Exelixis, Inc.

Good day, ladies and gentlemen, and welcome to the Ex-Alexis First Quarter 2025 Financial Results Conference Call. My name is Tawanda, and I will be your operator for today. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to your host for today, Ms. Susan Hubbard, Executive Vice President of Public Affairs and Investor Relations. Please proceed.

Thank you, Tawanda, and thank you all for joining us for the Ex-Alexis First Quarter 2025 Financial Results Conference Call. Joining me on today's call are Mike Morrisey, our President and CEO, Chris Center, our Chief Financial Officer, PJ Haley, our Executive Vice President of Commercial, Amy Peterson, our Chief Medical Officer, and Dana Aftab, our Chief Scientific Officer, who will review our progress for the first quarter 2025 and in March 31, 2025. 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, and government drug pricing policies and initiatives. Actual events or results could differ materially. We refer you to the documents we file from time to time with the SEC, which under the heading risk factors, identify important factors that could cause actual results to differ materially from those expressed by the company verbally and in writing today, including without limitation risks and uncertainties related to product commercial success, market competition, regulatory review, and approval processes, conducting clinical trials, compliance with applicable regulatory requirements, our dependence on collaboration partners, and the level of costs associated with discovery, product development, business development, and commercialization activities. And with that, I'd like to turn the call over to Mike.

All right. Thank you, Susan, and thanks to everyone for joining us on the call today. Exilex has had a strong first quarter, highlighted by significant progress and momentum across all components of our business. We continue to execute on our strategy to build a multi-compound, multi-franchise oncology enterprise. We expect 2025 to be a very busy and highly productive time for the company. I think it's safe to say that we have reached another critical inflection point in recent Exilex's history, and we're energized to take things to the next level as we move forward into the second quarter and beyond. As we've discussed previously, we have a singular focus on improving the standard of care for patients with cancer. Our future success in achieving this goal will enable Exilex to help many more cancer patients and ultimately solidify our leadership position through innovation and execution. We're pleased to see accelerating growth of the U.S. Cabo franchise in the first quarter, both in terms of absolute revenue and relative growth compared to the competition, which reflects Cabo's status as the leading TKI for RCC. We anticipate seeing additional upside with new indications in neuroendocrine tumors, where we secured regulatory approval at the end of March. Key highlights for the first quarter include first, we saw a strong performance of the Cabo's antitiv U.S. business with continued growth in demand, new starts, and revenue. First quarter 2025 U.S. Cabo franchise net product revenues grew 36 percent year over year to $513 million compared to $378 million in the first quarter 2024. Global Cabo franchise net product revenues generated by Exilex and his partners were approximately $680 million in the first quarter 2025 compared to $559 million in the first quarter 2024. Given the strong momentum of CaboMedics in the first quarter, we're increasing our 2025 full year financial guidance for net product revenues and total revenues by $100 million. Second, on top of our strong financial and commercial performance, the highlight of the quarter was the U.S. regulatory approval of CaboMedics in both Pnet and EPNet ahead of our assigned FDUFA date of April 3rd 2025. Our commercial team was ready to execute our detailed launch plan and we were out in the field within hours of approval. Kijie will provide more information and commentary about our first quarter commercial dynamics and the net launch and his prepared remarks. We plan to evaluate further updates to our 2025 financial guidance as we build momentum on the net launch and gain further clarity on additional revenue opportunities for 2025. Third, it's mission critical for us to advance new molecules from our pipeline into full development and ultimately onto the market to excel in our mission to help cancer patients recover stronger and live longer. We're excited to advance Zanza to the center stage in 2025 as our next oncology franchise opportunity. Important anticipated Zanza data milestones from pivotal trials in the second half of 2025 include top line results from Stellar 303 and colorectal cancer and Stellar 304 and non-clear cell RCC and a decision to advance the phase three portion of Stellar 305 and head and neck cancer all pending event rates for each trial. In addition, we expect to initiate the Stellar 311 trial of Zanza in NET in the first half of 2025 and anticipate Merck will initiate two RCC studies evaluating Zanza plus BOSU to fan this year. Fourth, as we highlighted recently, our XLXIS IND pipeline is coming into focus with a range of new and potentially differentiated molecules heading into and through early clinical evaluation. The goal of these efforts isn't to build a big pipeline, it's to carefully and quickly evaluate new clinical assets and identify the winners for advancement into full development as top investment priorities. Early development of XL309 continues to be a main focus as both the monotherapy and in combination with PARP inhibitors to deepen and prolong responses. Ghost escalation with XBO10 continues to advance quickly. We're making good progress on our goal to file up to three new INDs in 2025. XB628 recently entered the clinic and we remain on track for IND submissions for XBO64 and XB371 this year. Finally, in regard to capital allocation, we're excited about the trajectory of our business and have the balance sheet and expect the cash flow to advance our pipeline priorities, access new high conviction assets, and continue to repurchase shares when we believe they are undervalued. Business development activities continue in earnest and are focused on late stage assets in the GUGI space. Back-end loaded pay for success transactions that tuck nicely into our existing and potential future oncology franchise remain a top priority. As always, we're focused on doing the right deals for the right assets at the right valuations. So with that, please see our press release issued an hour ago for our first quarter of 2025 financial results and an extensive list of key corporate milestones achieved in the quarter. And I'll now turn the call over to Chris. Thanks,

