Exelixis, Inc.

Good day, ladies and gentlemen, and welcome to the Exalexis Third Quarter 2022 Financial Results Conference Call. My name is Chuck, 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 go ahead, ma'am.

Thank you, Chuck, and thank you all for joining us for the Exalexis Third 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, PJ Haley, our executive vice president of commercial, Vicki Goodman, our chief medical officer, and Peter Lamb, our chief scientific officer, who together will review our progress for the third quarter 2022 and in June 30th, 2022, and subsequent events, including the two business development announcements made today. 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 limitations, risks and uncertainties related to product commercial success, market competition, regulatory review, and approval processes, conducting clinical trials, compliance with applicable applicable regulatory requirements, our dependence on collaboration partners, and the level of cost associated with the discovery, product development, business development, and commercialization activities. And with that, I will turn the call over to Mike.

All right. Thank you, Susan, and thanks to everyone for joining us on the call today. Exalexis had a strong third quarter 2022 across all components of our business. We saw continued growth of the Cabo Xanthinib franchise in the U.S. while expanding our diverse portfolio of clinical and discovery programs with new collaborations to build the X-Alexis product portfolio of the future. Key highlights from Q3 include, first, we saw a strong performance of the Cabo Xanthinib business with significant growth in demand and revenue in the U.S. Cabo Medics maintained its status as the leading TKI for RCC. Cabo franchise revenue grew 39% year-over-year compared to third quarter 2021, marking its eighth consecutive quarter of growth. Importantly, global Cabo's antigen-franchised net product revenue generated by XLXS and its partners were $497 million in the third quarter 2022. Second, we continue to advance the Exalexis development pipeline with new potential CAVO indications and our growing pipeline of clinical compounds and additional candidates in non-clinical development. Important clinical updates for XL092 at EORTC and XB002 at ENA highlight recent progress to lay the foundation for moving these compounds into late-stage development. Third, business development activities continue to be a critical focus for Exalexis. We're pleased to announce two new option deals with Cybrexa and Siropa today, which highlight our strategic efforts to access clinical and or near clinical stage assets that have the potential to provide differentiated benefits to patients with cancer. You'll hear more about these two deals from Peter shortly. The option deal framework is ideal for us to employ as we can generate clinical proof of concept data with a wide range of experimental agents in a financially disciplined manner and only pay for success if and when that data is available. With that, please see our press release issued an hour ago for our third quarter financial results and an extensive list of key corporate milestones achieved in the quarter. I'll now turn the call over to Chris.

Thanks, Mike. For the third quarter of 2022, the company reported total revenues of approximately $412 million, which included Cabo Zantative franchise net product revenues of $366.5 million. Cabo Medics net product revenues were $361.4 million and included approximately $13 million in clinical trial sales. Gross net for the Cabo Zantative franchise in the third quarter of 2022 was 26.1%, which is lower than the gross net we experienced in the second quarter of 2022. This decrease in gross net deductions in the third quarter 2022 is primarily related to lower PHS, Medicare Part D, and co-pay assistance. Our Cabo Medics trade inventory increased slightly when compared to the second quarter 2022 to approximately 2.3 weeks on hand. Our revenues also included approximately $45 million in collaboration revenues, which includes approximately $30 million of royalties earned from Ipsen and Takeda on their sales of Cabo Zantanen. And finally, Clinical trial sales have historically been choppy between quarters, and we expect this to continue in future quarters. Our total operating expenses for the third quarter of 2022 were approximately $329 million compared to $336 million in the second quarter of 2022. SG&A expense was the primary driver of the decrease in total operating expenses, which was primarily related to lower legal and employee-related expenses. Provision for income taxes for the third quarter of 2022 was approximately $19 million, compared to approximately $18 million for the second quarter of 2022. The company reported gap net income of approximately $73 million, or $0.23 per share, on a fully diluted basis for the third quarter of 2022. The company also reported non-gap net income of approximately $102 million, or $0.31 per share, on a fully diluted basis. Non-GAAP net income includes the impact of approximately $29 million of stock-based compensation expense net of the related income tax effect. Cash and investments for the quarter ended September 30, 2022, with approximately $2.1 billion. This level of cash and investments, supported by our ongoing cash flow from operations, provides ex-flexes with flexibility to invest in internal discovery activities and also allows us to pursue external business development opportunities to expand our pipeline. And finally, turning to our financial guidance for the full year of 2022. Given where we are in the year, we are tightening our revenue guidance, and we are increasing our R&D and SG&A expense guidance. The increase in R&D expense guidance is primarily to reflect the two deals we announced today, and the increase in SG&A expense guidance is primarily related to increase in stock-based compensation. Please see slide 12 of our Q3 earnings presentation for further details. With that, I'll turn the call over to PJ.

Thank you, Chris. The third quarter of 2022 was a strong quarter for Composantage. 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 and second line HCC. Furthermore, Cabo Medics total prescriptions, or TRX, have now grown for eight consecutive quarters. Demand growth is being driven primarily by the longer duration of therapy for patients on cabometics in combination with nivolumab in first-line RCC. Prescription trends remain strong in Q3 2022. Year-over-year TRX growth in Q3 2022 was 23% relative to Q3 2021. Given the clinical data from the CHECKMATE9ER study, we anticipate these first-line patients to receive therapy for approximately a year and a half on average and driving significantly longer treatment duration for CABOMEDX. Turning to the TKI market basket of CABOMEDX and LIDA, SUTENT, VOTRIAT, and LIMVIMA, CABOMEDX TRX market share has increased every quarter since Q1 2021, and its share in Q3 2022 was 38%. As we've discussed previously, first-line RCC market is very competitive, and we're pleased with the performance of CaboMedix in combination with Nivolumab in this setting. Furthermore, we're still not seeing any significant competitive impact on our share. Uptake in the first-line RCC setting is broad across clinical risk groups and practice settings, and prescriber experience to date continues to be very positive. Additionally, in contrast to data from public sources, our internal data showed that CaboMedics had the highest level of new patient starts ever in Q3. Furthermore, within the quarter, we saw particular strength in both demand and new patient starts in September. We view this as encouraging, and it aligns with the feedback we received from customers about a significant level of vacation and travel this summer coming out of COVID. We believe all of this taken together positions CaboMedics for continued growth moving forward. Looking beyond the six current U.S. indications for Cabozantinib, we continue to plan for lifecycle expansion opportunities as additional Phase III studies read out in the near future. We look forward to having the opportunity pending data and approval to bring CaboMedics 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 CaboMedix 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.

