Exelixis, Inc.

Good day, ladies and gentlemen, and welcome to X-Alexis third quarter 2024 financial results conference call. My name is Tawanda, 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, Mr. Varant Shravinian, Director of Investor Relations. Please proceed.

Thank you, Tawanda, and thank you all for joining us for the XLX's third quarter 2024 financial results conference call. Joining me on today's call are Mike Morrissey, our president and CEO, Chris Senner, our chief financial officer, and PJ Haley, our executive vice president of commercial, who together will review our progress for the third quarter 2024, ended September 30th, 2024. Amy Peterson, our Chief Medical Officer, and Dana Aftab, our Chief Scientific Officer, are also on the call today and will participate in our question and answer session. 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 was 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, and estimates and projections from our annual U.S. net product revenues and potential marketing growth opportunities. These estimates and projections involve a number of assumptions and limitations, and we caution investors not to place undue reliance on this information. actual events or results could of course differ materially we refer you to the documents we file from time to time with the securities and exchange commission which under the heading risk factors identify important factors that could cause actual results to differ materially from those expressed by the company verbally and in writing today including without limitation risks and uncertainties related to product commercial success market competition, regulatory review and approval processes, conducting clinical trials, compliance with applicable regulatory requirements, our dependence on collaboration partners, and the level of cost associated with discovery, product development, business development, and commercialization activities. With that, I'll turn it over to Mike.