Mike. For the first quarter of 2025, the company reported total revenues of approximately $555 million, which included Cabozantin franchise net product revenues of $513.3 million. CaboMedics net product revenues were $510.9 million and included approximately $12 million in clinical trial sales. As a continued reminder, clinical trial sales have historically been choppy between quarters and we expect this to continue into the future. Gross net for the Cabozantin franchise in the first quarter of 2025 was 28.9%, which is higher than the gross net we experienced in the fourth quarter of 2024. This increase in gross net deductions in the first quarter of 2025 is primarily related to higher PHS and 340B volumes in a quarter. As previously disclosed, Exelixis has qualified as a specified small manufacturer with a phase which requires Exelixis to pay a 1% discount in 2025 on all Medicare Part D sales and is included in our gross net estimates for the year. Our inventory at the end of the first quarter of 2025 was approximately two weeks on hand, which was down slightly when compared to the fourth quarter of 2024. Because of this relatively flat inventory dynamic between the fourth quarter of 2024 and first quarter of 2025, we experienced little inventory de-stocking in the first quarter of 2025. Total revenues also included approximately $42 million in collaboration revenues, which includes approximately $36.7 million in royalties earned from our partners Ipsen and Decata on their sales of Cabozantin and their respective territories. Our total operating expenses for the first quarter of 2025 were approximately $369 million compared to $404 million in the fourth quarter of 2024. The sequential decline in these operating expenses was primarily driven by lower clinical costs, manufacturing costs for drug development candidates, and licensing costs. These lower R&D costs were offset by higher general administrative costs in the first quarter of 2025. Provision for income taxes for the first quarter of 2025 was approximately $46.1 million compared to a provision for income taxes of approximately $44.9 million for the fourth quarter of 2024. Company reported gap net income of approximately $159.6 million or $0.64 per share basic and $0.55 per share diluted for the first quarter 2025. The company also reported a non-gap net income of approximately $179.6 million or $0.64 per share basic and $0.62 per share diluted. Non-gap net income excludes the impact of approximately $20 million of stock-based compensation expense net of the related income tax effect. Cash and marketable securities for the quarter ended March 31, 2025, was approximately $1.65 billion. During the first quarter 2025, we repurchased approximately $289 million of the company's shares, resulting in the retirement of approximately $8 million of the company's shares at an average price per share of $35.83. As of the end of the first quarter 2025, we had approximately $5.5 million remaining under the $500 million stock repurchase plan authorized by the company's board in August 2024. In February 2025, the board authorized an additional $500 million stock repurchase plan that expires at the end of 2025. We have been purchasing shares under the February 2025 plan during the second quarter. Now turning to our net product revenue and total revenue financial guidance for the full year 2025. We're increasing our net product and total revenue guidance, giving capital medic strong performance in the quarter and our expectations of continuing strong performance throughout 2025. We're increasing our net product revenue guidance to $2.05 billion to $2.15 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. We're also making a corresponding increase to our total revenue guidance, which is now $2.25 billion to $2.35 billion. And finally, regarding the impact of tariffs on our business. As we said previously, our IP for both Cabo Zantinib and Zenzalintinib is domiciled in the union. And as of now, we are projecting minimal exposure on our U.S. Cabo Zantinib business. Our cost of goods sold is approximately 4% of net product revenue, and three of those four percentage points is royalty owed to a third party. The vast majority of Cabo Zantinib finished product for U.S. distribution is manufactured in Canada, and any potential tariff impact on the remaining 1% would be de minimis to the overall business. With that, I'll turn the call over to PJ.

