Exelixis, Inc.

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

Thank you, Cherie, and thank you all for joining us for the Exalexis Third Quarter 2025 Financial Results Conference Call. Joining me on today's call are Mike Morrissey, our President and CEO, Chris Center, our Chief Financial Officer, Dana Aftab, our Executive Vice President of Research and Development, and PJ Haley, our Executive Vice President of Commercial, who will review our progress for the third quarter 2025 and at October 3rd, 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, potential growth opportunities, and government drug pricing policies and initiatives. Actual events or results could, of course, differ materially. We refer you to the documents we file from time to time with the SEC, which, under the heading Risk Factors, identify important factors that cause actual results to differ materially from those expressed by the company verbally and in writing today, including, without limitations, risks and uncertainties related to product product commercial success, market competition, regulatory review, and approval processes, conducting clinical trials, compliance with applicable regulatory requirements, our dependence on collaborative partners, and the level of costs associated with discovery, product development, business development, and commercialization activities. And with that, I'll turn the call over to Mike.

All right. Thank you, Susan, and thanks to everyone for joining us on the call today. X-Alexis had a strong third quarter, building on our progress from the first half of 2025. Accelerating R&D momentum coupled with flawless commercial execution has the potential to transform our business as we bring new treatment options to patients and build value for shareholders. The entire Excelexis team is committed to building a best-in-class, multi-franchise oncology business, and all corporate activities are aligned on a single focus to improve the standard of care for patients with cancer. Our future success will be accelerated by increasing the number of cancer patients served with current and future ExoLess medicines and the impact we have on their disease. The Cabozantinib business has never been stronger, and we're pleased to see Zanzalintinib move to center stage with our first big clinical success in CRC. Key highlights for the third quarter include, first, continued robust performance of the Cabozantinib U.S. business, with strong growth in demand and revenue from our commercial activities. Cabo Zantib maintained its leadership position as the top TKI for RCC, and importantly, shows consistent growth in the first-line segment. U.S. Cabo franchise net product revenues grew approximately 14 percent year-over-year to $543 million in the third quarter of 2025, compared to $478 million in the third quarter of 2024. Global Cabo franchise and their product revenues generated by Exalexis and their partners were approximately $739 million in the third quarter 2025 compared with $653 million in the third quarter 2024. We're excited by the broad adoption of Cabo for the recently approved net indications and have already built a leading position in the oral second line plus net segment with a greater than 40% new patient share based on market research. CABA demand in neuroendocrine tumors grew about 50% and contributed approximately 6% of our third quarter business. With a strong foundation, we expect to exceed $100 million in revenue for the net indication in 2025. Based on our early success in the net launch, And with other GI opportunities on the horizon, we're expediting the full build out of our GI sales team starting in fourth quarter 2025 to accelerate the growth of the CABO net indication before ZANSA comes to the forefront. We think this enhancement could be an important component of our growth narrative in 2026 and speaks to the confidence we have in both CABO and ZANSA as we close out 2025. TJ will provide more information and commentary about our third quarter franchise performance and encouraging dynamics of the net launch in his prepared remarks. Second, zanzalitinib is rapidly advancing as our next oncology franchise opportunity and the focus of seven ongoing and soon-to-start pivotal trials. We've continued to prioritize ZANSA with existing and new indications and combinations as potentially the most promising and expeditious path to a second ExoLexus oncology franchise, and one that we believe can eclipse the size, scope, and impact of our cabozantinib business. Importantly, we're engaged in numerous clinical trial discussions for ZANSA that could expand the scope and reach of our ZANSA pivotal trial efforts. We're thrilled with the positive results for Stellar 303 and CRC and intend to file in this indication with regulators as quickly as possible. We understand the nuances of the CRC market in the U.S. and believe we can effectively navigate the intricacies of this complicated disease and the current competitive dynamics pending approval. I'll remind everyone of the important messages from the full dataset presented at ESMO and published simultaneously in Lancet. ZANSA, in combination with Atezo, led to the first clinical success in a non-MSI-high, third-line-plus CRC population when compared against a contemporary standard of care. I want to reiterate that four other checkpoint-containing regimens failed to achieve this goal. Market research underscores that late-line CRC patients are