All right. Thanks, Vrant, and thanks to everyone for joining us on the call today. We'll use our prepared remarks today to provide a strategic perspective on the business, with a forward-looking view of the opportunities for Cabo Zantanib, Zanzalintanib, and the early stage pipeline to maximize success in building a multi-franchise oncology business. The last few weeks have been extremely busy with the positive Cabo ANDA ruling and the Zanza collaboration announcement with Merck. As you saw in our press release issued an hour ago, ExoLexus had a very successful third quarter across all components of our business. I'll start today with a strategic overview to frame our near-term and aspirational vision for the company, followed by financial and commercial updates from Chris and PJ. Amy and Dana are here as well, and we'll address any technical R&D-related questions that come up in Q&A. Exalexis is obviously at an inflection point with the clarity on the Cabo Anda and significant momentum for Zanza. Cabo is having a strong 2024 across literally all commercial metrics that we track routinely as performance indicators for the business, and we remain very bullish on Cabo's revenue outlook into 2030. The Zanza opportunity represents an important component of mid- and long-term revenue growth, starting in the back half of this decade and potentially building into a dominant position in the 2030s. We're pleased to be working with Merck in kidney and head and neck cancers, and that cost-sharing, compound-sharing agreement provides significant validation and momentum for ZANSA while we maintain full global commercial rights. To collaborate with the competition model has been a pillar of our CABO development success, and we're pleased to get the first one moving with ZANSA. We're obviously not done in this regard and aim to expand into other collaborative opportunities in the future. With the ZANSA development plan, including six ongoing and planned pivotal trials, and more potentially on the horizon, we believe ZANSA has the opportunity to surpass CABO in scope and scale with one planned launch per year starting as early as 2026. Exalexis's aspirational goal is to be a market leader in both GU and GI oncology as our main therapeutic focus, Note that we're arguably already in the pole position as a GU oncology leader, so building momentum in the GI space is an immediate priority for both CABA and ZANSA. Additional ZANSA indications outside of GU and GI will be pursued opportunistically. Building, developing, accelerating, and pruning our early-stage pipeline is critically important as we advance towards a multi-franchise business. With three novel compounds in our early stage clinical pipeline, including XL309, XB010, and XL495, and several near-term INDs close behind, we plan to efficiently profile and prioritize potential winners for advancement into full development. As I said before, we're in the pivotal trial and p-value business where clear clinical differentiation is the mandatory prerequisite and the only viable path towards future commercial success. That's the essence of the CABO story, and we're applying that filter to everything we do in R&D. We have a lot of exciting mature data from our early clinical efforts with Zanza, and we expect to present a significant amount of clinical data from stellar 001 and 002 throughout 2025 at major medical meetings. We'll provide more granularity on those datasets as abstracts are accepted and titles published. In addition, we plan to host another R&D day in 2025 as well. With the annual litigation now largely behind us, we expect future business development activities to ramp up. As highlighted previously, we are targeting late-stage clinical assets in the GUGI oncology space, where we have clear conviction that clinical differentiation could drive ultimate commercial success. As we've highlighted previously, most biotech oncology launches since 2016 have been underwhelming, with CAVO being one of the few standouts in terms of indication expansion and revenue growth. So we're very selective as we evaluate the clinical and commercial opportunity of late-stage assets. XOXs could potentially pursue any type of transaction as we advance with a pragmatic, thoughtful, and unambiguous focus. on doing the right deal at the right valuation for the right asset. Finally, we're executing with an ambitious plan for building success as a multi-franchise company. To that end, I want to be very clear that we're committed to running the business and specifically R&D at recent expense levels for the foreseeable future. Our intention is to continue to rigorously and often aggressively prioritize spending and investments towards late-stage molecules to maximize our clinical and commercial success. while we advance the pipeline, generate free cash, and return a healthy portion of that free cash to shareholders. As you all know, clinical success never gets cheaper as compounds advance into late-stage development, so we'll continue to prioritize our spending as we did at previous Exalexis inflection points over the course of the last decade. Our share buybacks over the last two years, totaling $1 billion in commitment of another $500 million to the end of 2025, underscores our balanced and pragmatic approach to investing in the pipeline while returning cash flow to shareholders. So with that background in place, let's review the key highlights for the quarter and drill down into additional details for our near and midterm vision for CAVO and Zanza. First, let's start with the quarter. XLS has delivered outstanding financial performance in third quarter 2024, with top and bottom line growth year over year, driven by the strength of the Cabo San Antonio franchise, including increased demand, new patient starts, and revenue. Cabo Medics maintained its status as the leading TKI for RCC in the U.S. With third quarter 2024, Cabo franchised net product revenues of $478 million, up 9% quarter-over-quarter compared to 2Q 2024, and 12% year-over-year compared to the third quarter 2023. Global Cabo San Antonio franchised net product revenues generated by Exalexa and its partners grew to $653 million in the third quarter 2024. We have increased 2024 full-year net product revenue and total revenue guidance based on these robust results, and we're building on our strong commercial momentum as we wind up the year and head into 2025. Chris and PJ will provide details for the quarter in their prepared remarks. Let's move next to our future. first focusing on CABO to drive near-term upside with strong projected revenue growth through the end of the decade and the potential for ZANSA to drive significant revenue opportunities starting as early as 2026 and accelerating into the 2030s and throughout that decade. We're obviously pleased with the favorable ANDA ruling, which extends our CABO revenue runway into early 2030, subject to Exalexis' potential additional regulatory exclusivity. The district court's judgment is also subject to appeal by either party. I want to remind everyone that to the best of our knowledge, the FDA has not granted tentative approval of MSN's proposed and to product more than five years after their original submission. Building off the strength of CAVO's leadership position in RCC and potential new indications in NET and CRPC, Our midterm projections highlight the potential for Cabo to reach peak sales in the U.S. of nearly $3 billion annually by 2030. With conservative estimates for growth of the base business, capturing a significant market share of the oral net therapy indication, and a limited opportunity in prostate cancer, which is heavily discounted until we get clarity on regulatory traction with our projected fourth quarter filing. Let's turn next to Zanza. ZANZA has been largely under the radar from the street's perspective, with only a little over half of our covering analysts including it in their revenue models. We anticipate it will gain more attention and prominence moving forward now with the positive Cabo and Deruling and the recently announced collaboration with Merck. Specifically, ZANZA is built to expand on Cabo's foundation, and its early development plan provides a framework to surpass Cabo's clinical and commercial success. Our first six ZANSA pivotal trials and four lead indications, including colon cancer, kidney cancer, head and neck cancer, and neuroendocrine tumors, represents a large population of over 100,000 cancer patients annually with overwhelming unmet medical need based on current standards of care with a cadre of generic and established drugs. Critically, recent progress across these trials reinforces our plan to secure our first potential approval for ZANSA as early as 2026, and then in subsequent years, one additional approval per year pending clinical and regulatory success. The ZANSA revenue opportunity with this first wave of label-enabling trials is substantial, with projected greater than $5 billion of top-line sales in the U.S. in 2033, nearly equally split between GU and GI indications. Obviously, a second wave of new trials in GU, GI, and other appropriate indications could advance this opportunity to the next level in the mid-30s and beyond. ZANZA commercialization, XUS, either by Exalexis or a potential new partner, could drive significant commercial and financial upside as well. I'll wrap up here with a few additional comments on the pipeline advancing behind CABO and ZANZA. We're thrilled. but never satisfied with the depth and scope of the early pipeline assets we built and are moving into and through early clinical evaluation. Our small molecule and biologic approaches represent the opportunity to match the best modality with the most compelling tumor pathobiology as either monotherapies or combination partners with checkpoint inhibitors or proprietary exoexis molecules. We're advancing lead molecules in the synthetic lethality space with XL309 and XL495 and a variety of biologics in EDC, bispecific, and monoclonal antibody formats. The ultimate goal for all these programs is to rapidly generate clinical data to prioritize advancement into full development, all with the goal of exceeding expectations as a multi-product, multi-franchise oncology biopharma. So with that, please see our press release issued an hour ago for our third quarter, only 24 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 2024, the company reported total revenues of approximately $539.5 million, which included Cabo Xanthida franchise net product revenues of $478.1 million. Cabo Medics net product revenues were $475.7 million and included approximately $6.6 million in clinical trial sales, which is similar to Q2 2024. Gross-to-net for the Cabozante franchise in the third quarter of 2024 was 26%, which is lower than the gross-to-net we experienced in the second quarter of 2024. This decrease in gross-to-net deductions in the third quarter of 2024 is primarily related to lower Medicare Part D and DOD and TRICARE expenses. We are now projecting that our gross-to-net deductions for fiscal year 2024 will be between 28% and 29%. Our Cobb Medics trade inventory was flat at 2.1 weeks on hand when compared to the second quarter of 2024. As a continued reminder, clinical trial sales have historically been choppy between quarters, and we expect this to continue into the future. Total revenues included $60.2 million of licensed revenues for the third quarter of 2024. The largest contributor to our licensed revenues was $42 million from the royalties we earned from Ipsen and Takeda on their sales of Cabozantinib in their territories. Additionally, we recognize approximately $11 million in license revenues for a regulatory milestone resulting from Ipsen's filing of their application for a potential net indication with the European Medicines Agency. Our total operating expenses, including restructuring and impairment charges for the third quarter of 2024, were approximately $352 million compared to $361 million in the second quarter of 2024. The sequential decrease in these operating expenses was primarily driven by lower general and administrative expenses offset by higher clinical trial and licensing costs in the third quarter of 2024. After evaluating our near-term needs for both lab and office facilities on our Alameda campus, we put certain of our unoccupied leased facilities on the market for sublease. As a result, we recorded a non-cash impairment charge of approximately $52 million related to these lease facilities. Provision for income taxes for the third quarter of 2024 was approximately $37 million, compared to a provision for income taxes of approximately $67 million for the second quarter of 2024. The company reported gap in income of approximately $118 million, or 40 cents per share, on a fully diluted basis for the third quarter of 2024. The company also reported non-GAAP net income of approximately $136 million, or 47 cents per share, on a fully diluted basis. Non-GAAP net income excludes the impact of approximately $18 million of stock-based compensation expense net of the related income tax effect. Action marketable securities as of September 30, 2024, were approximately $1.7 billion. In the third quarter of 2024, we repurchased approximately $12 million of Exalix's shares at an average price of $25.61 as part of the $500 million share repurchase program authorized by the Board in August 2024. And finally, turning to our financial guidance for the full year 2024, we are increasing and narrowing our total revenue and net product revenue guidance given Cobb-O-Matic's strong net product revenue performance in Q2 and Q3 of this year. We are increasing our total revenue guidance to $2.15 billion to $2.2 billion. Additionally, we are increasing our net product revenue guidance to $1.775 billion to $1.825 billion, which increases the midpoint of our net product revenue guidance range by $100 million when compared to our previously provided net product revenue guidance. Given where we are in the year, we are tightening our R&D and SG&A expense guidance ranges. Please see slide 20 of our Q3 earnings presentation further detail. And with that, I'll turn the call over to PJ.