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 trial. In early July, we reported positive top-line results, OSMIC 313, evaluating cabozantinib in combination with nivolumab and ipilimumab in intermediate and poor-risk renal cell carcinoma. These data were presented by Dr. Tony Twery in a presidential symposium at ESMO. 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, an overall response rate was 43% in the triplet arm and 36% in the doublet arm. 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 control arm, and therefore the trial will continue to the next analysis of OS. 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 the study, and no new safety signals were identified. Following discussion with the FDA, we do not intend to submit a supplemental new drug application based on the currently available data and plan to discuss a potential regulatory submission with FDA when the results of the next OS analysis are available. For CONTACT-01, the Phase III pivotal study sponsored by Roche, which is 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 final analysis of the primary endpoint of overall survival is on track to occur before the end of this year. For CONTACT02, our Phase III study in combination with the tezolizumab and metastatic castrate-resistant prostate cancer, we are projecting that enrollment will be completed in the first half of next year. I would also like to share a brief update on CONTACT-03, the global phase three pivotal trial evaluating cabozantinib in combination with atezolizumab versus cabozantinib alone in patients with previously treated advanced renal cell carcinoma. For guidance from Roche, the study sponsor, top line data is now anticipated in the first half of 2023. Now turning to progress on our pipeline molecules. The first clinical data for XL092 from the stellar 001 dose escalation cohorts were presented at a poster at ESMO. These data showed early evidence of clinical activity, particularly in heavily pretreated patients with RCC, including many who had previously received cabozantinib, and demonstrated a manageable safety profile with no unexpected toxicities, providing support for the recommended dose of 100 milligrams. In June, we initiated the first Phase III study of XL092 in non-MSI-high colorectal cancer, and we expect to initiate an additional Phase III trial this year. XL092 is also being explored in combination with several checkpoint inhibitors and IO combinations. In October, we announced that we had expanded our partnership with BMS to study the combination of XL092 with the fixed-dose combination of the IO doublet, nivolumab, and rilatilumab. We look forward to evaluating this novel combination across multiple solid tumors. We also continue to evaluate additional potential combination opportunities with novel agents. XB002, our first antibody drug conjugate, which targets tissue factor without interfering with the coagulation pathway in preclinical models, continues in dose escalation. In October 2022, we announced promising initial dose escalation results from JUUL 101, the ongoing phase one trial evaluating XB002 in patients with advanced solid tumors during the antibody drug conjugates poster session at the 34th ENA Symposium. The data demonstrated that XB002 was well tolerated at multiple dose levels. Pharmacokinetic analyses showed that XB002 total antibody and intact ADCPK were similar, suggesting XB002 was stable after infusion. Additionally, at the 2 mg per kg dose, XB002 demonstrated approximately two-fold higher exposure with one-tenth the free payload relative to levels seen with the same dose of the sodamab-vidotin. As of the data cutoff, no bleeding events or corneal toxicities were observed at doses of up to two milligrams per kilogram. We expect to complete dose escalation and move into the multi-cohort dose expansion phase later this year. Dose escalation is ongoing for the combination of XB002 with nivolumab, and we expect to initiate dose escalation in combination with bevacizumab before the end of the year. 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. Preliminary data from dose escalation have been accepted for publication as a poster at the upcoming San Antonio Breast Cancer Symposium in December. Finally, we are making progress with hiring to our site in King of Prussia outside of Philadelphia. for roles both within and outside of development, as well as growing our existing presence at headquarters in Alameda. Within the development organization, key hires include three executive-level leaders who are based at King of Russia, and we've seen an uptick in East Coast-based candidate awareness and enthusiasm for the new site. We continue to seek to attract and retain the best talent across both coasts to meet the needs of our growing pipeline. We also continue to progress plans for a long-term, build-to-suit space of over 200,000 square feet, 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 medicine to improve the lives of patients with cancer. With that, I'll turn it over to Peter.