Thank you, Chris. As Mike highlighted, the Cabo Medics business was very strong in the first quarter of 2025. Importantly, Cabo Medics received approvals in neuroendocrine tumors on March 26. Cabo grew in terms of revenue, demand, and new patient starts, and notably performed well relative to the competition. The team continued to execute at an extremely high level, and this has resulted in Cabo Medics continuing to be the number one prescribed TKI in renal cell carcinoma, as well as the number one TKI plus IO combination in first line RCC. A commercial team is executing the launch in nets with great urgency and with the goal to rapidly establish Cabo Medics as a small molecule market leader in that space. We are pleased that prescribers are responding positively to the data and are excited to have a new therapy to address the unmet need in neuroendocrine tumors as we look to build on the strong momentum of the Cabo Medics business. The prescription data in the TKI market basket of Cabo, Lumbatinib, Exitinib, Tsunitinib, and Pizopinib, these the strength of Cabo relative to the competition. Looking at the TRX comparison, Q1 2024 to Q1 2025, Cabo Medics grew four share points from 40% to 44%. Importantly, Cabo is the only product in the market basket to grow market share. Cabo Medics TRX volume grew 18% in this time period, outpacing the growth rate of the market by 10 percentage points. This was the only product that grew at a rate greater than the market. The Checkmate 9ER five-year follow-up data presented at GU-ASCO in February has been resonating very well with prescribers in the RCC space. These data help our team continue to drive differentiation from the competition in the first line RCC markets. Starting to new prescriptions for NRX, Cabo Medics had even had even stronger data trends. Cabo Medics NRX share in the TKI market basket went from 38% in Q1 2024 to 43% in Q1 2025. This share gain is even more impressive as every other product in the market basket lost share in the same time period. NRX volume for Cabo Medics grew 27% year over year. We believe this strength in new prescriptions, which outpaces the total prescription growth of 18%, is an indicator that the business is well positioned to continue the strong momentum going forward. Furthermore, the new indications in NETS will add to the current momentum of the business. We're thrilled that Cabo Medics is approved for appropriate patients in neuroendocrine tumors. As we have discussed previously, we see this as a compelling commercial opportunity for exalixis and the Cabo Medics brand. Based upon market research, we believe that there will be approximately 9,000 drug-treated patients in the second and third lines in the U.S. in 2025. This is expected to grow to approximately 11,000 by 2030. Our research also indicates that the majority of the second and third line patients receive oral small molecules as their standard of care. Furthermore, as we have previously discussed, the oral market opportunity in 2025 is forecasted to be approximately a billion dollars in the U.S. Recall that the target NET physician universe has significant overlap with legacy Cabo Medics prescribers. We believe that this overlap coupled with our sales team's deep relationships would accelerate access and promotional opportunities, and we're pleased to see this come to fruition as our team called on more than 70% of the 3,500 NET prescriber NET physician targets in the first three weeks post-approval. As we have previously discussed, the cabinet study uniquely positions Cabo Medics across patient and tumor characteristics, including patients with neuroendocrine tumors arising in the pancreas, GI tract, and lung across all tumor grades from one to three, functional status, FFTR status, and those who have received prior treatment with Lutathera. The unique study population led to strong and broad NCCN guideline recommendations for Cabo Medics as a preferred or recommended option regardless of site of origin or tumor grade for patients who have received prior therapy. We're pleased with the Cabo Medics label, which will allow physicians to prescribe Cabo Medics to a wide range of NET patients who have received prior therapy. Importantly, this approval makes Cabo Medics the first and only systemic treatment that is FDA approved for previously treated NET, regardless of site of origin or patient's status. The team had been launch ready for some time prior to approval and literally hit the ground sprinting when Cabo received the NET indications. The Cabo Medics data and messages are resonating well and prescriber reception has been extremely positive and confirmatory of the unmet medical need in the neuroendocrine tumor space. Our core promotional assets were deployed within days, if not hours of approval, including personal promotional pieces, the website, targeted non-personal digital and social media tactics, -to-peer education, as well as patient and allied health care professional educational materials. Teams mobilized and are already working to quickly establish Cabo Medics as a new standard of care for second and third line NET patients. We are also pleased that the indication is providing us great access to customers, so we're able to discuss both the cabinet data as well as the RCC Checkmate 9ER five-year follow-up data for relevant physicians. We are excited by this opportunity to serve NET patients and our enthusiasm is matched by physicians' excitement to have a new and effective option for their patients. In general, prescribers see Cabo Medics as a more favorable choice versus current small molecule therapies. Additionally, the competition in the rural segment of the NET market are all generic therapies, which puts Cabo Medics at a significant advantage with a full commercial organization in support of the launch. All of this taken together drives our conviction that the NET market will be a substantial opportunity for the Cabo Medics business. With that, I will turn the call over to Amy.

