissey, President and CEO

Thanks. And in regard to your question around the Teva ANDA, I can't really provide more update today on that. So thanks for the question.

Operator, Operator

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

Jason Gerberry, Analyst

Actually, I could elaborate on my answer compared to the previous one. There is an update regarding a new patent in dispute related to one of your formulation patents that hasn’t been previously asserted in litigation. I'm curious if this is connected to the issues in the generic application concerning certain impurities, likely related to the cabozantinib form. If you can't go into too many details, I'm also interested in whether this patent will follow a separate litigation track from the other two. I'm just wondering how complicated the overall MSN litigation case has become.

Michael Morrissey, President and CEO

Yes, Jason, it's Mike. Thanks for the questions. All fair questions. I'm not going to be able to say much more. You're correct about the third newest Orange book addition and Paragraph IV, back and forth that's happening right now. So we're looking through all those details. And as that becomes clarified, it will show up in the public domain; you'll be able to see what's happening, okay? Can't really provide more updates. But thanks for the question.

Operator, Operator

Your next question comes from the line of Michael Schmidt with Guggenheim.

Michael Schmidt, Analyst

I had a few on CABOMETYX. Maybe first, if you could comment on market dynamics in the first-line RCC setting? Where does that growing TRx share? Where is it coming from? Are you still taking share from SUTENT predominantly or perhaps from some of the other combinations and the LENVIMA is also growing at the moment? I'm just curious how you see that playing out longer term in first-line RCC. A question on COSMIC-313. We were just wondering what the relevance of this OS analysis is just given that other drug, for example, the JAVELIN regimen did actually obtain approval just based on PFS without OS being ? And then lastly, on CONTACT-01, we're just curious what your expectation is how the control arm will perform here in lung cancer post checkpoint and chemotherapy and is perhaps the relevant historic comp?

Michael Morrissey, President and CEO

Okay. Thanks, Michael. Why don't we start with P.J. for the first question and then Vicki can follow up with the next two?

Patrick Haley, Executive Vice President of Commercial

Perfect. Thanks, Michael. It's P.J. Yes, as you mentioned with regards to the market dynamics in first-line RCC, we're certainly pleased with the growth we've seen, as we talked about seven quarters in a row of prescription growth. And Q2 this year over Q2 last year, TRx growth of 29%, we're certainly pleased with and 6% quarter-over-quarter. So I think what's happening in the marketplace is the data and the messages really resonating with physicians. As I mentioned in the prepared remarks, physician experience continues to be positive as physicians get more experience with CABOMETYX and nivo in the first-line setting. Certainly, our data and the messages of overall survival balanced with a good toxicity profile and quality of life really resonate there. So we continue to take share from multiple TKIs. And I think we're really well positioned going forward to continue to take share as well as continuing to get that growth, as I mentioned in my prepared remarks, from just the duration of therapy for those patients, where in the trial, the PFS is in the ballpark of 1.5 years. So I think we're benefiting from all those dynamics.

Vicki Goodman, Chief Medical Officer

Yes. For COSMIC-313, it's important to remember that we studied the triplet combination of CABOMETYX with nivolumab and ipilimumab compared to nivolumab and ipilimumab in patients with poor and intermediate risk, where nivo and ipi have already shown a survival benefit. This is the first Phase III clinical trial to test against a modern standard of care in renal cell carcinoma. The primary endpoint is progression-free survival, and we've clearly shown a benefit in PFS. The overall survival data is still maturing; the median OS with nivo and ipi in this patient population is around 4 years, so we expect it will take some time for that data to mature. With these results, we plan to discuss with the FDA a potential regulatory submission based on the progression-free survival data. Regarding CONTACT-01, this trial involves a patient population with non-small cell lung cancer who have already received both a checkpoint inhibitor and platinum-based chemotherapy. They have limited treatment options and often receive single-drug chemotherapy. The expected survival in this context is less than a year for these patients, highlighting the need for additional treatment options that can enhance overall survival.

Operator, Operator

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

Andy Hsieh, Analyst

Congratulations on the stellar quarter from the cabozantinib franchise, achieving over $2 billion annualized sales globally and also the 313 win. I have a question regarding the Senate bill. I'm just curious if you have any thoughts regarding the short-term impact from Medicare exposure? And potentially, longer term, as you think about portfolio diversification, any sort of push and pull that you expect as you plan on expanding the pipeline? The second question I have is for Peter. I am very curious about the BioInvent deal. I'm just curious about from a drug development standpoint, what potential blind spots can you uncover by using primary tissues versus just kind of cell lines? And I have a follow-up.