Thank you, Chris. The third quarter of 2024 was a very strong quarter as the team continued to execute at a high level, which has resulted in CaboMedix continuing to be the number one prescribed TKI in RCC. Additionally, CaboMedix remains the number one TKI plus IO combination in first-line renal cell carcinoma. CaboMedix TRX volume grew 9% year-over-year in Q3 2024 compared to Q3 2023. In the same period, the TKI market basket volume declined by 1%. Importantly, the business continues to grow in terms of demand and new patient starts, both of which were at an all-time high for CaboMedix in the third quarter. Cabo Medics continued to perform well from a marketplace and competitive perspective. Cabo Medics again led the TKI market basket with TRX share increasing to 42%. As we had discussed previously, the first-line RCC market is extremely competitive, and Q3 was the eighth full quarter in which Cabo Medics plus Nivolumab remain the number one prescribed TKI plus IO combination in first-line RCC. In particular, we're continuing to see strong growth in the community oncology setting. Looking forward, the commercial team is excited about the positive results from the cabinet study in neuroendocrine tumors as Exelixis aims to become a leader in the net space. We believe the RCC market provides a blueprint for how the net market could develop and grow in the coming years. The global RCC market grew from approximately $3.7 billion in 2016 to approximately $10 billion in 2023, driven by new therapeutic launches, improved outcomes for patients, leading to longer treatment durations and longer survival with patients receiving more lines of therapy. Similarly, early projections for the global net market show it could almost double going from approximately $2.5 billion in 2023 to approximately $4.6 billion in 2030. Based on the cabinet study, CaboMedx is well-positioned to capture a significant portion of this market pending regulatory approval. Beyond Cabo, the Stellar 311 study positions Zanza well in the neuroendocrine tumor space. However, it is not included in these early projections. The Cabinet data were enthusiastically received at this September's ESMO meeting and simultaneously published in the New England Journal of Medicine. As we talked to KOLs and physicians in market research, the efficacy data from Cabinet is viewed favorably by prescribers in terms of progression-free survival, overall response rate, and disease control rate. They view the Cabinet data as clinically meaningful and there is excitement for the potential for CABO to become available to net patients. The vast majority of physicians in our neuroendocrine tumor market research have experience with CABO in RCC, HCC, or DTC, which is consistent with CABOmedics utilization data. These oncologists cite their experience with CABOmedics in these tumors as a positive factor particularly when it comes to comfort with dose modification and toxicity management. The feedback and research clearly demonstrate that a regulatory approval for CaboMedics based on the cabinet study would have the potential to help build, excuse me, to help a broad range of net patients and address a significant unmet medical need. The cabinet study had a diverse population that included patients regardless of site of disease origin, tumor grade, prior Lutathera, SSTR status, or functional status of the tumors. In our market research and KOL feedback, physicians cite the study design as a positive in that it covers a wide range of net patients that they see in their practice, as well as the fact that it is a contemporary data set and is inclusive of patients who have received prior Lutathera. The potential broad utility of CABO and NETs is a differentiator in this setting relative to other approved agents. CABO may have the opportunity to be the easy choice to use in neuroendocrine tumors given that it was studied in all relevant clinical segments. In our analysis of the neuroendocrine prescriber universe, we see the vast majority of NET business potential in approximately 3,500 prescribers. We are thrilled that about 80% of these prescribers already have experience writing CaboMedx. Of these 3,500 net treaters, 2,800 are already current unlabeled targets for the sales force, indicating that access to them would be efficient. Also, of the 700 net prescribers who are not currently called on, the vast majority, 550, are co-located with current CaboMedx targets. Ending FDA approval, we are confident that we will be able to rapidly reach and educate this net prescriber universe efficiently, given the overlap with current sales targets and the fact that we expanded our GI sales team. Turning to the net market, we have conducted market research which shows that oral therapies account for approximately 25% of the first-line market and 50% of the utilization in the second and third line plus settings. Currently available oral options do not have the same breadth of data across all disease characteristics, including site of origin, grade, and functional status. Also, in market research, physicians do not view the toxicity profile of these agents in a favorable manner. The majority of net patients will receive multiple lines of therapy, And there is lack of optimal sequencing data in this setting, particularly in patients previously treated with Lutathera. All of this taken together underscores the need for a contemporary data set that is broadly applicable to address the unmet medical need for this heterogeneous patient population. Looking at the small molecule market for NETs in 2025 using contemporary pricing, small molecule opportunity would be approximately $1 billion in the U.S. Additionally, upon approval, Cabo Medix would be the only branded small molecule therapy competing in the neuroendocrine tumor market. This is a critical point as Cabo would have a clear advantage in promotional share of voice and be the only oral therapy with comprehensive patient support services. With the cabinet data and a focused launch strategy that leverages the positive prescriber experience with CAVO, Exelixis is well-positioned to rapidly penetrate this market. Furthermore, as Exelixis aims to become a leader in the neuroendocrine tumor market, we are excited about the planned STELR 311 trial of ZANZA and NETS. The commercial team is excited and motivated by the launch planning and preparation for the opportunity in NETS. The CABO franchise is closing out 2024 with significant momentum in our currently approved indications, and a potential regulatory approval of CABO Medics and NET would provide the opportunity to continue the growth and momentum in the coming years. Looking through the CABO lens, it is clear that great data with a great team behind it can significantly help patients and expand markets. We have seen this in RCC, as the oral therapy market has expanded by nearly 40% since the beginning of 2021. We are extremely excited about the portfolio of announced Phase III ZANSA trials. We are motivated to expand the CABO franchise to a kinase inhibitor franchise, with ZANSA having the potential to help patients in tumors where CABO has demonstrated activity, such as NETs and RCC, as well as new tumors, such as colorectal and head and neck cancers. So we can continue to help more patients with cancer as we strengthen our GU and GI franchises. And with that, I will turn the call back over to Mike.