Thank you, PJ. Everyone at Exelixis shares your excitement around the recent approval of Cavazantinib in patients with either pancreatic or extra-pancreatic neuroendocrine tumors. This approval came approximately one week prior to the BDUFA date, thanks to the team interacting seamlessly with the FDA and the Alliance Cooperative Group. With this major accomplishment now behind us, the Cabinet team is able to shift focus towards helping our partner Ipsen obtain ex-US approvals. As a reminder, this application was chosen for Project Orbus, an FDA initiative that can facilitate approvals in participating countries around the globe. Looking ahead, 2025 is shaping up to be a very big year, not just for Cavazantinib, but also for Zanzalitinib, given the breadth of data readouts and pivotal trial initiations anticipated. First, I want to remind you of why we are optimistic about Zanzalitinib's potential to become a -in-class VEGFR TKI. While Zanz's target profile is similar to Cavo's, its path life is much shorter, enabling faster recovery from treatment-related adverse events with dose modifications, and possibly favoring tumor accumulation over plasma concentration, as was observed in non-clinical models and presented at AACR last year. Either of these qualities could result in an improved therapeutic index for Zanzalitinib. In terms of pivotal data readouts, the first trial we anticipate data from is Stellar 303. This Phase 3 study compares the combination of Zanzalitinib plus Atazolizumab to Regirapinib in patients who have received multiple prior therapies for their advanced colorectal cancer. The trial is designed to assess outcomes in the population of patients without liver metastases, referred to as NLM, and in the -to-treat, or ITT, population. At ASCOGI in January of this year, we presented encouraging clinical data from the Stellar 001 expansion colorectal cohorts evaluating Zanzib with or without Atizote. As seen in Stellar 001, and frankly in all other colorectal trials, patients without liver metastases tend to live longer than those with liver metastases, regardless of treatment intervention. We announced completion of enrollment in Stellar 303 in the second quarter of last year. Given the maturity of follow-up time in the -to-treat population, we anticipate being able to perform the overall survival analysis in the ITT, simultaneous with the overall survival analysis in the non-liver met population. We have amended the statistical analysis plan to dual primary endpoints in NLM and ITT, and top-line data remains on track for the second half of 2025 events pending. Stellar 304 is our pivotal study evaluating the combination of Zanzalitinib plus Nivalimab versus Sunitinib in patients who have not yet received systemic therapy for their locally advanced or metastatic non-clear cell renal cell carcinoma. The primary endpoints in this study are progression-free survival as assessed by blinded independent central radiology and objective response rates by RESIST. We expect to wrap up enrollment this quarter and anticipate data in the second half of 2025 again events pending. Also in the second half of 2025, we expect the Phase 3 -no-go decision for Stellar 305, our Phase 2-3 study comparing Zanzalitinib plus Pembrolizumab to placebo plus Pembrolizumab in patients who have not yet received systemic therapy for their advanced -L1-expressing squamous cell carcinoma of the head and neck. Merck is supplying Pembrolizumab for this trial as part of our collaboration agreement. As for new trial starts, Stellar 311, our pivotal study comparing Zanzalitinib to Avrilimus as a first oral therapy in patients with neuroendocrine tumors is on track to initiate this quarter. And Merck is making steady progress with their Phase 2 and Phase 3 studies in clear cell renal cell carcinoma with anticipated starts in the second half of 2025. Finally, we are proud to have numerous presentations at ASCO 2025, including three involving Zanza. As you can imagine, we're excited about Zanza's potential and expect 2025 to be a very data-rich year. I'll leave you with that and turn the call over to Dana.

Thanks, Amy, and good afternoon, everyone. Today, I'm giving a brief update on our recent progress toward IND filings and advancing new compounds to development candidate status, and I'll close with an update on the XL-495 program. On the IND front, we've continued to make good progress on all of our pre-IND programs, and we are on track to file up to three this year. As you saw in the press release, we filed the IND for XB628 in the first quarter of this year, and the Phase 1 trial is now open and recruiting. XB628 is a bispecific antibody that targets NKG2A and PDL1, two separate immune checkpoint proteins that tumors use to overcombinate and adapt to anti-tumor immune responses. And because PDL1 is expressed on tumor cells while NKG2A is expressed on natural killer or NK cells, XB628 potentially can also act as an NK cell engager for tumors. As we demonstrated in our presentation last month at AACR, in preclinical models, XB628 causes tumor cells and NK cells to co-localize, resulting in tumor cell kill that is substantially higher than that seen with a combination of two monoclonals that separately target NKG2A and PDL1. As a -in-class molecule with an innovative mechanism of action, XB628 has created a lot of excitement with the principal investigators of the Phase 1 trial, so we're looking forward to efficient execution of this study. The second IND we expect to file this year is for XB371, our tissue factor targeting ADC that carries a topoisomerase inhibitor payload. Our presentation last month at AACR showed some very compelling preclinical data demonstrating deep and durable regression of human colorectal, lung, and pancreatic xenograft tumors in mice after a single dose of XB371, underscoring the significant potential for this molecule to address unmet need. Our IND-enabling activities for XB371 will wrap up soon, and we expect to file the IND and initiate the Phase 1 study later this year. The third IND we expect to file this year will be for XB064, our monoclonal antibody that targets ILT2. Our IND-enabling activities for XB064 are progressing on schedule to support filing an IND later this year. In terms of new development candidates, we have some exciting new programs progressing toward DC nomination, including some innovative small molecules and antibody drug conjugates, and I look forward to sharing more details about those programs at the R&D Day event we're planning for later this year. And finally, we've decided to discontinue the development program for XL495. Following enrollment in several cohorts in the dose escalation phase of the Phase 1 study, we encountered drug-related toxicities which we believe are due to on-target, off-tumor effects of the drug inhibiting PK-MIT1 in normal tissues. A clear signal to us that the therapeutic index is too low to support further development of the compound. We're in a high-atrition business, and this decision enables us to refocus our resources on advancing our next wave of promising development candidates into and through clinical studies. And with that, I'll turn the call back over to Mike.

All right, thanks, Dana. I'll wrap up here by thanking the entire XLXS team for our strong start in the first quarter of 2025. I want to commend everyone for their individual and collective urgency and resilience as we advance our discovery, development, and commercial priorities. 2025 was already shaping up to be another important year for the business and the patients we hope to serve, now and in the future. We're never satisfied or content with the status quo, and we look to make every hour count as we excel on our mission to help cancer patients recover stronger and live longer. We look forward to updating you on our progress in the future. Thank you for your continued support and interest in XLXS, and we're happy to now open the call for questions.