interested in utilizing immune checkpoint inhibition to attack their disease head-on, so the ZANZA-ATEZO combo could represent a meaningful advance. The absolute magnitude of the overall survival benefit in the ITT population with the ZANZA-ATEZO combination is notable, especially in the context of the offering the potential of a non-chemo-containing regimen. We're especially pleased with the magnitude of benefit in patients with prior Bevacizumab treatment since the vast majority of CRC patients in the U.S. receive Bevacizumab as part of their first and or second-line treatment regimens. Tolerability and safety of the Zanzu and Tezo combination is consistent with other TKI checkpoint combinations. The 303 trial continues to accrue survival events in the non-liverment subgroup, and we expect to trigger the final analysis for non-liverment patients in mid-year 2026. And again, as you'll hear from Dana, seven ongoing and new Xanadu-pivotal trials are in the queue to address important unmet medical needs for known and new indications across multiple lines of therapy. The XOX's early stage pipeline continues to progress quickly with a range of new and potentially differentiated biologics and small molecules heading into and through early clinical evaluation. Dana will highlight these activities today at a high level, and you can expect additional details on these efforts along with our ZANZA pivotal trial update at our upcoming R&D day on December 10th. Finally, we continue to carefully manage capital allocation while advancing our R&D and commercial priorities. Our balance sheet and expected free cash flows remain strong and provide us with the opportunity to advance our pipeline priorities while we return cash to shareholders. We plan to repurchase shares when we believe they are undervalued, and we're pleased that we have been authorized to repurchase an additional $750 million of our shares. So with that, please see our press release issued an hour ago for our third quarter 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 third quarter 2025, the company reported total revenues of approximately $598 million. which included Cabo Zantative franchise net product revenues of approximately $543 million. Cabo Medics net product revenues were approximately $540 million. Gross net for the Cabo Zantative franchise in the third quarter of 2025 was 30.4%. During the quarter, we experienced higher deductions from revenue related to 340B discounts offset by lower Medicare and co-pay assistance expenses. We continue to project that our gross net for the Cabo Zantative franchise will be approximately 30% for the year. Trade inventory at the end of the third quarter 2025 was approximately two weeks on hand, which was lower when compared to the second quarter 2025. Total revenues also included approximately $54.8 million in collaboration revenues, which includes approximately $46.3 million in royalties earned from our partners Ipsen and Takeda on their sales of Cabo Zantan and their respective territories. Our total operating expenses for the third quarter 2025 were approximately $361 million, compared to $355 million in the second quarter 2025. The sequential increase in these operating expenses was primarily driven by a $19.8 million restructuring charge we took during the third quarter. The increase in restructuring expense was partially offset by lower SG&A expenses. Provision for income taxes for the third quarter 2025 was approximately $58.8 million, compared to a provision for income taxes of approximately $45.6 million for the second quarter of 2025. The company reported gap net income of approximately $193.6 million, or $0.72 per share basic, and $0.69 per share diluted for the third quarter of 2025. The company also reported non-gap net income of approximately $217.9 million, or $0.81 per share basic, and $0.78 per share diluted. Non-GAAP net income excludes the impact of approximately $24 million of stock-based compensation expense net and related income tax effect. Cash and marketable securities for the quarter ended September 30, 2025, were approximately $1.6 billion. During the third quarter of 2025, we repurchased approximately $99 million of the company's shares, resulting in the retirement of approximately 2.4 million shares at an average price per share of $41.69. As of the end of the third quarter 2025, we had approximately $105 million remaining under the $500 million stock repurchase plan authorized by the company's board in February 2025. On October 31, 2025, the company's board authorized an additional share repurchase program totaling $750 million that expires at the end of 2026. We are updating a full year 2025 financial guidance, which is detailed on slide 14 of our earnings presentation. We are narrowing our total revenue and net product revenue guidance to the upper end of our previously provided guidance ranges. We are projecting that total revenue will be between $2.3 billion and $2.35 billion, and our net product revenue will be between $2.1 billion and $2.15 billion. We are tightening our cost of goods guidance to be approximately 4% of net product revenues. We are lowering our R&D expense guidance range by $75 million to $850 to $900 million. We are tightening our SG&A expense guidance range to be between $500 million and $525 million. And finally, we are lowering our full-year effective tax rate guidance to be between 17% and 18%. With that, I'll turn the call over to Dana.