Thanks, Vicki. As we've discussed on previous calls, we've been actively engaged in a process of assessing late preclinical and early clinical assets with the aim of identifying multiple opportunities to invest in. Since failure rates for oncology drugs remain high, our preferred strategy is to make multiple smaller option investments before clinical proof of concept rather than making more substantial investments based on inadequate or inconclusive clinical data. The deals that we announced earlier today with Cybrexa and Cyropa represent the initial outcome of this strategy. Starting with Cybrexa, developing mechanisms for preferentially delivering cytotoxic compounds to tumors has been a longstanding goal, with antibody drug conjugates representing the most validated and successful mechanism for doing this. The ADC approach relies upon having an antibody to a cell surface protein that is exclusively or preferentially expressed on tumor cells. and then covalently conjugating a cytotoxic payload to that antibody. When the antibody drug conjugate binds to the tumor cell expressing the target protein, it is then internalized and the payload is released, resulting in tumor cell killing. Since normal tissues have low or no expression of the selected target, they do not take up the payload, minimizing side effects. The success of this approach depends upon appropriate target selection, and with any target, there is variable levels of expression, both within and between tumor types, leading to some heterogeneity of clinical response. In addition, the stability of the attached payload varies between ADCs, with liberation of free payload contributing to adverse events. Nonetheless, development of ADCs has undergone a renaissance with multiple approvals over the last few years, and Exalixis has invested significantly in the area, both internally and via multiple collaborations, to develop our own pipeline of differentiated ADCs. The Cybrexor agreement announced today around CBX12 represents a further extension of this general approach and relies upon a novel tumor targeting mechanism. Cybrexor are developing a novel peptide exotecan conjugate, CBX12, that selectively inserts into tumor cell membranes as opposed to normal cell membranes due to the lower pH conditions present in the tumor microenvironment. It is well established that many tumors have an altered metabolism that results in them excreting lactic acid into the tumor microenvironment, thereby reducing the local pH. The peptide component of CBX12 is designed to be sensitive to pH, adopting a disordered structure under normal physiological pH, but assuming an ordered alpha-helical structure at lower pH, which allows it to insert into the tumor cell membrane and bring any attached payload with it. In CBX12, the payload is the potent topoisomerase inhibitor exotecan, which gets released inside the tumor cell by a cleavage of a disulfide bond that connects to the peptide. In preclinical models, Cybrexa have shown that following administration of CBX12, both intact CBX12 and free exotecan accumulates in tumors, whereas exotecan levels in bone marrow cells remain very low. Notably, this is a tumor-selective payload delivery mechanism that does not depend on expression of tumor antigen, unlike the standard ADC approach, so could be broadly applicable if successful. CBX12 is currently in phase one dose escalation trials. that are exploring a number of dosing schedules. Data from this trial was recently presented in the plenary session at the ENA triple meeting in Barcelona. So Brexler explored three IV dosing schedules, five consecutive days every three weeks, three consecutive days every three weeks and once weekly. Data from 33 patients was presented. The most frequent treatment-related adverse events were GI-related, cytopenias, and LFT elevations, which is consistent with the known profile of exotecan. Best response in the 18 valuable patients was a CR in ovarian, a PR in breast, and 13 patients with stable disease, including a second near PR in breast. Initial tumor biopsy assessments showed delivery of CBX12 and exotecan into the tumor. Dose escalation continues in the once-weekly cohort, and cohort expansion is ongoing at 45 megs a meter squared in the three consecutive days every three weeks cohort. We have an option to license CBX-12 after reviewing the totality of the data from the completion of the ongoing once-weekly dose escalation trial. Four phase 1b monotherapy expansion cohorts of about 40 patients in each major solid tumor type at the recommended phase two dose, and completion of a dose escalation combination cohort with pembrolizumab. All development will occur under a joint steering committee.

Okay, moving on to the Serov agreement, this represents an expansion of our approach to addressing the myeloid macrophage component of the tumor microenvironment. Tumor-associated macrophages along with other myeloid cells represent a significant and often major component of the solid tumor microenvironment and is prominent in tumors such as colorectal cancer, ovarian cancer, hepatocellular cancer, renal and breast carcinomas, for example. It is well established that these cells contribute to an immunosuppressive environment in these tumors. We have a number of ongoing programs that are aimed at addressing this aspect of tumor biology, including XB014, our PD-L1-CD47 bispecific currently in early preclinical development, and our collaboration with BioInvent aimed at identifying antibodies against novel myeloid targets expressed preferentially in the tumor microenvironment. Our agreement with Siropa provides us with another potential way of addressing this potentially impactful mechanism of action. Siropa is developing a monoclonal antibody, ADU-1805, targeting SIRP-alpha, one of the ligands for CD47. This has been a pathway of interest to us and others for a number of years, and there is now a degree of clinical validation for blocking the pathway along with an understanding of some of the issues associated with various therapeutic approaches. The CD47 SIRP-alpha axis modulates macrophage phagocytosis and antibody-dependent cellular phagocytosis. Expression of CD47 on tumor cells inhibits phagocytosis of tumor cells and thereby limits tumor antigen presentation by macrophages contributing to immune suppression. Blockade of CD47 itself, which has been the favorite approach historically, leads to anemia and thrombocytopenia due to CD47 expression on red blood cells and platelets. This also results in a significant PK sync effect. In contrast, SIRP-alpha expression is restricted primarily to myeloid cells, and antibodies targeting SIRP-alpha do not suffer the same PK-sync effect or cause cytopenias. This has been validated clinically in Phase I with an anti-SIRP-alpha monoclonal antibody being developed by Boehringer Ingelheim. This antibody has limited PK sync, does not cause thrombocytopenia or anemia, and has shown preliminary evidence of clinical activity, including a PR and HCC as a single agent, and three PRs in combinations with a checkpoint inhibitor. ADU1805 has similarly shown limited PK sync and no anemia or thrombocytopenia in preclinical safety studies. It is important to note that there are 10 SIRP alpha alleles in humans with their frequencies varying by population and antibodies vary in their ability to bind the different alleles. ADU1805 binds to all alleles meaning that patients can be treated without being genotyped in contrast to the BI antibody which binds tightly to only the B1 allele meaning that patients must be genotyped to assess which alleles they can carry prior to treatment. In the case of the BI antibody, patients must be homozygous for the V1 allele to enroll in their currently recruiting clinical trials. ADU1805 has also been optimized to preferentially bind to SIRP alpha versus other SIRP family members, which may enhance its ability to stimulate immune cells. This is another point of differentiation from CD47 targeted therapies, which block all interactions with all SIRP family members. Finally, ADU1805 is an IgG2 antibody, which has been shown to allow maximal phagocytosis in in vitro assays. In summary, the antibody has been constructed in a way that maximizes the potential benefit for blocking SIRP-alpha CD47 checkpoint while minimizing potential toxicities and allowing for treatment of the broadest population of appropriate patients. We believe this represents a differentiated and potentially best-in-class approach to this pathway. Siropa are on track to file an I&D for this asset in Q1 2023. We have an option to license ADU-1805 after completion of a single-agent dose escalation cohort, a single-agent expansion cohort, completion of a dose escalation combination cohort with pembrolizumab, and a 60-patient Simon 2-stage pembrolizumab combination expansion cohort in major solid tumor types. All development will occur under a joint steering committee. We're happy to have concluded these two agreements and are continuing to assess a broad variety of late preclinical and early clinical assets with the aim of making additional investments in the future to provide further option for expanding our clinical pipeline. So as you heard in the call today, the Excel team continued to execute across all components of our business in the third quarter with significant progress across our business development, clinical development, and commercial activities. As we enter Q4 of 2022, we're excited about the potential for the multiple growth drivers ahead of us, including our CAVA development activities and expanding pipeline of diverse clinical opportunities that we hope will enable ExoLexus to help even more cancer patients. I'll close by thanking the ExoLexus team for their individual and collective efforts to support our range of discovery, development, and commercial activities. I want to give our broad team focused on business development activities a huge shout out for their great work and collaborative efforts over the past few years and certainly the last few months to get the Cybrexa and Seropa deals over the goal line. Business development is a team sport here at Exalexis, and I'm proud of the closely aligned team from BD, R&D, legal, finance, commercial, CMC, and public affairs coming together to move these important initiatives forward. Individually and collectively, our team embodies the vision, urgency, and expertise to move Excel towards becoming 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.

