Exelixis, Inc.

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.

Thank you, Sarah, and thank you all for joining us for the Exalexis second quarter 2022 financial results conference call. Joining me on today's call are Mike Morsey, our president and CEO, Chris Center, our chief financial officer, PJ Haley, our executive vice president of commercial, Vicki Goodman, our chief medical officer, and Peter Lam, our chief scientific officer, who will together review our progress for the second quarter 2022 and the June 30th, 2022. During the call today, we will refer to financial measures not calculated according to generally accepting 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 costs associated with discovery, product development, business development, and commercialization activities. Now, with that, I will turn the call over to Mike.

All right. Thank you, Susan, and thanks to everyone for joining us on the call today. Exalexis had a strong second quarter 2022 across all components of our business. We saw continued growth of the Cabo's Antidote franchise, both in the U.S. and globally, while advancing a diversified pipeline of clinical and discovery programs to build the Exalexis product portfolio of the future. Key highlights from Q2 include, first, we saw strong performance of the Cabo's Antidote business with significant growth in demand and revenue in the U.S. Cabo Medics maintained its status as the leading TKI for RCC. the Cabo franchise grew 22% year-over-year compared to 2Q 2021, marking its seventh consecutive quarter of growth. Importantly, global Cabo Xanthan franchise net product revenues generated by Exalexis and its partners were almost $500 million in Q2 2022. Second, our emerging bi-coastal development team is focused on advancing the Exalexis development pipeline through potential new Cabo indications and a growing pipeline of clinical compounds including XL092, XB002, XL102, and XL114. Developments during the quarter include positive top line results for COSMIC 313 and the initiation of the pivotal trial program for XL092 with STELR 303. Third, our discovery activities focused both on small molecule and biologic programs continues 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.

Thanks, Mike. For the second quarter of 2022, the company reported total revenues of approximately $419 million, which included Cabo Zantative franchise net product revenues of $347 million. Cabo Medics net product revenues were $339.2 million and included approximately $17 million in clinical trial sales. Gross to net for the Cabo Zantative 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 copay assistance expenses. Our trade inventory weeks on hand remain 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 2022 were approximately $336 million compared to $273 million in first quarter 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 2022 was approximately $18 million, compared to approximately $17 million for the first quarter of 2022. The company reported gap net income of approximately $71 million, or 22 cents per share, on a fully diluted basis for the second quarter of 2022. The company also reported non-gap net income of approximately $90 million, or 28 cents per share, on a fully diluted basis. Non-gap 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 quarter ended June 30th, 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 PJ.

Thank you, Chris. The second quarter of 2022 was a strong quarter for Cabo Zantanib 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 Cabo Medics continuing to be the number one prescribed TKI in RCC. Furthermore, Cabo Medics 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 cabomedics in combination with nivolumab in the first-line setting. Prescription trends remain 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 a year and a half on average, thus driving a significantly longer treatment duration for coblometics. 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 Cabo Medix and Leida, SUTINT, Votrien, and LEMVIMA, Cabo TRX market share has increased every quarter since Q1 2021, and the 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 CaboMedix in combination with nivolumab in this setting. Furthermore, we are 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 CaboMedix continued growth in the second half of 2022. Turning to other settings, we are pleased that the Cabo Medics 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 Cabo Medics continues to be the most prescribed TKI in the second-line setting for patients treated with immunotherapy-containing regimens in the first lines. 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 lifecycle 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 CaboMedix 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 CobbleMedics to all eligible patients as we continue to build the franchise and serve patients. With that, I'll turn the call over to Vicki.

Thanks, PJ. 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 trials. 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 with the combination of nivolumab and ipilimumab with a hazard ratio of 0.73 and p-value of 0.01. A pre-specified 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 regimens 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 tabozantinib 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 three 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 one 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 two 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 1 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 cohort 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 to 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.

Thank you, Vicki. I'll provide an update of developments in the Exelix's 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 five 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're 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 molecules strategies. We recently concluded two deals that exemplify this approach. First, we are pleased to have entered into a collaboration with BioInvent to identify novel targets and antibodies using their first platform. BioInvent has significant antibody discovery and immune 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 could advance the antibodies as standalone 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 Ryview 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 anti-tumor 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 full 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 BD discussions as they come to fruition. I'll now turn the call back over to Mike.