Thanks, Chris. First, I'd like to start by saying how excited I am to be leading the R&D organization. The energy and engagement across R&D is super high right now, and the momentum that carried us into and through ESMO is continuing to drive our teams with an emphasis on execution and collaboration. Our focus in R&D is on maximizing the opportunities for our portfolio, including zanzalitinib and our earlier stage pipeline of promising small molecules and biotherapeutics. As I mentioned, we have a lot of momentum coming out of ESMO, primarily driven by our presentation of the results from the STELLAR-303 trial, comparing the combination of zanzalitinib plus atezolizumab versus regorafenib, in patients with non-microsatellite instability high or non-MSI high colorectal cancer who have received multiple prior therapies. As a brief reminder, the trial has dual primary endpoints designed to assess survival outcomes more broadly in the intention to treat or ITT population, and more specifically in the population of patients without liver metastases, which we refer to as the MLM patients or populations. The study met one of its dual primary endpoints, demonstrating a 20% reduction in the risk of death with the combination in the ITT population at the final analysis, with a stratified hazard ratio of 0.80, a 95% confidence interval of 0.69 to 0.93, and a p-value of 0.0045. At a median follow-up of 18 months, the median overall survival in the ITT population was 10.9 months, with the combination of Zanzibar plus Atezo versus 9.4 months with Rego. The survival benefit with the combination was demonstrated early and was consistent throughout the Kaplan-Meier curve. The overall survival benefit with the Zanzibar plus Atezo combination was observed across all pre-specified subgroups with similar hazard ratios observed in key subgroups including liver involvement, prior treatment with anti-VEGF therapy, geographic region, and RAS mutation status. Data pertaining to the other dual primary endpoint of overall survival in the NLM population were immature at the data cutoff, but a pre-specified interim analysis showed a trend in overall survival favoring the Zansub plus the Tezo combination, with a median of 15.9 months with the combination and 12.7 months with Rego. With a median follow-up of 16.8 months, the stratified hazard ratio for this analysis was 0.79, with a 95% confidence interval of 0.61 to 1.03, and a p-value of 0.0875. The trial will proceed to the planned final analysis for this endpoint, which our current projections indicate will be triggered around mid-year 2026. The safety profile of the combination was consistent with other TKI-IO combinations with no new safety signals. And finally, we were thrilled to have the trial results published in the Lancet simultaneously with the ESMO presentation. Needless to say, we are very excited about these results, which are highly impactful for a number of reasons. First, prior to the Stellar 303 readout, there were four Phase III clinical trials in colorectal cancer that evaluated immunotherapy-containing regimens, all of which failed to show an overall survival benefit versus a standard of care in non-MSI high patients, which comprised 95% of the overall colorectal cancer population. As the first and only phase three trial to show an overall survival benefit compared to a standard of care in these patients, we believe Stellar 303 demonstrates clear clinical differentiation of ZANZA from other TKIs and IO partners investigated in this space. As a reminder, in addition to VEGF receptors, ZANSA simultaneously targets the TAM kinases and MET, which have been shown in preclinical models to drive the ability of tumors to evade anti-tumor immunity. We believe this differentiated mechanism of action is a key factor in the clinical differentiation of ZANSA compared to other kinase inhibitors investigated in this space and really underscores the franchise potential for ZANSA. Second, it's certainly worth noting that, to date, no other regimen has demonstrated a higher median overall survival in this setting. Again, in Stellar 303, the combination of Zanzibar plus Atezo showed median overall survival values of 10.9 months in the ITT population and 10.5 months in patients who had received prior Bevacizumab. And while we are conscious of the caveats associated with cross-trial comparisons, it's relative to observe that prior to Stellar-303, the sunlight trial showed median overall survivals for TASC-102 plus Bev of 10.8 months in the ITT population and only nine months in the Bev pretreated population. We believe these are important data points to note, given that the majority of patients in the U.S. are receiving Bev in earlier lines of treatment. And last but not least, being an immunotherapy-containing, chemo-free regimen If approved, ZANSA in combination with atezo could be an opportunity to switch mechanisms to a TKI-IO regimen after receiving chemo plus Bev, which we have heard from investigators and key opinion leaders is an important potential choice for patients. Thus, we certainly believe that the combination of ZANSA plus atezo has the potential for very meaningful impact in this high unmet need population. That conviction has been driving our internal teams to work nonstop preparing for potential NDA filing, which we intend to submit this December pending the government reopening for business. We also intend to complete data collection and analysis for the dual primary endpoint of overall survival in the NLM population, which we anticipate will occur around mid-year 2026. Moving on to Stellar 304, this is our pivotal study evaluating the combination of Zanzibar plus Nivolumab versus Sunitinib in patients who have not yet received systemic therapy for their locally advanced or metastatic non-clear cell renal cell carcinoma. Based on the current event rate, we are anticipating top-line results around mid-year 2026. And if positive, those results could lead to the second NDA filing for Zanzibar and Sunitinib. Regarding other clinical development activity for ZANSA, earlier this year, we initiated Stellar 311, our Phase 3 trial evaluating ZANSA compared to Everolimus as a first oral therapy in patients with neuroendocrine tumors, and that study is proceeding on schedule. Progress also continues with regard to the Phase 2 umbrella study being conducted by Merck. in which the combination of ZANZA plus Belzutifan is being evaluated in patients with previously treated metastatic RCC, and two pivotal studies that Merck is running in clear cell renal cell carcinoma, evaluating ZANZA in combination with BELZ. And we anticipate these studies could start near the end of this year. Regarding the next wave of pivotal studies for ZANZA, we expect to start two additional trials in 2026, one focused on patients with recurrent meningioma, and one specifically investigating the adjuvant setting in colorectal cancer where patients have been treated with surgery and chemotherapy but have a high risk of recurrence. Given the demonstrated clinical differentiation we've seen with ZANZA and its potential to be the TKI of choice for combinations with IO, we're continuing to assess the landscape for additional opportunities for ZANZA development, and we look forward to sharing more details of these important opportunities as we get closer to launching the trials. Now shifting to our early clinical pipeline, we have four molecules in this space that are currently in clinical development, namely XL309, XB010, XB628, and XB371. And the phase one studies for these early molecules are progressing well. In terms of new development candidates, we are continuing to advance exciting new small molecule and ADC programs, and I look forward to sharing more details about our early pipeline programs at the R&D Day event we're planning for December 10th this year. So with that, I'll turn the call over to PJ.