All right. Thanks, PJ. I'd like to close our call today by thanking all of our very talented and dedicated employees who are unwavering in fulfilling our mission to help cancer patients recover stronger and live longer. Successfully litigating the ANDA was the result of extremely hard work and perseverance over literally years, led by our excellent legal team in partnership with outside counsel, Wilmer Hales. I'm grateful to the numerous internal employees who were interviewed, deposed, and otherwise engaged in supporting this litigation, including scientists in discovery and manufacturing, leaders and members of the commercial and medical affairs teams, as well as finance and public affairs. It was a two-team effort across the entire company, and I appreciate the commitment of everyone who was involved in seeing it through to fruition. I'd also like to recognize the team involved in successfully negotiating the Merck clinical development collaboration, which was another cross-functional effort led by our business development colleagues. With this collaboration, we're on our way to helping many more cancer patients with Zanza. I'd also like to thank our commercial organization, which has driven Pablo's up performance and contributed to our strong financial results over the first nine months of this year. And finally, I'd like to recognize our entire R&D organization who have propelled our pipeline efforts forward at a rapid pace. The collective ExoLexus team has accomplished a great deal thus far in 2024, and with much more to come on the horizon as we strive to deliver results for cancer patients and our shareholders. We look forward to updating you on our progress. Thank you for your continued support and interest in ExoLexus, and we're happy to now open the call to questions.

Thank you. Ladies and gentlemen, to ask the question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. As a reminder, we ask that you limit yourself to one question only. Please stand by while we compile the Q&A roster. Our first question comes from the line of Astika Van Warden with Truist. Your line is open. Hi, guys.

I speak to my questions and congrats on the beating the race here. It's very encouraging to see that. Since I'm restricted to just one question, I'll just focus on the Merck collaboration that was recently announced. Can you maybe give us some color on the diligence process that went into that deal? How extensive was it? I know it's hard to comment on that, but that'll be useful. And the reason I'm asking is, because Merck already has lindetinib, a drug that where tolerability and half-life has been debilitating to its development. I'm just trying to get a sense of how, what they did when they did the analysis for Zanzibar. Thanks.

Yeah, I asked the question, Mike. Thanks for the question. Yeah, it's a hard question to answer. We don't want to speak for Merck. We certainly want to respect the process that took place over many, many, many months. We're thrilled to be working with arguably our main competitor in the RCC space with Cabo, moving forward together with them with Zanza. So we're excited about moving forward. Obviously, there's nobody better in the industry to actually executing trials than Merck. So the fact that they're running two large pivotal trials is just awesome from our point of view, and we're certainly excited to work with them going forward with these first set of trials with Zanza.