All right. Thanks, Peter. As you heard on the call today, the XL 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. Excuse me. 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 XLX to help many more cancer patients. I'll close by thanking the Exalexis 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 Exalexis East presence. We have the vision, determination, and resources to become a multi-product 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 Exalexis, and we're now happy to open the call for questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. Your first question comes from the line of Ashthika Gunawardame with Truist. Please proceed.

Hello. This is Anand Shaner for Austica. First of all, congrats on the quarter. Just had some questions here on Excel 102. Are you guys still going to do the expansion cohorts in HR-positive breast cancer, and when can we expect enrollment to open in that? Secondly, with respect to gross to net, it seems like quarter over quarter, your discounts were pretty flat while your gross product revenues grew. How do you see that evolving in the second half? Is there anything different from your previous expectations? And thirdly, in the 10Q, I saw that Teva seems to have filed a ANDA amendment, and they're going to, or you guys are going to potentially file a suit against them. Would that be a separate suit, or would that be rolled into the current suit against Teva? Thank you.

Yeah, 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.

Sure, so with respect to Excel 102, As I mentioned, we're currently in the dose escalation phase, and once we reach a recommended phase two 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.

Thanks, Mike. So this is Chris Hunter. So from a gross to net perspective, last quarter, so first quarter this year, gross to net was 30.8%. We came down to 28.2% this quarter. And that was driven, as I said, mostly around Medicare Part D and lower copay assistance for commercial patients. As I said on the last quarter call, we're thinking that gross to net for the year is going to be in the 29% range as we see it today.

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

Thank you so much.

Your next question comes from the line of Jason Kerberry with Bank of America. Please proceed.

Oh, hey, guys. Thanks for taking my question. And hopefully the answer could be a little more expounded upon than the last one. But just You know, there was an update that there's a new patent in dispute that pertains to one of your formulation patents that hadn't been asserted earlier on in litigation. And just curious if that's in any way connected to there's a deficiency in the generic application regarding some impurities, presumably around their S form of cabozotinib. And if you can't get into too many details, just curious, you know, will that patent operate under a separate litigation track than the other two tracks? I'm just kind of curious. how complex the overall MSN litigation case has gotten.

Yeah, Jason, it's Mike. Thanks for the question. All fair questions. I'm not going to be able to say much more. You're correct about the third newest Orange Book edition and paragraph four, 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, and you'll be able to see what's happening. Okay? Can't really provide more updates, but thanks for the question.

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

Hey, guys. Thanks for taking my questions. I had a few on Cabo Medics. Maybe first, if you could comment on market dynamics in the first line RCC setting. You know, where does that growing TRX share, where is it coming from? Are you still taking share from SUTEN 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 Drugs, for example, the Javelin regimen did actually obtain approval just based on non-PFS without OS being stat-sick. 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 Canopy 2 perhaps the relevant historic comp? Thanks so much.

Okay, thanks, Michael. Why don't we start with PJ for the first question, and then Vicky can follow up with the next two?

Perfect. Thanks, Michael. It's PJ. Yeah, you know, as you mentioned with regards to the market dynamics and 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%, you know, quarter over quarter. You know, so I think what's happening in the marketplace is the data and the messages are really resonating with physicians. As I mentioned in the prepared remarks, you know, physician experience continues to be positive here. you know, as physicians get more experience with CaboMedix and NEVO in the first-line setting. Certainly our data and the messages of overall survival balanced with, you know, a good toxicity profile and quality of life really resonates there. You know, so we continue to take share from multiple TKIs. And, you know, I think we're really well positioned going forward to continue to take share as well as, you know, continuing to get that growth, as I mentioned in my prepared remarks, from just the duration of therapy for those patients, which were, you know, in the trial, the PFS is in the ballpark of a year and a half. So I think we're benefiting from all those dynamics.

Great. Thanks, PJ. Vicky? Yes.