Thank you, Dana. The Cabo Medics business remains strong in the third quarter of 2025, and importantly, the launch in neuroendocrine tumors is off to a great start. Cabo continued to show growth 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 with CaboMedix 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. The prescription data in the oral TKI market basket of Cabo, Rizatinib, Exitinib, Unitinib, and Prozopinib and they had the strength of Cabo relative to the competition. Looking at the TRX comparison of Q3 2024 to Q3 2025, Cabo Medics grew four share points from 42% to 46%. Importantly, Cabo Medics was the only product in the market basket to grow market share year over year. Cabo Medics TRX volume grew 21%, in Q3 2025 relative to Q3 2024, outpacing the growth rate of the market basket, which was 13 percent. Importantly, Palometic's RCC business remains strong and continues to grow. The new indications for previously treated nets are providing our experienced sales team great access to customers, and we're able to discuss both the cabinet data as well as the RCC Checkmate 9ER five-year follow-up data with relevant physicians. The 90-hour data presented at ASCO GU in February resonate with the RCC space and help our team continue to drive differentiation from the competition in first-line RCC. In fact, CaboMedx plus Novolumab first-line new patient market share in the third quarter was the highest it has ever been. This momentum bodes well for future growth in terms of new patient starts and total demand as more first-line patients receive incremental refills and volume as we look forward into 2026. Turning to neuroendocrine tumors, our market research and feedback from customers demonstrate that prescribers are excited for a new treatment option for their neuroendocrine tumor patients. The first broadly applicable new oral small molecule therapy in nine years. Physicians are responding positively to the broad net label in the contemporary trial design and perceive the efficacy and tolerability of the CABO data as favorable relative to the other small molecule therapies in the space. Prescribers are using CABO broadly across patient and tumor characteristics, including patients with neuroendocrine tumors arising in the pancreas GI tract and lung across all tumor grades, functional and SSTR status, and those who have received prior treatment with Lutathera. The recent ESMO presentation of the lung subset data from the cabinet study continues to elucidate the CABO data in a segment of patients accounting for approximately 20% of NETs who have a high unmet need. many of which test SSTR-negative. Turning to new patient market share for second-line plus neuroendocrine tumors in T3, we're pleased that Cabo Medix has rapidly become the market leader in the segment, with greater than 40% new patient share for oral therapies. This share is very encouraging so early in the launch, and we believe that new patient share should continue to increase. Over time, as more patients start therapy with CABO and receive refills, we believe demand will continue to grow. Neuroendocrine tumor demand contributed approximately 6% of total demand for CABO in Q3, and we expect that contribution to increase going forward. Demand in neuroendocrine tumors increased by over 50% in Q3 relative to Q2. Finally, market research continues to indicate that CaboMedix is viewed as the best-in-class oral therapy in neuroendocrine tumors. This perception is typically a leading indicator of prescribing behavior. It gives us confidence that CaboMedix new patient market share will continue to increase in coming quarters. This research finding aligns well with the anecdotal feedback our experienced sales team is receiving from their customers, many of whom are saying they will prescribe CABO for their net patients once they progress and need a different systemic therapy. Taken together, the data and customer feedback give us a high degree of confidence in the growth of CABO medics in neuroendocrine tumors. If we look at the CABO neuroendocrine tumor business, the revenue for 2025 is vectoring towards exceeding $100 million. This trajectory taken together with the market uptake and enthusiasm, provides great momentum for the business heading into 2026. When we think about building on and expanding our GI franchise, we are thrilled with the results of Stellar 303. Pending regulatory approval, we believe that these data would provide Exelixis with a compelling commercial opportunity in colorectal cancer, one of the big four tumors. Many physicians cite the availability of an immune checkpoint inhibitor for the broader population as important for their patients. They also view ZANSA as differentiated given the data and the fact that the combination of ZANSA plus atezom was successful in a cold tumor where other TKI plus ICI combinations have failed. With all the appropriate caveats for cross-trial comparisons, A median OS for ZANZA of 10.9 months is on par with Lonser plus elastin bevacizumab from the sunlight study. However, in the sunlight study, patients who had received prior BEV had a median OS of only 9 months. The BEV pretreated group will be relevant for the U.S. population as approximately 75% of patients have received BEV before reaching the third-line setting and most of these patients have received BEV in both the first and second line settings. Exalexis has had numerous successful launches with CABO. We are excited to expand on the commercial capabilities we have built over the last decade and to build on our GI franchise, where we already have experience in hepatocellular carcinoma and neuroendocrine tumors. As you know, we already have a significant GU presence And for zanzalitinib, we would envision growing our GI infrastructure to a size and scale similar to our GU team. As Mike mentioned, we are expediting the build-out of our GI sales team as we see a great opportunity to continue to drive growth in the net indication. Additionally, having a full GI team in place will provide important experience selling Cabo, as well as forming relationships with accounts to be ready for Zanza. The incremental sales representatives will enable us to have greater reach in the community setting, which is a segment where our team has typically excelled. This build-out speaks to our confidence and excitement, Cabo net opportunity, as well as Zanzalitnib. In closing, we are pleased with the Cabo business, both in RCC and net. In neuroendocrine tumors, prescribers see CaboMedix as a more favorable choice versus other previously approved small molecule therapies. Additionally, the competition in the oral segment of the net market are generic therapies, which puts CaboMedix at a significant advantage with a full commercial organization energized and supporting the launch. All of this taken together drives our conviction that the net market will be a substantial opportunity for the CaboMedix business. We are pleased that CaboMedix plus Nivolumab has achieved the regimen's highest market share ever in first-line RCC setting as this sets up the brand for continued growth in kidney cancer. And with that, I will turn the call back over to Mike.