Please go ahead.

Thank you.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. And to withdraw your question, please press star then 2. And at this time, we'll pause momentarily to assemble our roster. And the first question will come from with Truist Securities. Please go ahead.

Well, hi, guys. Thanks for taking my questions, and congrats on a nice, tidy quarter. Just a couple of questions, simple ones here. First to PJ, I was just wondering if you could quantify the gross net impact for the quarter and maybe how much the slight increase in inventory contributed to sales. I was just wondering if you could maybe give us, given the run rate of events, when we could expect the next look at OS to take place for COSMIC 3.1.3. And then I just want to offer my congrats to the BizDev team for the deals that were announced today, and in particular, the deal for CVX-12 looks quite interesting in the recent data. I'm just wondering when we can expect the next update on the dose escalation, and when do you expect the dose escalation to complete? Okay.

Thanks, Asika. Lots of questions there. So let's start with Chris on the inventory and gross to net, and then we'll go to Vicky and then Peter.

Thanks, Mike. So, Asika, from a gross to net perspective, as I mentioned on the call, we came in around 26.1% for Q3. If you go back to Q2, we're around 28.2% overall for the Cabo Zantana franchise. You know, it's come down as we've come through the year. It was higher in Q1 and come down in Q2 and come down in Q3. And so, you know, as I mentioned on the prepared remarks, too, that decline was really driven by lower PHS, Medicare Part D, and then also co-pay assistance. You know, as we talk about the year, previously I said we think we'll come in the range or come in around 29%. I think we're probably now thinking we're going to come in the range of 28% to 29% for the year. From an inventory perspective, this quarter we came in around 2.3 weeks on hand. Last quarter we're around 2.1 weeks on hand. So it's about a day, and I'm not going to quantify it from a sales perspective. But it's not a significant increase by any means.

Okay, good. Thanks, Vicki.

Yeah, so with respect to the overall survival from COSMIC-313, just a quick reminder on the study design here. So this is the triplet combination of nivolumab and ipilimumab with cabozantinib versus a control arm of nivolumab and ipilimumab, which has become a standard of care on the basis of demonstrating an overall survival benefit relative to sunitinib. in intermediate and poor risk patients. And as you may recall from the pivotal trial of NEVO and the CHECKMATE 214, the updated survival data demonstrated a survival, median survival on the order of about four years. So not unexpected that at this time with the primary PFS analysis, the overall survival would still be immature. The next analysis will be event driven. And so we'll be providing updated guidance, you know, as we get a better sense of when those events might come in for OS. There was a question in there, I believe, on dose escalation. Was it XP002? I'm not sure I heard the asset correctly.

Yeah, Nikki, that was a question about Cyberexa.

Peter, you want to take that one? Oh, I'm sorry. Okay. Okay. Thank you.

Yeah, thanks for your comments on CBX-12. We certainly view it as a pretty interesting and differentiated mechanism. I mean, obviously, they just presented the initial data at the plenary session in the triple meeting, so it's probably a bit soon to say when the next data release will be. And, you know, obviously, dose escalation is ongoing, so it's kind of, you know, it's hard to predict when that will top out and when we'll be in a place to have a recommended phase 2 dose. So stay tuned. We're certainly eager to see the next set of data as well.

Great. Thanks, guys.

You bet, Asuka.

The next question will come from Michael Schmidt with Guggenheim. Please go ahead.

Hey, guys. Thanks for taking my questions. I had a couple pipeline questions. One also on the XB002 data from the triple meeting. So, I mean, the ADC looked pretty safe. Do you have any plans to go higher than the 2 milligram per kick, you know, dose cohort just in context of the safety profile and You know, how do you think about the potential of this antibody in other cancers outside cervical, for example, perhaps where TF may be expressed? And then I had a follow-up question.

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

Yeah, sure. So dose escalation with XB002 continues at this point. You know, obviously, we'll continue to monitor closely for dose-limiting toxicities before we establish a recommended phase 2 dose. So I would say, you know, stay tuned there as far as where we'll land on the dose. We do have broad plans to look at this across a number of different solid tumors, including, you know, outside of cervical cancer, both as a monotherapy and potentially in combination with both nivolumab and with bevacizumab. And among the dose expansion cohorts in the current study include tumors such as non-small cell lung cancer, head and neck, and breast cancer, among others. So again, we're going to establish a dose, move quickly into expansion cohorts, see where we demonstrate activity, and then plan to move quickly into registrational trials. We do believe that this asset, again, has some Potential advantages over the competition, given that the intact ADC is stable, we're seeing low levels of free payload. Thus far, that seems to be playing out in terms of a potentially differentiated safety profile and may impact what we see with efficacy as well, as well as what seems to be, you know, reduced bleeding risk with no bleeding involved. events having been seen at the time of the data cutoff. So we're excited about this asset and eager to move it into expansion and ultimately registrational trials.