Yep. So COSMICS 313, you know, I think it's important to remember for this trial that we studied the triplet combination of hebo medics in combination with nivolumab and ipilimumab versus nivolumab and ipilimumab in poor and intermediate risk patients where nevo and ipi have already demonstrated a survival benefit, right? So this is the first phase three clinical trial to go up against a modern standard of care in renal cell carcinoma. So the primary endpoint here is progression-free survival, and we've clearly demonstrated a benefit in PFS. The OS, as you might imagine, is immature. The median OS with NEVO and IPI in this particular patient population is approximately four years, so we do expect for it to be some time before the data mature. And with these data in hand, we do plan to approach... the FDA to have a conversation about a potential regulatory submission based on the progression-free survival data. With respect to CONTACT-01, you know, as you noted, this is a patient population in non-small cell lung cancer of patients who have already received the checkpoint inhibitor and button-based chemotherapy, so they have relatively few therapeutic options and often receive single-agent vaccine chemotherapy. You know, the expected survival in this setting is, you know, is less than a year for these patients, and so there really are, there really is a need for additional treatment options that can improve upon that overall survival.

Thank you. All right. Thank you.

Okay, operator, we'll take the next question when you're ready.

Your next question comes from the line of Andy Shea with William Blair. Please proceed.

Great, yeah. Congratulations on a stellar quarter from the Cabozantinib franchise, achieving over 2 billion, you know, analyzed 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, you know, 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, you know, kind of cell lines? And I have a follow-up.

All right, well, Annie, well, thanks for the questions. I'll take the first one. Peter can wax poetic on the second one, I'm sure, for as much time as we've got. In terms of the Inflation Reduction Act and the drug pricing part of that, again, it's been a pretty interesting weekend to watch all the pushes and pulls. Certainly, it'll get, I think, signed by the end of next week is, I think, the timeline. You know, at a high level, let me say the following, because we're doing a lot of work. It's pretty complicated. There's about 200 pages of drug pricing info in an 800-page bill. So we're doing a lot of math right now to be able to understand things both quantitatively and temporally. So I think we'll have probably more data in a few weeks in terms of how that looks. I would say at a high level, you know, it really doesn't impact us that much as the company as we are today. We fall into that small company, if you will, clinical category with a single product in terms of the criteria that are outlined in the draft wording of the bill. So we don't anticipate much impact on our business, but as you said, I think very eloquently, we aspire to do more and have more and be more as we go forward, be a multi-product company covering both small molecules and biologics, and that diversity of modalities certainly plays well with the proposed wording of the bill as well as just in terms of being able to help more patients. So, certainly in the longer term, there might be issues. We think we can navigate all those issues as we go forward, but we're certainly pleased to be able to see, at least in terms of short mid-term impact, be minimal probably at best.

Peter? Yeah. Hi, Andy. Thanks for the question on bioinvent. Yeah, I'm certainly very happy to have done that deal, and as you correctly pointed out, the starting point for the target ID and validation efforts is primary human tumor material. So I think it has a number of key advantages versus certainly cell lines, but even animal models. I mean, it is the most relevant tissue that you can get if you're thinking ultimately of trying to treat cancer patients. So you know you're starting from a point of some relevance, especially if you can look across multiple samples, which they can do. Secondly, and I think this is super important, of course, in the biopsies that they're starting from, in the tumor material they're starting from, it's not just cancer cells, right? you are looking at the true tumor microenvironment, including stromal cells and also crucially immune cells of various different subtypes. So all those are in there. And in terms of target expression, of course, you know, regulation target expression can often be very complicated. It can depend on the local growth factor cytokine milieu, for example. Often when you take things out of their normal in vivo setting and try and, you know, culture them, you lose all of that. So It's really, I think, very strong to be able to start from that primary material. I think the second aspect of the collaboration that we found compelling was the way that they look for targets is really the same as the way you get antibodies. So they basically pan the human tumor material with their in-house antibody library and look for what sticks. And then there's a big deep convolution process. which determines, you know, what cell types is it sticking to? Is it just something that's expressed on a lot of normal tissues? So obviously the process there is to look for things which are specifically upregulated in human tumor tissue. And then since you have an antibody, you can then ask, does it do anything functionally? Does it kill the tumor cells? Does it activate immune cells, for example? So I think those two components together make it a very powerful platform, and we're excited to be working with them.