Thank you. Ladies and gentlemen, to ask the question, please press star 1-1 on your telephone, then wait for your name to be announced. To withdraw your question, please press star 1-1 again. 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 Mike Schmidt at Guggenheim. Your line is open.

Good afternoon. Thanks for taking our questions and congrats on a great first quarter result here. So, 1Q sales were obviously very strong in terms of growth over last year. Could you just help us understand a little bit better what's been driving cable growth at this point? And obviously, NeuroEndocrine was approved at the end of 1Q. Did you see some contribution from that prior to approval already? And secondly, could you just provide some more color about the launch in NeuroEndocrine tumors and expectations for the early trajectory there throughout the rest of the year? Thanks so much.

All right. Thanks, Michael. PJ, why don't you start, and then Chris and I can provide some color commentary afterwards as needed. Go ahead.

Okay. Thanks for the question, Michael. Yeah, as you mentioned, we had a strong quarter of results. We're very pleased with the progress we've made. As you look at the business in terms of demand and TRX, we grew significantly in terms of market share from 40% to 44%. And on an absolute level, the volume grew 18% year over year. Similarly, NRX, we grew share from 38% to 43% in terms of new prescription share in our TKI market basket and even had a more substantial growth on absolute terms of 27%. And both of those were the only product to grow share. So performing really well relative to the competition. In terms of our business, the majority of this is being driven by RCC and in particular, frontline RCC in terms of the combination of Cabo with Nebo. As I mentioned in my prepared remarks, we had updated data presented at GU-ASCO in terms of Checkmate 9ER and the five-year follow-up data. That's been resonating really well with physicians and really continues to position us in a way that differentiates us from the competition, which we're pleased with. Now a little bit in terms of net. What I'll say is we only promote on label. There was a little bit of net utilization we saw prior to approval. But as I mentioned, the approvals came on March 26th, so very early days in terms of but what I can tell you is that the feedback we're getting is really positive from prescribers. The team was literally sprinting out of the gate across all tactics and really all channels. So we're really pleased with the momentum there in net. And we think, as I mentioned, it's a really substantial opportunity, but obviously really early days here. And we'll be excited to continue to report updates on that as the launch progresses and we get throughout the year.

Thank you. Please stand by for our next question. Our next question comes from the line of Astika Gungwarden with Truis. Your line is open.

Hey guys, thanks for taking my questions and I'll echo the congratulations on some pretty rock-star performance in Q1 here and the guidance raise. I want to add on to Michael's question just to get a little bit more of the dynamics on the net Did you guys see a bolus effect or are you guys anticipating a bolus effect here in the early days of launch at net? And then when do you and if so when do you kind of expect it to kind of stabilize to give you a more accurate run rate in terms of acceleration and uptake? And then second, if I may, when you modify the statistical analysis for STELA 303 to do it instead of doing sequentially from non-LiverMed to ITG and do it more as a dual primary endpoint for both those groups, does that help in any way with the alpha spend or maybe the hazard ratio you need to meet statistical significance? Thanks.

All right, thanks Astika. PJ, real quick on nets and then we'll go over to Ane for 303.

Yeah, thanks for the question Astika. You know, what I'll say is obviously very early days in the launch as I mentioned, we're very excited about it. You know, we'll continue to see the trends as we move forward. I mean these patients are advanced in their disease with neuroendocrine tumor so we're necessarily expecting to see a bolus there. You know, as I mentioned, you know, great prescriber excitement about the drug. We're seeing new prescriptions, you know, out of the gate and just looking forward to tracking that going forward.

Great. Amy? Sure, thanks Astika. So just quickly with regard to changing the endpoint just to reset for a second, Stellar 303 is a very large global clinical phase three pivotal study and the trial was designed to allow us to assess outcomes in the population of patients without liver mats referred to as NLM and in the ITT population. As you know, we completed enrollment about a year ago and Mike has said many times we're in the business of generating p-values and positive outcomes for patients and we continuously evaluate our studies and make modifications necessary to ensure we achieve the maximum success for those patients. So given that we completed enrollment about a year ago, then the relative maturity of events in the liver met population really suggested to us that it's best to move the ITT analysis from sequential to dual because of the really significant potential value as a positive outcome would help a much larger patient population. So it really wasn't about p-values or hazard ratios or alpha.

Thank you. Please stand by for our next question. Our next question comes from the line of Sean Lawman with Morgan Stanley. Your line is open.

Good afternoon Mike and team. A great set of results. Maybe just sort of contextualize what seasonality we can expect for Cabo for the year. I think that the beat on street was around 50 million on revenue and the raise is about 100 million on revenue and maybe just to give us some context around that please.

Sure. Chris, you want to start with that? No. Code of commentary.

Thanks Sean. So I mean the seasonality, I think that we've seen in the past where we saw higher growth in the first quarter and lower growth in it progressing throughout the year is gone because of our specified mall manufacturer designation. So the 1% is across all Medicare patients throughout the year. So that creates some stability in the growth in it. We're still projecting growth in that to be in the 29 to 30% range like I talked about last quarter. And so in this year we also didn't have an inventory dynamic like we've had in past years where we had higher inventory coming in at Q4 and lower in the de-stocking in Q1. So we didn't see that either. So you know from a growth to net perspective we see some stability there in that 29 to 30% range and we didn't have the inventory dynamics that we've seen in the past.