Okay, great. Thanks. And then a question on XL102, your CDK7 inhibitor. Just wondering if you could help set expectations for the scope of this update here at San Antonio. And did the dose escalation perhaps bias towards recruiting breast cancer patients You know, how should we think about, you know, potentially achieving single-agent activity with this target? Is this an area where you might consider implementing biomarker selection, or is this something that could have a broader potential without selection in breast cancer? Thanks so much.

Yeah. So on Excel 102, again, it will be presented at the San Antonio Breast Cancer Symposium in about a month. As far as the details on the content, I'd say stay tuned both for the abstract and the presentation, but it will be data from dose escalation cohorts.

Thank you. Thank you, Michael.

The next question will come from Mike King with EF Hutton. Please go ahead.

Hey, guys. Thanks for taking the question, and let me add my congratulations on a nice quarter. I'm wondering if you could talk a little bit more about your optimism about Contact 01, because it just seems to me, you know, you mention it in every call, but I wonder what your thoughts, what thoughts you could share with us on the probability of success here, because even a small piece of the second line on small cell markets, it's a pretty big commercial opportunity, and that could create an interesting inflection for Cabo, I would think. So I just wonder if you could expand on it without giving... you know, too many of the secrets away.

Sure, happy to. So, you know, oh, okay, yes, so contact 01, again, this is in a post-step point inhibitor, post-platinum chemotherapy setting in non-small cell lung cancer, you know, patients without an actionable mutation. It's an area of huge unmet need, right? There's no well-defined standard of care. Docetaxel is a common treatment, and You know, as we know from even the pre-checkpoint inhibitor days, response rate there is, you know, on the order of 10% and survival, median overall survival expectation is less than a year. So it is an important area of unmet need. And here we're evaluating whether cabozantinib, which can induce a more immune permissive environment, might help overcome some of the resistance to checkpoint inhibition, in this case with atezolizumab. and whether that combination can improve overall survival, again, in a setting where the survival expectation is quite low. So we do look forward to these results, which, as I said, we'll have in hand before the end of the year.

Are you in charge of the data release, or is that a Roche decision?

It is a Roche-sponsored study, so we're working very closely with Roche on how and when those data will be released.

Thank you.

Thanks, Mike. The next question will come from Do Kim with Piper Sandler. Please go ahead.

Great. Thanks for taking my questions, and congrats on the quarter. Just trying to understand the updated guidance. You raised the lower end of the range, but it still suggests a decline in net product revenues quarter over quarter. Just wondering if it's because of the choppiness of clinical trial cells that you see, Do you exclude that potential sales to clinical trials, or is there something else you're seeing in demand or gross to net that keeps guidance at the lower level?

Yeah, this is Chris. So, you know, the guidance, the Titan guidance range is $13.75 to, you know, $1.375 billion to $1.4 billion. If you look at that range versus where we are year to date, the middle to the top end of that range gives you growth for the next quarter. And we continue to see strong growth coming out of Q3, as PJ mentioned, in September. We ended September in a very strong fashion from a demand and a new patients perspective. There's also a lot of variables around gross to net that we have to take into account. But overall, you know, the top end, the middle to the top end of that range expects growth.

Okay, great. And regarding your newly announced deals, it looks like the platform technology drove the Cybrexa deal and the target Serp Alpha drove the Siropa deal. Is that how you think about it, and do you prioritize potential deals by a certain novel drug technology or looking at clinically validated targets?

Yeah, thanks for the question. You know, I think I somewhat agree with your characterization. I think we would view the Cybrexa CBX12 as really a first-in-class type of asset, and Yeah, as commented in the script, it's really an extension or expansion of kind of overall ADC approach, but importantly, you know, in a sort of tumor target agnostic way. You don't need to express a particular tumor target in this case, which means it could be broadly applicable, you know, as a platform. Siropa is really more of a best-in-class opportunity. Obviously, there's been a fair amount of activity around the whole, you know, CD47, SERP-alpha The macrophage checkpoint area, much more on the CD47 side, this particular asset looks really attractive to us just because we thought it was very well thought out in terms of maximizing the potential for blocking this checkpoint. you know, from a tox point of view, from a potential efficacy point of view, and from an addressable patient population point of view. So, you know, in general, we look broadly at a lot of things, small molecules and biologics. So I wouldn't say we bias more towards, you know, target versus platform, and you probably see us do a mixture of things going forward.

Great. Thank you.

Thank you.

The next question will come from Sylvie Turkin with JMP. Please go ahead.

Well, thank you very much for taking my questions, and apologies for my voice, and congrats on the quarter. I have one question. You mentioned that you have seen the highest levels of new patient starts versus what is available in public sources. Could you please comment on that, and would those be new patient starts and frontline RCC mainly? And what do we know about the time on treatment now in frontline renal cells versus what we've seen in the trial. Thank you very much.