Oh, great.

Yeah, thanks for that.

I do. I do. So this might not be a kind of a fair question. It's a catch-all. There's a lot of kind of clinical development going on across the oncology field, you know, Fresco 2 in CRC. There's been some news about RCC adjuvant, you know, HCC, Lenvima combination. I'm just curious if Vicky can kind of opine on all the recent developments in the oncology space and how that could, you know, change maybe your confidence level and strategic position for XL092.

Yeah, thanks for the question. So, well, I wouldn't comment on data sets that I haven't seen from competitors. I will say, you know, obviously, you know, drug development is not a sure bet. I think that When we look at 092, I think there's a couple 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, you know, including PD-1s 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. And 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 NIST that really provided the background data and confidence to move forward in that tumor type. And so you'll be seeing additional phase three 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.

That's very helpful. Thank you so much.

Thank you, Andy. Your next question comes from the line of Jay Olson with Oppenheimer. Please proceed.

Oh, hey. Congrats on the quarter, and thank you for taking the questions. 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 XLO-92 and 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. Thank you.

Hey, 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, we're 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, OK? In terms of guidance, I'll pass it over to Chris.

Thanks, Mike. So from a revenue perspective, yeah, We're maintaining the guidance level for product revenue of $1,325,000,000 to $1,425,000. And right now, based on what we've done year-to-date, it's $657,000. 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.

Great. Thanks for taking the questions.

You bet. Thank you, Jerry.

Your next question comes from the line of Akash Kiwari with Jefferies. Please proceed.

Hi, everyone. This is Ivy for Akash. Thanks for taking our questions. We have a couple questions, if we may. So the first question is about XB002. So from the poster, it seems the main improvement in XB002 is related to neutral pneumonia and also bleeding AEs. However, we are seeing that around 20% of patients in TVEX Pivotal Cervical Cancer Trial have ocular AE that leads to dose reduction and there are 5% of patients discontinue the treatment. So how much confidence do you have that you will be able to dose pass TVEX two mcs per cake and get around eye toxicity? The second one is about CAVL. So, are you still feel comfortable with the run rate of 1.5 billion caplomatic fields by the year end? Also, what makes you feel confident about CAVL's growth post-2022 and beyond, given the COSMIC 313 data and also competition from other treatments in the space? Thank you.

Yeah. Hi, Amice, Peter. Thanks for the question on XB002. You know, in comparison to TIVDAC, there are a number of differentiating factors with XB002 that we feel are compelling. I mean, I think it's a great example of taking a target which has clinical validation, as shown by the TIVDAC data, and then kind of building on that experience. So, just to run through them, first, obviously, the antibody is not the same. It binds to a different epitope on tissue factor. It was very carefully selected such that the epitope does not interfere with Factor VII and therefore does not interfere with coagulation at all. And we've shown that in multiple preclinical models, both in vitro and in vivo. So I'm fairly confident that that's going to translate clinically. The second major point of differentiation is really around the linker payload. XB002 uses the ZLA ZymLink linker payload from ZymWorks. That is a modified orostatin, so it's not you know, the standard MMAE that has been so prevalently used. It's fairly heavily modified and has a different linker. These were carefully optimized for a number of parameters, you know, kind of biophysical parameters, but also especially for the stability of the linker with that bond to the antibody. And certainly, again, both preclinically, we've kind of recapitulated that with OO2 Upon dosing, we see very low levels of free circulating payload whilst maintaining good levels of intact ADC. Obviously, as you get increasing levels of free circulating payload, that's something that can contribute to multiple AEs. And so we think, for example, the reduced neutropenia that was commented on in the preclinical models may be a consequence of that. So I think the promise of OO2 is maybe the ability, as you pointed out, to dose higher than has been achievable with TIVDAC, either from a MIGBA KIG, but ultimately from an actual plasma exposure point of view, and then see if that leads to an increased efficacy with a good therapeutic index. So we'll see how the results turn out.