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

Hi, this is Chi. I'm for Jason. Thanks for taking our question. A congressman securing a favorable ruling on Cabo IP. One on business development. Understanding you look to do the right deal at the right valuation. for the right asset within the GUGI space. I'm curious if you have a preference for modality, whether it's small molecule, monoclonal, bi-specific, or ADC, and whether you have a ceiling on the size of the deal you would consider for BD. Thanks so much.

Yeah, thanks for the question on BD. Look, we're agnostic to, I think, almost all those factors. We're focused on active molecules, as I mentioned in our prepared remarks, that we have conviction on in terms of having the ability or the opportunity to generate differentiating clinical data. that we can then convert into commercial success. I mean, again, that's the learning from Cabo. That's the Cabo lens that we base everything on. So, we obviously want to be able to work in the GU, GI space because we're really set up to execute very well there, both clinically and commercially. But in terms of modalities, we're open. We're looking for active molecules that we think we can build into a franchise. number one, and then get over the goal line numerous times from a regulatory point of view with the obvious upside in helping more patients and then having that translate into commercial success.

Thank you. Please stand by for our next question. Our next question comes from the line of Sylvan Turkin with Citizens JMP. The line is open.

Yeah, thanks, Tim. Thanks for taking my question. Congrats on the beat. I would like to know about maybe that there's a gap between, obviously, between your near-term growth with Carol and Zanda and then that you want to show with BD and then your earlier pipeline. But you were talking about the earlier pipeline, your synthetic utility assets. When can we expect some data there? And what's your view on this space with all the competitive data that has come out recently here? Thank you so much.

Dana, I want to take that one first from a competitive point of view, and then I think both Amy and I can provide some color commentary as well, so.

Sure, sure. So thanks for the question. Just regarding, so let's just be clear, we've got two compounds in the clinic now that are in the synthetic lethality space, XL309, which targets US design. And as we announced in the press release, XL495 has now been filed and the phase one trial is running. As I highlighted at our R&D Day presentation in December, both of those molecules are substantially differentiated from the other molecules that are in the clinic. Regarding XL309, we now believe we are the frontrunner in the clinic with Roche pulling back on their molecule to rework and work through some PK issues. They really hit a ceiling in terms of exposure. So we're quite happy with our position now in the clinic with that compound. And then with 495, the PK-MIT-1 inhibitor, the main competition there is from repair with Lunar Certib. And as we presented at R&D Day in December, Our compound, we believe, has a PK advantage as well as a selectivity advantage. With our PK modeling, we believe we can hit well into the efficacious range of exposure with one's daily dosing. And we also hit about 33% or 35% fewer kinases in a broad selectivity panel compared to that competitor compound. So we think there might be a safety advantage as well.

Amy? Yeah, so I know we spent a lot of time talking about Cabo and Zanza because those are sort of the newer term things, but trust me, Dana's keeping the development team very busy with some of these assets in the pipeline as they advance. And they are, you know, we really are focusing on best in class. And with the modality that we have around USP1 and single-stranded brake repair, there's really an opportunity to not only extend the reach of of PARP inhibition and BRCA mutations, but potentially also take it beyond BRCA mutated patients into HRD and potentially other indications. And we have the XB010 ADC with MMAE payload that targets 524. And now, as Dana just pointed out, FPI to 495. So, we are busy with the pipeline. There's a lot coming. There's more to come. And we are really focusing on that just as much and as intensely as we are focusing on ZANSA and maturing it.

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

Hey, thanks for taking my questions. Great to see a reacceleration of CABO sales growth to double digits here in the second half of this year. Could you just comment on what's been the primary driver for that? And then on ZANSA, you know, congrats on the Merck collaboration. I'm just curious if you could comment on the two planned phase three studies of ZANSA and Belzirifan in RCC and how you think about positioning that versus CABO and the ARCOS HIF-2 alpha inhibitor longer term. Thanks so much.

Okay. PJ, take the first one, and I'll comment on the second one. Okay?

Yeah. Thanks for the question, Michael. We're certainly very pleased. As I mentioned with the quarter and the significant momentum we have with Cabo now and the franchise, you know, as I've mentioned previously, we're sort of continuing to see new highs in both demand and new patient starts and really primarily driven by first-line RCC. You know, we maintain our market leadership position there. And as we see increasing new patient starts there, we continue to see patient stacking and sort of demand moving forward. So very pleased with that. And, you know, really it comes down to we've got great data across the board there and then a great team really focused on executing at a high level and just, you know, continue to see that moving forward. Great.

In terms of ZANSA with Merck again, we've agreed with Merck to keep the details to ourselves for now as I'm sure time goes on and trials are moving forward. Merck, again, who's running those trials will communicate the design and those kinds of issues. So stay tuned on that. I don't have much to say in terms of Other competitive programs, we're very, very happy to be partnered with Merck, which has the only FDA-approved HIF inhibitor on the market right now. And with the momentum we've got with Zanza and certainly with their firepower, we're very excited to be moving forward here with them going forward.

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

Great. Good evening. Good afternoon, Mike and team. Congrats on the quarter and also on the string of recent great, great updates. Mike, maybe sticking with Zanzalidimab and that we appreciate the layout of some of the peak opportunity longer term. That's great to see. Just wanted to ask if you could maybe elaborate a little bit further on some of the The assumptions there, as you certainly mentioned, of the patient stacks, which is helpful, the differentiating data that you would expect to get to those numbers, and even the unadjusted nature. But as we think about those breakdowns with respect to GU and GI and head and neck would be great. And certainly related, Mike, what is the optimal pipeline construct and portfolio construct for you? Having gone back, having lived through the Cabo days, establishing and defending the competitive positioning, is BANZA sort of that single asset to get that full white space and diversity of opportunity the right way of thinking for Exalexis moving forward? Thanks so much, and congrats again, guys.