Yeah, thanks for the question, Sylvan. This is PJ. Yeah, we are really pleased with the quarter. As you pointed out, you know, I'd maybe just highlight three things in the quarter in terms of its strength. We have the highest ever net product revenue, the highest ever demand, and as you mentioned, the highest ever new patient starts. You know, what we're seeing there primarily is those new patient starts are driven by renal and specifically primarily first-line combination use with nivolumab, and, you know, we've seen that in multiple market share data that we have. You know, with regards to that, that does give us... Yeah, it is encouraging, as I mentioned also, with the fact that we had good momentum in September kind of coming out of the core. With regards to sort of the duration of treatment, as I mentioned in the prepared remarks, as our mix has shifted over the last, you know, year and a half, seven quarters with the launch of 9ER and first-line treatments, Combination utilization we're seeing that mix shift in our duration Increase over time what we saw in the you know in the 90 our trial is patients you know PFS of the ballpark of a year and a half and It's really too early to get a good lead on duration for those particular patients commercially because we just haven't been on the market long enough and And duration is something you have to have a lot of data and look at retrospectively. But very pleased with what we're seeing. The team is executing at a very high level. We're happy that things are opened up with regards to offices and medical meetings, et cetera. So we're very engaged and excited to continue to help patients with Cabo Medics. Great. Thank you very much.

Okay. You bet, Selden. Feel better.

The next question will come from Jason Gerberry with Bank of America. Please go ahead.

Hey, guys. Thanks for taking my questions. Just one quick follow-up on the CyBrexit deal. So it's just the language. Is there a phase one contingency regarding the upfront and moving forward with the transaction? I was curious if you could elaborate on that commentary. And I would assume that the next steps would be similar to what CyBrexit communicated, which was a phase two ovarian breast and non-small cell lung cancer as next steps, but just curious if you can elaborate there. And then just the other question, are you still expecting a ruling in the CABO patent trial for that first case in the near term? I think fall 2022 is the last communication, but just kind of curious, anything that we should know there? Thanks.

Yeah, with respect to Cybrexa, the way it's structured, right, there's an upfront payment and then... There's a certain amount of clinical work that needs to be completed up to the point at which we can exercise. Yeah, we have the ability to take the asset on. As commented, we're still really in dose escalation on one of the schedules, which is the once weekly schedule. So that dose escalation will continue. There's a dose being expanded on one other schedule, which is kind of the three consecutive days, every three-week schedule. And then there's, again, provision for expansion cohorts in major solid tumor types at a recommended phase two dose. So that's basically the package of clinical information that would be collected prior to option, plus a dose escalation in combination with pembrolizumab.

And Jason, it's Mike on the ANDA front. Yeah, we still expect a ruling sometime this fall, timing to be determined by the judge, so stay tuned. All right, thanks.

Yep.

Yeah, thanks, Jason.

The next question will come from Andy Hasai with William Blair. Please go ahead.

Oh, great. Thanks for taking my questions. Congratulations on an upfront, you know, strong commercial CABO sales. clinical updates, and then BD, of course. Peter, I hope you're feeling okay. Hope you feel better soon. Got a question about the CBX 112. So, I remember from the triple meeting, the data was mostly generated from, you know, either the three consecutive day and five consecutive day schedule. And as you think about moving to the weekly schedule, just curious about the PK profile, you know, for that dosing schedule. For, you know, the pH tumor microenvironment is pretty interesting. I am curious if there is a way to, you know, either through a biomarker or potentially F18 FDG to really select for patients who might, you know, best benefit from this kind of therapy.

Yeah, thanks, Andy. Just to your questions. Yeah, so there was data presented on the five consecutive days every three weeks, and then three consecutive days every three weeks. And I think the first dose, which is 20 mg per meter squared on the once-weekly dose. I think what was actually encouraging there is if you looked at the data, you would have seen that the partial response in breast was actually on the once-weekly dose schedule. So we were certainly encouraged by that. You know, the overall PK for this molecule is pretty interesting. You know, what we understand from the preclinical data is, you know, you give a dose, you start seeing accumulation of CDX12 in the, you know, kind of in the tumor or tumor microenvironments, and then a release, essentially, of exotecan that builds up over time. You know, how that's going to play out clinically, of course, is still being analyzed. They did present a little bit of data that was encouraging, certainly showing you know, pretty reasonable free exotecan levels in some tumor biopsies. Was there another question? I think there was, right?

Oh, the biomarker one.

Yeah.

Yeah, exactly, biomarker.

Yeah, so generally speaking, right, the approach does rely on the tumors being metabolically inactive, and typically in this case being glucose utilizing, although not completely necessarily. So in principle, FDG-PET could be used. However, I would suggest that this is such a broad phenomenon that it's probably not necessary to pre-select patients.

Got it. Okay. Yeah, I also have a quick question about maybe how you're thinking about you know, in terms of Exa-092, the ability to salvage Cabo pretreated patients in RCC, I guess you've probably, you know, we probably saw that in HCC where, you know, fluorinated serafinib was able to salvage serafinib patients. I don't know if you have any, you know, comments on that phenomenon as well.

Yeah, it's certainly interesting. You know, we've certainly seen activity with 092, you know, post-cabozantinib in that setting. And, you know, the exact reasons for that I think mechanistically aren't entirely clear. You know, sometimes it's a phenomenon, as you rightly point out, that's been seen with a number of not just TKIs but drugs. You kind of have a, you know, a kind of rest period, a time off, you can get re-responses if you re-dose. Not completely fully understood, but I think certainly encouraging from a clinical activity point of view.

Great. And maybe perhaps last question for PJ. XB02, very encouraging signal, no neuropathy or bleeding events, very, very, very, you know, off to a great start. Just maybe from a physician feedback standpoint, do they prefer, you know, kind of push a dose and with very hands-on you know, ocular toxicity management protocol or perhaps, you know, a little bit hands-off and, you know, by providing some just intrinsically safer profile. Just curious about how you think about it from a product development standpoint.

Yeah, Andy, thanks for the question. I think, you know, at this point, obviously, with our product so early in development, I'll just speak generally about, you know, kind of what we see across the board in different areas. you know, tumor types and market. I think, you know, really what it would come down to is the specific, you know, specific details of the toxicity profiles of the you know, the competitive environment, so to speak, or the standard of care in that particular setting. So I think it's really hard to generalize, but, you know, obviously, generally speaking in oncology, where there aren't as many options and where the unmet medical needs high, physicians are willing to tolerate greater, you know, toxicity profiles, but, you know, really too early, I think, to to think too much about that, kind of have to get data and understand the settings that we're talking about in detail.