Michael Morrissey, President and CEO

Thank you for the questions, Andy. I'll address the first one, and Peter can elaborate on the second. Regarding the Inflation Reduction Act and the drug pricing component, it’s been quite an eventful weekend with various developments. I believe it should be signed by the end of next week. To give you a broad overview, there is quite a bit of complexity involved with approximately 200 pages dedicated to drug pricing within the 800-page legislation. We're currently analyzing the details to grasp both the quantitative and temporal aspects better. In a few weeks, we should have additional insights on this. Overall, it doesn't significantly affect our company in its current state. We are classified as a small clinical entity with only one product, according to the criteria in the draft bill, so we don't foresee a substantial impact on our operations. As you mentioned eloquently, we aim to grow and expand our offerings to become a multi-product company with both small molecules and biologics, which aligns well with the bill’s language and our goal to assist more patients. While there may be challenges in the long run, we are confident we can navigate them. For the short- to mid-term, we expect the impact to be minimal. Peter?

Peter Lamb, Chief Scientific Officer

Thank you for the question on BioInvent. I'm very pleased with the deal we made. As you noted, their target identification and validation efforts begin with primary human tumor material, which has several advantages over cell lines and even animal models. It represents the most relevant tissue for developing treatments for cancer patients. Starting from this relevant point is particularly beneficial, especially when examining multiple samples. Additionally, the biopsies and tumor material they use include not only cancer cells but also the true tumor microenvironment with various immune cells and stromal cells. This comprehensive approach enhances the analysis. Regarding target expression, it's often complex and influenced by local factors like growth factors and cytokines. When these samples are removed from their natural setting and cultured, that complexity can be lost. Therefore, beginning with this primary material is very advantageous. Another compelling aspect of the collaboration is their target identification method, which parallels the way antibodies are developed. They use their in-house antibody library to probe the human tumor material and identify what binds, followed by a detailed process to analyze which cell types the antibodies attach to, particularly focusing on elements specific to human tumors. Once antibodies are identified, it allows for functional assessments, such as determining if they can kill tumor cells or activate immune responses. These two components combined create a powerful platform, and we are excited to collaborate with them.

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

Andy, did you have a follow up?

Andy Hsieh, Analyst

I do. This might not be a fair question. There's a lot of political development happening in the oncology field. With the recent news regarding FRESCO-2 in CRC, RCC adjuvant, and HCC, along with the LENVIMA combination, I'm curious if Vicki can share her thoughts on these developments in the oncology space and how they might influence your confidence level and strategic position for XL092.

Vicki Goodman, Chief Medical Officer

Yes. Thanks for the question. So well, I wouldn't comment on datasets that I haven't seen from competitors. I will say, obviously, drug development is not a sure bet. I think that when we look at XL092, I think there's a couple of reasons for having confidence. One is, it has a very similar kinase profile to cabozantinib. It has a shorter half-life as it was designed to in order to potentially make the management of adverse events more manageable with temporary interruptions. And then I think the ability to combine with any number of additional combination agents. So as I mentioned in my prepared remarks, combining with a variety of different IO agents, both checkpoint inhibitors, including PD-1 as well as potentially novel agents, really gives us a broad number of possibilities, and we are leveraging the cabozantinib data that we've seen, given the similar kinase profile to really consider where to go next with the perfect example of that is the CRC program where you saw the data at ASCO-GI earlier this year from both COSMIC-021 as well as from an IST that really provided the background data and confidence to move forward in that tumor type. And so you'll be seeing additional Phase III trials where we will be leveraging the cabozantinib data and activity that we've seen, particularly with combination approaches to move forward with additional registrational programs.

Operator, Operator

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

Jay Olson, Analyst

Congrats on the quarter. Can you talk about the feedback that you've received from KOLs on the COSMIC-313 top line results? And any lessons you learned that you plan to apply to triplet regimens with XL092 in other tumor types? And then separately, we had a question on the factors that drove you to maintain your revenue guidance. And any comments you can share on Cabo sales trends going into the second half of the year?

Michael Morrissey, President and CEO

Jay, it's Mike. It's probably a little bit early to be commenting on feedback we're getting on 313. Again, as Vicki mentioned in her prepared remarks, I'm hoping to have that data presentation sometime this year. So maybe we can come back to that question once the data is out, and we can speak more freely about the totality of the data that's available, okay? In terms of guidance, I'll pass it over to Chris.