Yeah, thanks, Greg. Appreciate the comments and the questions. Look, as we talked about previously, Cabo provides the foundation for which we're building future projects. opportunities with ZANZA going forward that we've learned a lot with CABA. We've spent 15 plus years developing that molecule. We've had a string of successes. We've done, I think, a lot of really great science at the lab bench and the clinic, been able to learn a lot as an organization to be able to maneuver. So I think we're applying all those learnings from all those different lanes into how we view the ZANZA opportunity. In terms of details on assumptions, you know, we have a very sophisticated commercial organization that does modeling professionally. I mean, this is what they do. So we'll share those assumptions and that data in time. I think it's I think it's important for the sell side now, to be quite frank, to roll up their sleeves, sharpen their pencils, and look at these opportunities, start doing your own modeling. And we can talk about that together when some of that data, some of your modeling is more mature in the future. We're thrilled about having Zanzibar where it's at to have a molecule at this stage in six ongoing or planned pivotal trials. We think there's more opportunity on the way. You know, collaboration with Merck, you know, top line data in 303 and 2025, potentially first launch in 26th. you know, the momentum is palpable right now coming off the strength of Coddler. So we're excited to be, you know, again, to be past the ANDA so everybody can focus on the business moving forward, positive direction forward, without having the, you know, some of the overhang that we've had with ANDA and other stuff in the past. So happy to engage with you going forward and looking forward to, you know, making this happen.

Thank you. Please stand by for our next question. Our next question comes from the line of Yaron Werber with TD Coin. Your line is open.

Great. Thanks for taking my question. Congrats on the quarter and on the litigation. So, Mike, just the one thing that really caught my mind is your comment about potentially looking at late stage deals. I think you've kind of commented on that, but I think this is kind of something you're highlighting a bit more now, at least in our view. Am I thinking about this correctly, and are you open for acquisitions, or is this really in licensing only? Thank you.

Yeah, Jeroen, so thanks for the question and the commentary. Look, we've been talking about late-stage opportunities for a while now. As you heard from Dana and Amy, we have a very full early-stage pipeline. We like these molecules. We think they're best in class. We have a lot of work to do to interrogate and then prioritize what moves into full development. So to be quite frank, we don't need more development candidates, more INDs, more phase one molecules, because we've got, you know, our plate's full, right, in terms of what we're doing internally, right? We're interested in building Exalexis into a multi-product, multi-franchise oncology business. That's the goal. And to do that, and obviously we have CAVO going full steam. Zans have got great traction. But if we can find, again, the right asset that has the right level of, gives us the right level of conviction on being able to generate differentiating clinical data that can then drive commercial performance, We're very interested in finding a way to bring that molecule or those molecules into the organization. As I said in my prepared remarks, we have any number of different potential business development opportunities going forward. We can do virtually anything we think makes sense, but it's got to be for the right deal, the right valuation with the right asset.

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

Wow. Congrats on all the progress across so many fronts. Really appreciate the optimism around Zanza, an impressive $5 billion peak U.S. sales potential. Can you comment on what gives you the conviction at this point in time to share your thoughts on the commercial potential? Is it related to the Merck collaboration or something else? And since you have global rights to Zanza, why did you focus your outlook on U.S. revenues and how are you thinking about the ex-U.S. opportunity? Thank you.

Yeah, Jay, thanks for the question. You know, it's really the right time. I said in my early comments this afternoon, we're at this inflection point organizationally where we're past We're past the ANDA. We have that overhang finally removed. We want everybody, all of our various stakeholders, to look at us today as we're going forward with a successful product in Cabo, an asset in Zanza that has multiple, I would say, high PTRS shots on goal in terms of new indications. that we think could really build on CABA's success and expand it from the scale and scope that we're seeing currently with CABA. So it's really the right time to get everybody focused on the future. Again, as I mentioned with Greg, we've had challenging time getting people to pay attention to us from the standpoint of where we're at and where we're going so to get you guys everybody off the sidelines and you know looking at us in a maybe a new light with the momentum we've got right now I think is super important we are focused on building a multi-product multi-franchise business because that's where the value is for patients and for shareholders And with the momentum we have with CABO and with ZANZA and the pipeline, lots of optionality BD-wise. We're super excited about our path going forward.

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

Thanks for taking our questions. Really encourage to see the durability of CABO's leadership there. Two questions, if I may. One for PJ. So there's a PET imaging agent for CA9 for RCC that could get approval potentially next year. I'm just wondering how you view that, you know, potentially pulling some patients who otherwise would have gotten, gone undiagnosed. And, you know, would that be a potential upside to your 10 billion TAM that you laid out for RCC? Second question has to do with the, also the 1 billion TAM that you mentioned for the small molecule NET. Just kind of back of the level of calculation, I think you're probably projecting anywhere from a five to six month duration. I'm curious if you look at the landscape, especially with like a finitor label, some of the durations for earlier lines are basically 9, 10 months. So is it unreasonable to assume that if Zanza entrenches earlier in the treatment landscape for NETs, that duration will be significantly higher given that it's a more indolent cancer? Thank you.