Thank you, Jay.

Great job.

Thank you so much.

Oh, you bet, Andy. Thank you.

The next question will come from Jay Olson with Oppenheimer. Please go ahead.

Oh, hey, congrats on the quarter, and thank you for taking the questions. Can you talk about what we should be looking for in the stellar O2 data at CITSE? as you build on the expectations that were set with the initial stellar 01 data you presented at ESMO, and maybe any comments you have on the next pivotal study indications for XL092?

Yeah, so stellar 002, still in early days. So we are in dose escalation for the combination with nivolumab and nivolumab and ipilimumab. And of course, we'll soon be adding the Denevo-Relatlimab combo to that as well. So no data to be presented quite yet. Looking forward to being able to give an update on data timing when that's available. Sorry, I just forgot your other question. I apologize.

Oh, any comments you could share on the next indications you intend to pursue in pivotal studies?

Yeah. So, as mentioned earlier, we started the first Phase III, Stellar 303, which is the CRC trial earlier this year. We are focusing now on a second Phase III trial. I'd say stay tuned for the indication coming soon, but we do hope to initiate that one by the end of the year.

Okay, great. Thank you. That's helpful. And then congrats on the business development progress. I was curious if you could comment on any appetite for late stage BD deals. And also, congrats on the on the US geographic expansion. And I was wondering any, any comments you could share on X US geographic expansion?

Just to comment on the late-stage deals, I mean, as I commented at the beginning, yeah, we have been looking at a lot of, you know, late preclinical, early clinical deals, and we're going to continue to do that. That being said, absolutely, we would look at later-stage clinical assets. But, you know, there just has to be that confluence of, you know, us having feelings of solid scientific rationale and you know, compelling clinical data have been generated to date that there's, you know, a good clinical and commercial future for the asset. So all those things have to happen for us to kind of pull the trigger on a later stage deal.

And this is Chris. On U.S. and ex-U.S. expansion, so from a U.S. perspective that Vicky talked about, We're expanding in King of Prussia, and we'll eventually have a larger building there with both office for the development organization and other G&A-type organizations, but also labs for discovery. From an XUS perspective, as Mike said, in J.P. Morgan 2020, all the compounds going forward coming out of our pipeline are being licensed. We're going to launch those globally. So when we get closer to launch, we'll expand that. will expand internationally.

Great. That's super helpful. Thanks for taking the questions.

You bet. Always good to hear you, Jay.

The next question will come from Etzer Dorout with BMO. Please go ahead.

Great. Thanks for taking the questions, and congrats on the quarter. I guess first question for me, if you could just kind of speak to maybe the balance of the R&D spend step-up for your guidance sort of beyond the funds you indicated for the two deals announced today. And then second, you know, the early data for CBX-12 was pretty interesting at ENA. Interesting technology as well in terms of this pH dependency. I guess I wondered if that delta between healthy and tumor cells for pH in terms of, you know, where this may make more sense. in terms of the tumor types, and if that sort of correlates with the tumor type that Subrexa is pursuing, right, that delta in terms of pH from healthy to tumor cells.

Yeah, so this is Chris. So from an R&D expense guidance perspective, I mean, as I mentioned, it's primarily to reflect the two deals we announced today and then also just our continued investment in the pipeline throughout the fourth quarter.

Yeah, it's Mike. On the Subrexa side, you know, I don't think it's well documented from a tumor to tumor level. The relative pH difference between individual tumors or tumor types and normal cells, I think that's probably cutting it a bit thin in terms of what's actually known. So the general phenomena, I think, has been pretty well validated, as Peter mentioned, from the point of view of the lactate that's involved. But I think on a case-to-case basis, our view is that the overall approach with CBX12 gets us into a game, if you will, that allows us to target any tumor, potentially, without having to have an address, as you would normally see with an ADC. Peter, would you agree with that?

Yeah, exactly. Yeah, I think that's the intriguing part of the platform. It's a target agnostic way of enhancing delivery of a cytotoxic to, you know, potentially a broad variety of tumor cells.

Great.

Thanks, Ed, and congrats again on the quarter.

Thank you, Edward.

The next question will come from Peter Lawson with Barclays.

Please go ahead. Hey, thanks for taking my question. It's just on Stella 303 in CRC. When can we see data around that? Is there interim analysis in the second phase three? Could that generate data sooner than the 303 trial?

So we're in the very early days of enrollment for Stellar 303. I would say stay tuned for more information about when we expect a readout as we're able to better project events as it is an event-driven We are evaluating other additional indications, including potential for early registration path. And so, you know, certainly looking across a range of different solid tumors, I would say where we have data with CABO. and given the shorter half-life of XL092, even looking at, you know, settings where we were unable to take CABO as well as, of course, the novel combinations, they're really looking for maximizing that opportunity and looking for rapid paths to registration across multiple tumor types.

Thank you. And then just a follow-up for Chris around the revenues in the quarter. Just what was the benefit from, if there was a benefit from clinical trial sales in the quarter and Has that ended their expectations for Q4 by any chance?

Yeah, Peter, thanks. Yeah, so as I mentioned in the prepared remarks, we talked about having clinical trial sales of about $13 million in Q3. I also mentioned that there has been choppiness over the last year or so, going from $8 million to $17 million in any given quarter. So we think that sort of choppiness will continue going forward in future quarters.

Gotcha. And you'd expect that to go through 23 as well. It's not a kind of a

Peter, it's not, that one's not up to us, right? I mean, we're getting orders from other companies that are, you know, doing trials with Calvin Medics. So, you know, that's up to the trial and their ordering patterns. Perfect. Thank you.