All right, thanks, PJ. We will wrap up here with a big shout out to the Exalexis team to thank everyone for helping make our third quarter so successful. I'm pleased to see our collective commitment, focus, and urgency continue at a high level as we advance our priorities across discovery, development, and commercial activities. On a personal note, after more than 35 years in the biopharma industry, Susan Hubbard, our EVP, Public Affairs and Investor Relations, has decided to retire to pursue her passions outside of her profession. We are incredibly fortunate that Susan joined us in 2014 with her depth of experience and broad expertise in both clinical and commercial. She provided strong leadership and guidance to help us navigate all the twists and turns we've encountered over the years as we grew into the company we are today. And I personally, again, I'm very grateful for Susan, and she's been my go-to thought partner for framing the XOX's narrative to all our various stakeholders, and we wish her all the best. Susan will be with us by the end of the year, and I'm confident our investor relations and public affairs teams are well equipped for the future. Moving forward into 2026, Andrew Peters, currently Senior Vice President of Strategy, will add investor relations to his responsibilities, reporting to Chris Senner. This is a natural move for Andrew, who joined ExoLexis in 2018, following 12 years as a biopharma equity research analyst. To both Susan and Andrew. So we'll close here and look forward to updating you on our progress in the future. And thank you for your continued support and interest in ExoLexis. And we're happy to now open the call for questions.