Yeah, Andy, thanks for the questions.

You know, briefly with regards to RCC, you know, I think a lot of patients are in the funnel and we're certainly, as I mentioned, pleased with our performance there and our leading, you know, TRX market share, which continues to grow now up to 42% in that market basket. And, you know, I think that market, most of the patients are being treated. And I think, you know, the bar is, for success, particularly in the first line, and really even with Cabo in the second line is quite high. So, you know, I view that market as relatively, you know, stable in the near term vis-a-vis other mechanisms of action. You know, in thinking about NET, as you mentioned, yeah, as I mentioned, you know, about a quarter of the patients in first line NET are getting oral therapies, approximately 50% in the second, third line settings getting orals. And we basically use, I won't go into the details of all of our assumptions, but we've done a lot of market research there, understand it very well, and using durations that we see from that. I certainly think you're correct. Obviously, the earlier you do go, the longer the durations of therapy, particularly in neuroendocrine tumors. you know, which is a bit more indolent than some other solid tumors. And, you know, I think there is the potential for ZANZA in the long term, you know, pending trial results, regulatory approval, et cetera, of having earlier utilization and therefore a longer duration. I think, you know, that's certainly right. But what I'd say in the near term, we're really excited about CABO and the potential approval that we're, you know, looking at with the PDUFA date of April 3rd. And as we think about that market and that billion dollar market in 2025 that I mentioned, we think we're incredibly well positioned to not only penetrate it and achieve a lot of that market, but do it rapidly. Really, the more we think about it as we're the only branded oral therapy in the space, it really gives us a big advantage in terms of the promotional share of voice, And really just the ability to help patients, comprehensive patient support services, we think will be really important. So we're really excited about that opportunity in the near term.

Thank you. Please stand by for our next question. Our next question comes from the line of David Leibowitz with Citi. Your line is open.

Hi, guys. John, I'm for David. Thanks for taking our question. For combo and neuroendocrine tumors, I know you're touching on some of the commercial considerations for this market, but what sort of work still needs to be done before a potential launch? And assuming approval, how should we be thinking about initial launch cadence? Are there any existing indications that might serve as sort of a proxy for how we should be thinking about early uptake? Thanks.

Yeah, thanks for the question, Jonathan. You know, our team, as I mentioned, we're incredibly excited and motivated across the board getting ready for this launch. You know, we will be ready to go on day one, as we always are, for launching a new indication. And frankly, the more we do it, I think the better we get at it. So, you know, what I would anticipate here, as I mentioned, not having – really the amount of competition that you have in RCC, which is, for example, very competitive, we would anticipate a very strong uptake right from the beginning. And we believe our data is very strong. I went into some detail on the prescriber universe. The sales force has been expanded and we're frankly really ready to go. And we believe we can really move into the market rapidly and efficiently. And really, we're very excited about the opportunity to help, you know, potentially a lot of patients with neuroendocrine tumors.

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

Hi, this is Anastasia for Akash. Congrats on the quarter and on the recent IP decision. Just a couple on my end. The first is about the potential to expand Merck partnership beyond RCC and head and neck. Do you think that's possible as we get more data from the PD-L1 VEGF by specifics? And then the second question is, do you think that your head and neck data would compare well versus mirrors in the PD-L1 refractory population, or do you see it as kind of better or worse on that front?

Anastasia, thanks for the questions. Amy, you want to start with the head and neck question, and then I'll address the Merck?

Yeah. Yeah. So, you know, when it comes to ZANZA, we're obviously interested in developing it broadly as it's best in class, and we have multiple collaborations to that end with other IOs, including Atizo and including Novalimab, and now recently with Pembrolizumab in head and neck. So, whether or not there's expansion beyond head and neck, I would say we're always looking. And, of course, we're interested in getting ZANSA into as many indications as possible. What we combine with remains to be seen. And I guess when it comes to the data with the bispecifics in the PD-1 refractory I'm not quite sure. We're competing with them. We have about a year lead time with BICARA, against BICARA in the frontline space and MARIS. And we are leveraging that lead time very aggressively to ensure sites that we can enroll and read that study out. How it plays out in the PD-1 refractory space. Maybe I didn't understand the question, but I'm not sure I'm able to answer that by CARA. Okay.

Thank you.

Thank you. Will you stand by for our next question? Our next question comes from the line of Steven Willie with CIFL. Your line is open.

Yeah. Good afternoon. Thanks for taking the questions, and congrats on the quarter. I know you previously characterized Stellar 305 as a Phase 2-3. I think you're now kind of explicitly referring to it as a Phase 3. So just wondering if you've completed that formal assessment of Phase 2 data to officially transition into Phase 3. And I guess if so, can you speak to those metrics that you're evaluating to make that decision and just whether you might be disclosing that data at some point? Thanks. Amy, please go ahead.

Yeah, quickly, thanks for the question. It is a Phase 2-3. We are still enrolling, and we'll disclose data when it is mature.

Thank you. Please stand by for our next question. Our next question comes from the line of Ash Verma with UBS. Your line is open.

Thanks for taking our question. So I just wanted to understand the capital allocation priorities from here. You have a pretty sizable buyback program outstanding. Do you think this was the right focus when you were dealing with the IP uncertainty? But now that the IP decision is behind you, why not focus most of your capital deployment on the pipeline build out? Thanks.