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

Hi. Thanks so much for taking our question. This is for Greg. Just a quick question on the full year's 25 guidance. Could you confirm if the $100 million increase in terms of where does that come from and how much of the contribution of that amount come from the net? And related questions, when do you anticipate having a clarity on the potential of net to include into the full year 25 guidance? Thanks so much.

Yeah. Thanks for the question. Yeah. Just talking about the guidance raise, I think it's safe to say the biggest part of that is in the RCC-based business. It's a little bit of net in there, but the majority of it is based on the strength of the base business in the first quarter. You know we're tracking net very closely obviously as well as for the whole business because that's what we do. And as we feel like we've you know got momentum there certainly coming out of the launch and great performance so far. So don't want to give you guidance on giving you a different guidance later, but we're tracking that closely and when we think it's the right time with the right level of confidence we will talk about that in the

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

Thank you so much for taking my question and congrats on this stellar quarter. I just wanted to ask some more general question on your BD Appetite. Can you just maybe talk about specifically this scenario for Ex-LiXa and by extrapolation to some of your peers, how does the current environment influence your BD plans? Are you currently on hold? Are you looking? Are there certain roadblocks that need to get away for you to pull the trigger here? Thank you.

Yeah thanks for the question. As I said in my prepared remarks, you know we are definitely open for business on the BD side. We're focused on high conviction assets that fit into our franchise framework within GU and GI oncology where we believe we have the opportunity to convert differentiating clinical data into commercial success. That's the Cabo story. That's the lens with which we look at all opportunities internally and externally. So that quite frankly isn't, is the same, hasn't changed and will continue to be the same going forward. We're not looking to buy on the cheap. We're not looking to buy assets that we have or we see as being very risky but they're cheap so it might make sense. That's not how we look at it. We're a high science. We want to make sure we can move the needle for patients and the dynamic that we've observed and learned and you know been able to be successful with the Cabo is that if you can move the needle for patients, if you can improve standard of care, you can commercialize that asset very, very productively. So that's the goal. So as I've said previous calls, we've burned many a haystack. We've got a few needles that we're looking at right now. We're hoping to transact. Maybe we do, maybe we don't. It's all about the right asset at the right time and the right valuation but we've got a great team across the BD and financial sectors within legal, within commercial, within discovery and development. So we've got a full press here to be able to figure out what makes the most sense for us and then really how to do that in a practical way that can build value for patients and for shareholders.

Thank you. Please stand by for our next question. Our next question comes from Yolana of Yawan Weber with TD Cohen. Yolana's open.

Great. Congratulations again. It's really a terrific showing. So I have maybe two interrelated questions. One is just a little housekeeping. If you can just remind us, Part D redesigned, how much of an impact did it have this quarter, if any? And what percentage of your business is Medicare facing versus commercial? And then sort of the more meaty question is, it's clearly, Mike, it sounds like you're waiting for the uptake in net and you're saying it's a billion dollar opportunity. How much of that billion is sort of first line versus second or third line for small molecules? I mean, it sounds like you're aiming and you're intending and you should probably raise guidance again. Thank you.

Yeah. So Chris, why don't you take care of the housekeeping and then PJ can address some of the kind of overall market dynamics for net as we see it currently. Go ahead, Chris.

All right. Your role in this, Chris. So from a Medicare Part D redesigned perspective, if you look at a quarter Q4 versus Q1, we didn't see a big dynamic there, big change in the amount of Medicare reimbursements we had to make. If you look at it versus Q1 last year, there was a larger, there's a bigger difference there. We had some benefit towards us in the Q1 this year. Now, from a split between commercial and commercial business and Medicare Part D business, it's about equal when you look at the two compared to one another from a patient and payer mix perspective.

Yeah. And as far as net goes, like I mentioned, we view this as a substantial opportunity. The billion dollars is across all lines of therapy. That said, in terms of second and third line, that is where small molecules make up the majority of utilization. And we think there's substantial opportunity there. Even looking at another therapy in the market, for example, if you look at Lutathera's recent revenue, if you look at their

quarter's

revenue, given at a run rate, that's at $560 million annualized. So again, we're very excited by this opportunity. When it comes to the small molecule market, we're the only branded molecule out there with a substantial and experienced team behind this. And we're really excited about the ability to help patients and move the business forward.

Thank you. Our next question comes from Milana Chai Fong with Bank of America Securities. Your line is open.

Hey, guys, this is Chi for Jason. Thanks for taking our questions. We have a question on capital allocation. Mike, I've asked you this question early in the year before, and I'm going to ask you again. I'm curious about your philosophy in terms of the Buy Back program. Obviously, you guys have consistently been buying back since 2023. I think roughly a high single digit percentage of outstanding shares, if I count correctly, the annual maybe like $500 million at least, give or take. So I'm just curious, if share price remain current existing level, or even if capital sales increase, what's your philosophy on share buyback versus reinvesting capital into R&D or business development? Thanks so much.