Good. On the other questions, Mike, yeah, we're certainly vectoring in the direction of that $1.5 billion run rate by the end of the year. So, we've got two more quarters to go, but we certainly think we're off to a good start in Q1 and Q2 of 2022. So, obviously, stay tuned for the next updates as we go on throughout the year. In terms of, you know, longer-term growth potential for Cabo, obviously, A lot of that's dependent upon how the contact trials work out. Obviously, we need positive data to be able to drive revenue growth. Certainly, the RCC effort, as PJ and team have talked about today, has gone really well. And certainly, we're excited about 313, at least that top-line data. We need to see where that goes in terms of discussions with the FDA. But again, good data, but gets the opportunity for top-line growth. And that's the business that we're in. So stay tuned.

Thank you, Amy. Your next question comes from the line of Yaron Werber with Cowan. Please proceed.

Good afternoon, everybody. 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 Cabo, 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 end to the year. Are you expecting sort of similar seasonality or is 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 OS? And 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, in, in, uh, prostate, and I think you're guiding to completing enrollment in the first half. So I just want to make sure if you complete enrollment in the first half, does it sound like you're on track for data by the end of the year? Thank you.

Okay, so I'll take the first question, and Vicki can address the next two. Yeah, your own fair question about Q3. Obviously, that's the quarter we're in, and we don't really comment on what's happening in the current quarter. So you're certainly unable to go back, look at prior years, and draw your own conclusions, but we're not going to comment on that. So thank you. Vicki?

Yeah, and so I believe you meant Contact 01, the non-small cell study. where you were asking about the OS analysis. So this is a Roche-run trial. 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, you know, we look forward to sharing those data at a medical conference when we receive them and certainly would, you know, include details of the specifics of the trial design. I apologize. I missed your second question for me.

Yeah. And so, contact 02 in prostate, Ipsen is guiding to data by the end of or data next year. And I think you're guiding to completing enrollment in the first half. So it sounds like if you complete enrollment in the first half, you'll have data by the end of the year. Just want to make sure it's consistent. Thank you.

Okay, thanks. So, yes, we are focused on completing enrollment right now, and we do anticipate that that will be in the first half of next year. I think we'll have a better sense of our projection for when the events are coming in and the timing of the analysis once we complete enrollment.

Great, Yaron. Thank you.

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

Great. Thanks so much for taking the question. 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. Thank you.

All right, Peter, thanks. It's Chris. So, yeah, I mean, we have $2 billion, and as I mentioned in the prepared remarks, we feel that that's an asset that we can utilize to continue to build out our development and our discovery organizations. But also, you know, in parallel to that, you know, our business development efforts and, you know, we're continuing to evaluate assets just because they're less expensive doesn't mean they look better. You know, science is where we're headed with this, and so we're going to continue with the science and then obviously the economics fall out of that. But, you know, we're out there hunting and looking for assets that can help us expand our pipeline. Gotcha.

Do you feel asset prices have got to – a reasonable level?

Yeah, 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.

Gotcha. Thank you. And then I guess for Vicky, just on XL102, just what we should expect for the second half data for and how many patients and tumor types and cohorts, et cetera?

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, you know, that will obviously be shared at the time that the abstract is published and ultimately with the 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. Okay.

Thanks so much. Thanks for taking the questions.

You bet, Peter. Thank you.

Your next question comes from the line of Gregory Renza with RBC Capital Markets. Please proceed.

Yes, hi. This is Sudan Logan Nathan on for Greg Renz. Thanks for taking my questions and congrats on the great quarter. So first I wanted to touch on the ASCO 2022 data that you guys presented for CABO combinations, you know, with pembrolizumab, specifically in the head and neck sarcomas and non-small cell lung cancer in UC indications. Just, you know, how do you view that combination going forward? And, you know, can we get some insight into that? potential registration trials and how that may be formulated. And then secondly, just wanted to give you guys the opportunity again to really talk about the BD activity that you have embarked on recently. It seems like it's very active and with multiple different targets and multiple different technologies and just very curious on if there's any specific technologies there that you're most excited about or if you are diversifying the sense of looking into liquid cancers and solid tumors, just looking for, you know, any clarity that you have on that aspect as well.

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

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.