Okay, Peter.

The next question will come from Jeroen Werber with Calvin. Please go ahead.

Great. Thanks for taking my question. I got maybe just a couple. PJ, maybe for you, just the first one. In terms of growth for Cabo, is it share gains from what? Is it still moving away from the old TKIs, or is it potentially continuing to make dent into the Nivo EP opportunity? And then secondly, in terms of growth to net, as you think about next year, I know you can't give guidance, but is the 28% to 29% range sort of what you're anticipating based on what you know now? And then just finally, on contact 03, the co-primary of PFS and OS, is it you need to hit both, or can you do either or? Thank you.

Yeah, so I'll start off. This is PJ talking about the growth. You know, what we've said and what we're seeing with regards to growth for CaboMedix is a couple things. As I mentioned, you know, we had our highest new patient starts ever, and, you know, what we're seeing there is – primarily driven by first line combination patients and You know the sources say that we're our market share has been growing certainly at the expense of other competitors So we've seen that across the board but growth also is is being strongly driven by the increasing duration of therapy from Cabo medics overall as more and more of our patients over time our first line combination patients which You know, have a profile of a longer duration of therapy, as I mentioned, you know, 90-yard PFS in the ballpark of a year and a half. So those are kind of the two elements of growth as we see it.

Your Honor, it's Chris. So, yeah, as I mentioned answering Astica's question, we think this year is going to be closer in the range of 28% to 29%. As we talked about earlier, too, you know, we've seen gross to net come down quarter to quarter from Q1 to Q3. You know, we've seen that in other years. And it's right now, you know, we're not providing guidance or recommendations for 2023 yet. But, you know, we could talk about that on the Q4 call in February.

And for contact O3, so PFS and OS are dual primary endpoints. We will be looking at mature PFS data and in interim for OS. And essentially, the trial needs to hit one of the endpoints to be declared a successful trial.

Thanks, Yaron. Operator, do we have any more questions?

Yes, ma'am. The next question will come from Chris Shibutani with Goldman Sachs. Please go ahead.

Great. Thank you very much. On the business development, congratulations on some activity there. Can you just elaborate a little bit on what the decision would be for you to go ahead and acquire CBX-12? What would that be based on? What kind of clinical data might you consider encouraging enough for you to advance that acquisition?

Yeah, Chris, it's Mike. That's based on probably good data, and we'll know it when we see it. So wouldn't want to preempt that now, but obviously we're in the game of generating data that we can use to differentiate and build upon the platform that we've got to help patients. So obviously the better the data, the more likely we are to trigger any milestone that drives us to move forward with any collaboration.

Okay, well, certainly that makes sense. Then as we think about, and Peter asked this question earlier, in terms of your interest, you certainly have building cash, $2 billion. It's a question really about capital allocation priorities. It seems from the activity that's been heightened on the business development front, and as you outlined in the opening sentence of the press release for the quarter, that you have a focus on things that are sort of clinical or near to clinical. As I think about the possibility of the timeline for these to become commercial, it's a little bit more on the intermediate to longer-term range. And if I juxtapose that against kind of the potential duration of Cabo as an asset, can you help give a sense for, you know, your confidence in this strategy of going with these clinical stage assets more that might ripen towards the back end of the decade but may not be at the level of the revenues that are certainly demonstrated by the success with Cabo thus far? I'm just trying to think about the longer-term profile of revenues as we go through the balance of the decade with the decisions that you're making now on the BD front.

Yeah, I would say we probably don't share your view on timelines to successful implementation and execution around getting to pivotal trials, having those run and read out. So our view is we're doing BD on a pretty aggressive scale based upon the conviction we have in the asset pool that's available broadly within oncology. you know, small mid-cap biopharma. Our view is we have to, you know, do deals with and for assets that we have conviction can actually work. And then we get to a point where, in the case of both assets, we can move forward pretty aggressively once we have proof of concept data. So I think our view on timing and your view on timing are different, and it'll be up to us to prove that as we did with CAVO in the past. Obviously, we have a pretty strong lens here with the CAVO experience, not only in navigating the development and regulatory success, but having a molecule now that has a global run rate based upon Q3 of almost $2 billion a year. So I think we have a lot of competence and a lot of Certainly record of success there. The team is growing. We certainly have a broad net for additional assets going forward. My guess and my projection would be these won't be the last two asset deals or option deals you see for novel assets, and that will continue over time. And the goal is and has been for the last couple of years to build a diversified portfolio of assets that we can drive growth in the out years, and that's still the plan.

Great, and then there's a complement to that naturally then, the operating expense levels. With your confidence in advancing through clinicals, as I think about 23 to 28, just say the next five years, do you believe that consensus is forecasting your OPEX, in particular R&D levels, correctly to mirror your confidence in the ability to advance the clinicals and to generate revenues at that scale. It certainly seems as if you're doing a great job of expanding your footprint, but just in terms of level of spend on OpEx, in particular on the R&D front, any color there would be helpful.

Yeah, Chris, I don't know how we could possibly give you guidance on that or opine upon that guidance that you're speaking to or those models based upon what's happening in our world today. Obviously, we're running a business where we have a lot of cash. We generate free cash on a regular basis. We've been profitable for many years going back in time. So our job is to obviously balance, manage the P&L carefully and and build for the future growth of the revenue base that we're trying to do. So we'll do that well, but certainly can't opine upon models that are going out to, you know, later years in the decade, right?

Okay, appreciate your perspective.

Thank you.

Okay, thanks, Chris.

This concludes our question and answer session. I would like to turn the conference back over to Ms. Susan Hubbard for any closing remarks. Please go ahead.

Yeah, thank you, Chuck, and thank you all for joining us today. We certainly welcome any follow-up calls with questions that you may have.

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