Yeah, thanks for the question. It's Mike.

Yeah, I think with our cash flows, we can do all the above. So as I mentioned in my prepared remarks, we're committed to being very disciplined as we go forward in terms of expense levels, kind of keeping expense levels kind of where they are currently for the foreseeable future. With the cash flows that we have and project, we think we can continue investing in the pipeline, doing BD, and then returning cash to shareholders.

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

Great. Thanks for taking my questions. Just I have a question around slide nine, the guidance around ZANZA. So should we read that as kind of ZANZA 5 billion in 2033 and then what CARBO kind of essentially declines to zero?

Peter, it's Mike.

I think the CABO LOE is in the 2030 timeframe. So, as outlined on slide nine, that is a 2024 number. And we see ZANSA growing dramatically over the next several years as these pivotal trials read out. And if successful, it could drive a lot of upside growth for ZANSA.

Thank you. Please stand by for our next question. Our next question comes from the line at the route, DMO Capital Markets. Your line is open.

Hey, it's Luke Shemaly on for answer. Thanks for taking my question. For the ZAMSA colorectal cancer update next year, the primary endpoint is OS in patients without liver mets. How readily identifiable are patients without liver mets in the real world? And would that require a companion diagnostic?

Hi, Lucas. This is Amy. Thanks for the question. So this is an imaging assessment. All patients, when they're diagnosed with advanced disease, tend to get scanned from head to toe. And that absolutely includes a liver scan, especially for patients with colorectal because of its predilection to metastasize to the liver. So all patients with colorectal will have a scan of their liver And it's pretty straightforward to identify whether or not there is a disease present in the liver or not. So it's an imaging. It's a clinical assessment. It's actually not a companion diagnostic, and it's readily utilized by physicians every day.

Thank you. Please stand by for our next question. Our next question comes from the line of student Logan Nathan with Stevens. Your line is open.

Hi, thank you for taking the time to share your quarterly results this evening. Congratulations on the great quarter and the recent progress on many fronts. With the breadth of clinical program opportunities for CAVO and ZANZA in the GU and GI space, what indications of therapeutic technologies are left out there of interest when you're looking for assets during the BD endeavors? Are you specifically looking for assets primarily for novel combinations with CAVO and ZANZA or monotherapy options out there too? cover all the GUGI indications.

Thank you for the questions, Mike. I would say the simplest answer is all of the above. Our conviction is around clinical differentiation that can drive commercial success. If those assets combine with Zanza, other XL molecules in the pipeline, great. If they're standalone agents or combined with checkpoints, that's fine too. So again, we're agnostic when it comes to modality, MOA type of transaction. We're focused on really high level of conviction on clinical differentiation that then drives commercial success.

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

Thank you, Mike. As you think about how you're staffing your teams and obviously monitoring how you're spending, noting that SG&A, the R&D has come down, what are the areas that you feel are going to be important to expand further?

Thanks, Chris. Yeah, I think we're at a pretty good spot right now. Obviously, you know, if we have in the out years continued clinical success and we need to augment what we've got commercially, that's a relatively easy and incremental growth as we've seen so far in our planning for the net space. You know, but in terms of, you know, the company, we have 1,100-plus employees. I think we're lean and mean in terms of what we are aspiring to do organizationally in terms of building this multi-franchise oncology business. But we've got a lot of momentum in the organization from an R&D point of view, from a commercial point of view, with the right size G&A to make it all work. So we're excited about where we are, and we think we've got the right team and certainly the right horsepower, both talent-wise as well as energy-wise, to make that happen as we go forward.

Thank you. Please stand by for our final question. Our final question comes from the line of Joe Cantazar with Piper Sandler. Your line is open.

Hey, great. Thanks for taking my question. Congrats on the quarter. I had one on the PK-MID program since it's now in phase one. So you mentioned loan restorative, and that program seems to have honed in on a biomarker-selected population in endometrial and ovarian cancer. So maybe can you speak to your strategy around tumor type selection and biomarkers that you may be using? And then you also mentioned potential cytotoxic combinations for that program. Wondering if maybe you could elaborate a bit more on that. Thanks.

Yeah, thanks for the question, Joe. This is Dana. I'll take that one. Yeah, so XL495, as you're quite aware, is a PKMET1 inhibitor, which has shown synthetic lethality in tumors that have increased cycling E levels. That can be driven by a number of different actual genetic biomarkers, including CCNE amplification and a few others. So we've certainly identified those biomarkers in our preclinical models, but we've also identified some other interesting biomarkers that we have not yet disclosed, which we're also quite excited about. So we are looking at all of these biomarkers in the phase one study. We have also conducted quite a few combination studies preclinically looking at, as you mentioned, cytotoxics, but also a very expanded range of drugs that have direct or indirect impacts on generating sort of a replication stress type phenotype in the cells. And we have a lot of opportunities there. So we haven't really disclosed details of our phase one program yet. We will do that at some point in the future, but until then, we're looking at quite a few different hypotheses in the clinic for both biomarkers and combinations.

Thank you. Ladies and gentlemen, I'm sure I know further questions in the queue. I would now like to turn the call back over to your host, Bharat, for closing remarks.

Thank you, Tawanda, and thank you all for joining us today. We welcome your follow-up calls with any additional questions you may have that we were unable to address during today's conference.

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