Thank you. To ask a question, you will need to press star 11 on your telephone. withdraw your question press star 1 1 again due to time restraints we ask that you please limit yourself to one question please stand by while we compile the q a roster and our first question will come from the line of sylvan turkan with citizens your line is open yeah thank you and congratulations on all the progress um maybe

If you could just summarize the post-ESMO feedback that you had on the usando litmus results and how they match up with those points that you unveiled today regarding how you plan to position this product in the market. Thank you.

Yeah, thanks, Sylvain. Yeah, PJ, you want to start with that one, and then maybe Dana and I can provide some color commentary as needed.

Sure. Thanks for the question, Sylvain. You know, we've conducted extensive market research with the data that was presented in ESMO, which has really been very positive. You know, physicians are seeing the overall survival benefit as very important. They're certainly seeing the fact that we're bringing an IO to bear in one of the biggest tumors, one of the big four tumors, as I said. where IO hasn't been available, where TKI plus IO has failed in the past, is also very important to physicians, as well as the fact that this is a chemo-free option. So what we've seen, you know, as I think about this market, and as we see the market now, it's a very fragmented market. As you look at it, about a third of the market is Lansurf Bev. A third of the third-line plus market is TKI. And the final third of that market is really sort of a smattering of different chemos as well as various targeted therapies. So, you know, fragmented market really is one that provides opportunity should we be approved in the setting. And our market research clearly indicates that we'll take market share from all the competitors in space. So that's been certainly very positive as well. And, you know, as I mentioned, we're excited to build out our GI franchise capabilities, our sales team, as we're, you know, the net launch is going well. This gives us the opportunity to reach further in the community and, you know, continue to drive uptake in net, as well as to be really fully prepared and optimized should we have the opportunity to launch Zanza in the near future. So just very exciting all around. Great, PJ. Thanks.

One moment for our next question. And that will come from the line of Sean Lamann with Morgan Stanley. Your line is open.

Hi, this is Catherine on for Sean. Thanks so much for taking our question. We had one looking at SANS on NCCRCC. Ahead of the readout for Solar 304 in mid-year 26, could you help provide more color and why sunitinib is the right control given the various histologic subtypes that make up this population? Thanks so much.

Thanks for the question. This is Dana. Yeah, so the comparator in 304 is sunitinib, which is a standard of care in this setting. We think it's a highly relevant comparator, especially given the overlap in target profile with ZANZA. And it's used quite extensively, especially ex-US, but a number of patients in the US are also treated with this. So it's a standard of care, and thus is a good comparator to go with a phase three pivotal trial.

One moment for our next question. And that will come from the line of Paul Choi with Goldman Sachs. Your line is open.

Hi, this is Kirshma on for Paul. Thank you so much for taking our questions and congrats on the quarter. So given the performance in the Stellar 03 initial cut of data from ESMO, how does level set expectations for the NLM cut coming out early next year And particularly, we were interested in the idea of powering with relation to this study, given that LawnServe Bev had approximately 500 patients in their Phase 3 study. Can you speak to your decision to enroll roughly 900 patients in Cellular 303 and the overall implications? Thank you.