Yeah, thank you for the question. Look, again, as we talked about previously reiterated in prepared remarks today, you know, with our balance sheet and, you know, expected free cash flows, we think we can allocate capital effectively around investing in the internal pipeline, doing the appropriate thoughtful and pragmatic BD, and still buying back shares when we think the shares are undervalued relative to where we think it can go. So I think that's the right approach. How we do that, how we emphasize one over the other will be situationally dependent. You know, I think by my math, we've bought back about -20% of our outstanding float over the last couple of years. We've done that at significantly lower prices than where the stock is trading at today. So that's a good move from an investment point of view. You know, we like investing in ourselves, right? Again, in the context of how we view quality, how we view assets that can move the needle for patients and shareholders, we think XOXIS is a great place to put that money. So that's how we're going to continue to operate. You know, we're data dependent, we're data driven, so we'll see how that goes in the future. But again, having the cash flows that we've got and the balance sheet that we have gives us the ultimate optionality, and we like that going forward.

Thank you. Please stand by for our next question. Our next question comes from the line of Akash Tewary with Jeffery. The line is open.

Hey, thanks so much. So it sounds like you're going to have a bill or no-go decision on your head and neck study with Merck at the end of the year. What do you want to see on event rates to justify moving forward with that trial? And then also, when we think about the PD-1 VEGF bisocific class, there's a lot of similarities to kind of the picture on Zanza. You know, you hit VEGF, but you have a wider therapeutic window. Have you thought about acquiring one of those assets for RCC and head and neck, given your partner Merck already has the NOVA asset? Thank you.

Okay, so why don't you, Amy, take the head and neck question, and I'll come back on the BD-CYBELFEST.

Okay, yeah. Thanks, Akash, for the question. So I did mention in the prepared remarks that we are anticipating to have sufficient number of events in order for the IDMC to review and enable a -no-go to phase three. We don't typically talk about what those events are, and so I'm just waiting for the data to mature so that we can have the call and get the decision, but that's about really all I can say.

Okay, thank you. Yeah, on the BD side, look, we're, you know, we look at everything with a pretty careful eye. We really like being in the bisocific space, and certainly 628 is a good example of that, that we think the potential combination with Zanza gives us really good coverage on the PD-L1 side, on the VEGF side, and then bringing in NK cells as well. So, you know, how you slice and dice those opportunities, you have to be really thoughtful and really careful. Obviously, there's a lot of PD-L1 VEGF targeting bisocifics right now. We don't see a lot of differentiation in that area, and certainly there's key data waiting to be disclosed around, certainly, say, the survival data in the non-small cell lung cancer trials. So, we're looking at everything. We consider everything. Again, we have a, I think, unique perspective on how to build value, and we're going to continue to execute on that as we go forward.

Thank you. Please stand by for our next question. Our next question comes from the line of Derek Achilla with Wells Fargo. Your line is open.

Hi, this is Yvonne. For Derek, thanks for taking our question, and congrats on the quarter. A quick one from us. Can you help set expectations a bit on the non-clear cell renal cell carcinoma study, and what have we seen here from student lineage in this patient population, then?

Amy, you want to take that? Yeah, sure. So, with regard to setting expectations, this is, I think, a very exciting study for us. One, it is a study in kidney cancer. It's the first phase three that's ever been run in the smaller population in kidney cancer, and so having a positive outcome, we think, would really benefit patients who have been otherwise lumped into the category of clear cell kidney cancer. The best benchmark that we have is probably with Sutent. That's what we're going up against. So, this is a study that is looking at nivolumab plus zanzalitinib versus sunitinib. We know that Cabo has beaten sunitinib and ahead to head. Cabo Nivo beat sunitinib, and we think that Zanz is better than Cabo, and so Cabo Nivo against sunitinib, we think, has a very high probability of success here. The PFS that is most commonly quoted for sunitinib in non-clear cell space is about five to six months.

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

Thanks for taking our questions. Congratulations on the beat and raise. Two quick ones for us. Going back to the 303 statistical analysis change, I'm curious about the definition. Dual versus co-primary endpoints, can you declare victory with just win in either endpoint? That's part one. Part two, the alpha spend, do you need .025 end for success on just one of the two endpoints? That's the scenario. That was captivated by Dana's commentary about the induced proximity mechanism for 628. I saw several of the presentations looking at dual bispecific ADCs and dual payloads. Curious about your thoughts on expanding on your toolkits to explore that opportunity. Thank you.

We've addressed the 303 questions several times. Let's start with Dana on the 628 and the strategy there. Then we'll go to Amy real fast for a wrap up on 303. Just

to reiterate, XB628 presentation at ACR was our first data dump on that compound at a scientific conference. We showed quite a few data points. I think the key one you're referencing, Andy, is the one showing the ability of the molecule to co-localize NK cells with tumor cells. Then critically, that translated to a much higher sort of level of NK mediated cytotoxicity against those tumor cells in an in vitro assay compared to monospecific antibodies hitting each checkpoint individually. Obviously, we're very excited about this molecule based on its ability to potentially impact or address unmet need across all of our key therapeutic areas, including GU and GI oncology and colorectal cancer in combination with drugs like Zanzalintinib and other drugs. When it comes to other types of technologies that you kind of hinted at in terms of multi payloads and things like that, we're of course very interested in those types of technologies and what I would just say at this point is stay tuned for more information that we plan to kind of bring out from behind the curtain at the R&D Day event later this year where we're planning to really go into a lot more of our strategy for the future of our discovery pipeline. Awesome. Thank you.