Christopher Senner, Chief Financial Officer

Thanks, Mike. So from a revenue perspective, yes, we're maintaining the guidance level for product revenue of $1.325 billion to $1.425 billion. And right now, based on what we've done year-to-date at $657 million. So if you annualize that, that's in the lower end of the range. But we continue to see growth. We've seen growth in Q1, we've seen growth in Q2, and that's our expectation for growth in the second half of this year to meet that revenue guidance number.

Operator, Operator

Your next question comes from the line of Akash Tewari with Jefferies.

Unidentified Analyst, Analyst

This is Akash. We have a couple of questions. The first question is about XB002. From the poster, it seems the main improvement in XB002 is related to neutral aspects, however, we noticed that around 20% of patients in the TIVDAK pivotal cervical cancer trial experienced ocular adverse events that led to dose reductions, and 5% of patients discontinued treatment. How confident are you that you will be able to administer 2 mg per kg and manage immuno-oncology toxicity? The second question is about cabo. Are you still confident in the projected run rate of $1.5 billion in cabo sales by year-end? Additionally, what leads you to be confident about cabo's growth after 2022, considering the COSMIC-313 data and competition from other treatments in the market?

Peter Lamb, Chief Scientific Officer

It's Peter. Thank you for the question regarding XB002. There are several important differences between XB002 and TIVDAK that we believe are significant. This is a strong example of utilizing a target that has been clinically validated, as evidenced by the TIVDAK data, and then building on that foundation. Let me highlight some points. Firstly, the antibody is distinct and binds to a different epitope on tissue factor. It was selected carefully to ensure that the epitope does not interfere with Factor VII binding and does not affect coagulation, which we have demonstrated in various preclinical models, both in vitro and in vivo. Therefore, we are quite confident that this will translate to clinical results. The second major differentiating factor is the payload linker. XB002 employs the ZymeLink linker payload from Zymeworks, which is a modified oral statin, differing from the standard MMAE that has been widely used. This has been significantly modified and utilizes a different linker, which was optimized for various parameters, particularly the stability of the bond between the linker and the antibody. Preclinically, we have observed consistent results with XB002. Regarding dosing, we have noted very low levels of free circulating payload while still achieving good levels of intact antibody-drug conjugate. Increasing levels of free payload can lead to various adverse events, and we believe that the reduced neutropenia observed in the preclinical models may be related to this. We think that XB002 may allow for higher dosing than what has been possible with TIVDAK, whether in terms of milligrams per kilogram or actual plasma exposure, potentially leading to increased efficacy with a favorable therapeutic index. We'll have to wait and see how the results unfold.

Michael Morrissey, President and CEO

Regarding the other questions, Mike, we are indeed on track for that $1.5 billion run rate by the end of the year. We have two more quarters ahead, and I believe we have gotten off to a solid start in the first and second quarters of 2022. Please stay tuned for updates as we progress through the year. Concerning the long-term growth potential for CABOMETYX, much of that depends on the outcomes of the CONTACT trials. We need positive results to drive revenue growth. The RCC initiative, as P.J. and the team have mentioned today, has been progressing very well. We are also optimistic about 313, particularly the top-line data. We need to determine the next steps in discussions with the FDA. Good data presents an opportunity for top-line growth, which is essential to our business. Please stay tuned.

Operator, Operator

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

Yaron Werber, Analyst

So I have a couple of questions. The first one, just maybe as a follow-up to the last one. When we look at seasonality for CABOMETYX, it looks like at least the last two years sort of Q3 is a little weaker and then Q4 has a really strong kind of bounce back and enter the year. Are you expecting sort of similar seasonality? Or was that more of a COVID issue? And then secondly, with respect to CONTACT-01, I know you probably can't say a lot, but can you give us any flavor at all as to what was the interim analysis bar for . It sounds like you passed futility. So just confirm there was a futility look. And then finally, Ipsen is guiding to CONTACT-02 data next year in prostate, and I think you're guiding to completing enrollment in the first half. So I just want to make sure if you continue enrollment in the first half, does it sound like you're on track for data by the end of the year?

Michael Morrissey, President and CEO

I’ll answer the first question, and then Vicki can respond to the next two. Regarding your question about the third quarter, it’s understandable, but we don’t provide insights into current quarter performance. You’re welcome to look at previous years to form your own conclusions, but we won’t comment further on that. Thank you. Vicki?