Yeah, 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. You know, that said, I think there is a lot of, you know, interesting approaches and technologies out there that enable one to take on a broader range of targets than, you know, 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. Lightweight is 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 that are either in late preclinical development or early clinical development. with the aim of potentially optioning or licensing those.

So, yeah, lots going on, so stay tuned. Great. Thank you, Alfred. Our next question?

Your next question comes from the line of Edsir Duralt with BMO Capital Markets. Please proceed.

Great. Thanks for taking the question and congrats on the quarter. Just a question on the XL092 presentation at ASMO. Maybe just speak to us a little bit about sort of, you know, where maybe we should be focused on in the data set. And maybe will we start to sort of gleam into, you know, the profile that led to the, you know, initiation of the CRC trial with metazolizumab. Just want to get a sense of sort of what your expectations are in the data set and how we should be thinking about that data set as it's presented. Thank you.

Okay. So with respect to XL092, I'll say we're pleased that ESMO has accepted our abstract for a poster. As I mentioned earlier, these are going to be data from dose escalation cohorts that supported the recommended phase two dose, both for the monotherapy for XL092 and for XL092 in combination with atezolizumab. So predominantly focused on safety data and pharmacokinetics that supported the dose that we're moving forward with, both for the monotherapy and the combination. There will be preliminary data looking at activity, of course, across multiple doses and multiple tumor types, but I think that it will give you a sense of the general activity profile of the molecule, and we look forward to sharing more details in the ESMO poster.

Great. Thank you.

Your next question comes from the line of Chris Shibutani with Goldman Sachs. Please proceed.

Hi. Good afternoon. This is Steven. I'm for Chris. Thanks for taking our question. I have a couple related to the reconciliation bill and potential for price negotiations. Can you just remind us about the split of patients reimbursed through commercial payers versus government payers? How is your team thinking or modeling the Cabometics loss exclusivity? Any thoughts there would be helpful. Thank you.

Thanks, Stephen. This is Chris Hunter. So from a proportion of business perspective, commercial versus government payer, from a government payer perspective, we're in that 40% range. It depends on the quarter, obviously, and the stream of patients, but we're in that 40% range. It could be higher, it could be lower, depending on the quarter, but that's the way we've seen it historically.

Yeah, it's Mike. In terms of long-range planning, all the work that we've done to date focuses on a CAVO LOE of 2030. Okay.

Thank you very much.

Thank you, Stephen.

Your next question comes from the line of Andy Shea with William Blair. Please proceed.

Oh, thanks. Thanks for the follow-up question. So for Peter, I'm just curious if you can elaborate on a new XB014 program. Obviously, it's modulating the two more exciting checkpoints. I just want to know about the design considerations You know, are you trying to achieve induced proximity across two distinct cell types, or there's something more going on there? And, you know, it goes without saying that investors and also maybe clinicians are interested in the strategy that you employ to potentially reduce red blood cell binding. So I don't know if you are willing to kind of comment on that as well. Thanks.

Yeah, sure, Andy. So, yes, you're correct. XB014 essentially has, you know, is a bispecific that has two arms, one targeting the well-known PD-L1, PD-1 T-cell checkpoint, the other the CD47 SERP alpha macrophage checkpoint. There's always been a lot of recent interest in the latter, and a lot has been learned, I think, from the initial clinical experiences with a number of those agents, including the fact that, you know, anemia and thrombocytopenia are some of the major AEs that are seen. We have very carefully designed XB014, taking those data into account. In brief, we've got a tight binding PD-L1 side, but we've detuned the CD47 side a little bit. So, you know, what we see is kind of minimal binding to red blood cells, but we still get avid binding to tumor cells because of the PD-L1 arm bringing the CD47 arm down. So it's an avidity effect, essentially. And yes, we would expect that there's going to be a proximity effect there as well in terms of bringing macrophages into play. And finally, because of the design of the molecule, we're able to have a wild-type IgG1 FC in there, which normally you have to silence because of the red blood cell binding. And, of course, having that FC domain will then synergize somewhat with the CD47 checkpoint. So all of those things are incorporated. We think it's an interesting and reasonably unique profile, so we're excited to be taking it forward.

Great. Thanks. Look forward to the data generated from that program.

Great, Andy. Thank you very much for the question.

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.

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