Amy? Yep. Just real quickly. So you were right, Andy, in that a co-primary requires both be positive in order for the study to be positive. Dual primary means either one can be positive for the study to be positive. However, it does not necessitate equal split of alpha.

Thank you. Please stand by for our next question. Our next question comes from the line of Andrew Behrens with Lerink Partners. Your line is open.

Hi. Good afternoon. This is the Easton on for Andy. Congrats on the quarter and thanks for taking our question. Just two quick ones. On 303, can you remind us what Zanzantazo has demonstrated in the ITT and how do you expect the control arm to perform? Then maybe on 304, will we get an interim OS as part of the second half update? And just curious, do you anticipate needing OS data in order to file? Thank you.

Amy? Yeah, sure. So thanks for the question. I'll remind everybody of the data that we presented in Stellar 001, which was Zanzapilicetezolizumab in patients with colorectal cancer. The eligibility criteria were pretty similar to that for 303, with the exception that everybody had to be RAS-Wild type on Stellar 001. But there what we saw was median OS was Zanzatizo of 11.7 months in the ITT population. And it was 18.5 months in the -liver-med patient population. And of course, that study is still ongoing with additional follow-up and we'll update those as possible. That bodes well when you consider in non-cross trial comparisons, the benchmark of Regirafenib that we know from the RCAHD database, from the phase three studies and other comparators is really in the ITT patient population somewhere between six to eight months.

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

Oh, hi. This is Sean. I'm a line for Jay. Thanks for taking the question and congrats on the quarter. Maybe two questions from us. First, going back to the early launch of CABOE and NET, I'm wondering if you can maybe describe the characteristics of those early adopters, for example, like the number of prior line of therapy and also their tumor location. And secondly, on 309, I'm wondering if you can provide some color on the data to be presented this year, whether that will include both single agent and also combination data. Thank you.

Yeah. PJ, why don't you start with the NET? I'm not sure we can answer that question effectively, but go ahead. Yeah.

I mean, I guess what I can say is qualitatively, similar to the data set of CABOE and the label being very broad, what we're hearing generally is excitement to utilize the drug and utilization in a very broad manner, regardless of sort of tumor location, patient grade, line of therapy, etc. So I think

just

a lot of excitement to have a drug that physicians can use kind of broadly across the neuroendocrine tumor space.

But it's safe to say that in the commercial setting, we don't get a lot of details on the patients that are getting the drug, unlike in trial itself.

Correct. Yeah, yeah, just qualitative.

Okay.

309 real fast, Amy? Yeah, sure, Jay. Really excited about XL309. This is our small molecule USP1 inhibitor. We are in dose escalation, both as monotherapy and in combination with PARP inhibition. We will be happy to share the data publicly once we have a complete data set.

Okay. 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 my question. So I wanted to understand the net launch dynamic a little bit. If you can elaborate on where you expect the update to come from, is it from the PPnet or the Pnet setting? And is there any difference between this being used before or after ever in this or should we think about the competition with Lutathera? Thanks.

Again, I would just say early days in terms of the launch setting and our expectation and what we're kind of hearing from customers is that given the data abroad and this data set is unique in sense and utilized across sites of origin, lines of therapy, et cetera, that's what we're hearing as well as that's the fact that our expectation is that it will be broadly utilized across that. And we're aiming to be the small molecule leader in the space within our indication.

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. Thank you so much. Thanks for taking the question. Congratulations on the quarter. Just on the quarter, I don't think you mentioned about tentacle trial sales. If you could talk about that and then how are you going to think about pricing power considering your position in RCC? Thank you.

Chris, go ahead. We

did talk about clinical trial sales in the prepared remarks section. We had about 12 million in the quarter.

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

Hi, this is Felix. I'm from Sudin Logan Nathan. Congrats on the quarter. I have a quick question regarding STELA 311 in the next indication that will be initiated by first half 2025. Given the approval of CARBO for the same indication, how does that change the bar for success for the STELA 3 next trial?

Thanks, Felix. I'll try and answer this quickly. This is a study that is going up against everolimus. This will be Zanzalitinib versus everolimus as a first oral therapy in patients who have progressed on their SSA. It's a slightly different space. All of the KOLs, we have a global steering committee and we've been talking globally with thought leaders around the world. They're very excited about this option and the trial. At this point in time, we're not that concerned about competing with CARBO.

Thank you. Ladies and gentlemen, I'm showing no further questions in the queue. I will now like to turn the call back over to your host, Ms. Susan Hubbard.

Thank you, Twanda, and thank you all for joining us today. We certainly welcome your follow-up calls with any additional questions you may have.

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