Vicki Goodman, Chief Medical Officer

Yes. And so I believe in CONTACT-01, the non-small cell study, where you're asking about the OS analysis. So this is a Roche-run trial that we're partnering with Roche. And per their process, the IDMC met to review an interim analysis of overall survival and recommended that the trial be blinded and continue on to the final analysis. So we expect to see the final analysis data before the end of the year. And we look forward to sharing those data at a medical conference when we receive them and certainly include details of the specifics of the trial design. I apologize. I missed your second question for me.

Yaron Werber, Analyst

Yes. Ipsen is guiding that CONTACT-02 in prostate will have data available by the end of next year. I believe you are also indicating that enrollment will be completed in the first half. Just to clarify, if enrollment is finished in the first half, will the data be available by the year's end? I want to ensure that information is consistent.

Vicki Goodman, Chief Medical Officer

We are currently focused on completing enrollment and anticipate finishing this in the first half of next year. Once enrollment is complete, we will have a clearer understanding of our timeline for the events and the analysis.

Operator, Operator

Your next question comes from the line of Peter Lawson with Barclays.

Peter Lawson, Analyst

Chris, I guess just thoughts on the use of cash and thoughts on potential M&A and asset crisis. Any kind of commentary around that would be great.

Christopher Senner, Chief Financial Officer

Thank you, Peter. This is Chris. We currently have $2 billion, and as I stated in my prepared remarks, we view this as a resource to further develop our discovery and development teams. Additionally, we are actively pursuing business development opportunities and evaluating assets. Just because some assets are more affordable does not necessarily mean they are more favorable. Our focus is on the science, and from that, we believe the economic aspects will follow. We're actively seeking assets that can enhance our pipeline.

Peter Lawson, Analyst

Got you. And do you feel asset prices have reached a reasonable level?

Christopher Senner, Chief Financial Officer

Yes. I mean, Peter, they've come down, but I mean, it's all relative. It's all relative to the value that you see based on the data that you're seeing and the opportunity in the market. So it's a relative number. So we're continuing to look.

Vicki Goodman, Chief Medical Officer

Yes. So we have submitted an abstract for XL102 with the hopes of sharing data later this year at a medical conference. I think in terms of the details, that will obviously be shared at the time that the abstract is published and ultimately with the presentation at the conference. It is a dose escalation, looking across multiple cohorts and multiple tumor types. And so that is what you would expect to see at that time.

Unidentified Analyst, Analyst

This is Greg Renza. Congratulations on the great quarter. First, I wanted to discuss the ASCO 2022 data you presented regarding CABO combinations with pembrolizumab, particularly in head and neck sarcomas and non-small cell lung cancer. How do you view that combination moving forward? Could you provide some insight into potential registration trials and how they may be structured?

Michael Morrissey, President and CEO

Okay. Vicki, do you want to take the first part?

Vicki Goodman, Chief Medical Officer

Sure. So with regard to the cabozantinib plus pembrolizumab data that were presented at ASCO. So this was from an investigator-sponsored trial in recurrent head and neck cancer. Certainly, interesting data. As we've said before, we're looking to leverage data from our cabozantinib development program to move forward with XL092 as quickly as possible given the similar kinase profile. Again, I think checkpoint inhibitor combinations are certainly of interest to us given the potential immune modulation and what we've seen in terms of activity for checkpoint inhibitor combinations with the tyrosine kinase inhibitors. So we're going to continue to leverage those learnings as we develop additional registrational trials. So for now, stay tuned.

Peter Lamb, Chief Scientific Officer

Yes, this is Peter. So with respect to ongoing BD activities, you're correct, yes, very active right now. We're looking at a pretty broad spectrum of things just to provide a bit more color. We have obviously are building a fairly substantial internal small molecule discovery capability. That said, I think there is a lot of interesting approaches and technologies out there that enables one to take on a broader range of targets than the traditional small molecule kind of targets that have been out there previously, such as kinases. So we're always looking at those, essentially seeking to complement what we can do internally and then broaden the range of targets that we can take on. Likewise, on the biotherapeutics front, for us, that's much more being done through a network of collaborations. So again, we continue to look at collaborations that will give us access to a broader range of targets, antibodies, payloads, and platforms potentially as well. And then coupled with that, of course, we've been very actively looking at a wide range of both small molecules and biotherapeutics or either in late preclinical development or early clinical development with the aim of potentially optioning or licensing those. So yes, lots going on, so stay tuned.

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

At this time, there are no further questions. And so I will turn the call over to today's host, Susan Hubbard. Ms. Hubbard? Yes, thank you. And thank you all for joining us today. We certainly welcome your follow-up calls with any additional questions you may have that we were unable to address during today's call.

Operator, Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.