I also want to ask... Yeah, it's kind of hard to hear your question with all the background noise. So, Dana, can you navigate that one?

Yeah, sure. So, you know, the study started out or, you know, the prior iteration before it had dual primary endpoints. It had a single primary endpoint in patients with non-liver metastases. We have a scientific rationale to look at that, especially with emerging data coming from the LEAP-17 trial and other studies showing that Those patients without liver metastases seemed to do better with IO. But as the trial evolved and as we were accruing patients and events, we realized that we had, you know, an important opportunity to potentially bring the patients the results in earlier with the ITT population, meaning with the strong contribution of events from the patients with liver metastases, it's a much poorer prognosis with those patients. The disease is much more aggressive. They progress faster. They achieve events for overall survival faster. So that's where we realized we really needed to change the trial so that we could get endpoints in both the non-liver meds and the full ITT population. So the result that we presented in Berlin a couple of weeks ago includes both, you know, it's a combined analysis of both liver meds and non-liver meds, the entire ITT population. That population is a little bit skewed toward non-liver meds patients in that we put a cap amount of patients with liver metastases that could enroll in the trial. So typically, a trial population that doesn't manage liver mets the way we did will be about 80 percent liver mets and 20 percent, 20 to 30 percent non-liver mets. We had about 38 percent non-liver mets. So that certainly changed the dynamics of the trial, but the result that we achieved was in the entire population. So as we said, because the non-liver meds progress a little more slowly, we expect to see results in that subgroup sometime next year, around the middle of next year.

One moment for our next question. And that will come from the line of Ashtika Goonwarden with CHWIST. Your line is open.

Hi, guys. Thanks for taking my questions. I want to offer my congratulations on both the top and bottom line growth here that you guys are showing. Really impressive. So I have a question on this. Merck announced LightSpark 011 was positive, and one could assume that they'll be putting effort into marketing Belzu plus Linbatinib combination in second-line RCC patients. We all know that Zanza is a better drug than Lendatinib, but there could be a lot of population overlap between LifeSpark 011 and the Belzoo-Zanza cohort in Keymaker's U03. So does that reduce the probability that Merck will want to pursue a pivotal second-line study with Belzoo and Zanza? And then if I can sneak one in, and I'll show you in here, what was the clinical trial contribution for carboxylicin-3q? Thanks, guys.

Chris, take that second question first real fast.

Sure. So, as Chris, there were actually no clinical trial sales in the quarter.

And, yes, Mike, the first question was a long, drawn-out question. Lots of twists and turns. We are confident that the Merck trials that we've been discussing for the last year will continue and start later this year. So don't want to say more than that. We don't want to speculate on other people's data, especially when there's only a press release. We're excited about that collaboration, and we'll see that moving forward.

And one moment for our next question. That will come from the line of Akash Tiwari with Jefferies. Your line is open. Hi, this is Anastasia on for Akash.

Thanks for taking the question. So do you see any risk to your Stella 303 trial approval, given that Vinay was publicly apprehensive about the usefulness of cabinet?

I'm sorry, do you mind repeating the question? I don't think we got all that.

Yeah, for sure. So do you see any risk to your Stella 303 trial, specifically its approval, given that Vinay has been publicly apprehensive about the usefulness of cabinet?

Yeah, I wouldn't want to comment on that. Thank you.

One moment for our next question. And that will come from the line of Andy Shea with William Blair. Your line is open.

Oh, great. Thanks. Well, first and foremost, Susan, congrats on the illustrious career in the biopharma industry. You've been a mentor to so many of us. I'm really happy for you, and I'll miss working with you dearly. Thank you very much. So my question has to do... So my question has to do with the NET population, obviously very, very successful launch. And I'm just curious as you look forward to the ZANSA phase three trial, I'm curious about the strategy in terms of navigating the potential of cannibalization as Cabo is being used, later the beta line, potentially entrenching in the earlier line by setting.

Thank you. Okay, PJ, go ahead. Yeah, thanks for the question, Andy. You know, in terms of net, you know, as you mentioned, we're having really pleased with the launch, how it's going. I mentioned kind of the 50% demand growth quarter over quarter we're pleased with, and certainly the broad utilization across all the relevant demographics in the population. And, you know, kind of very early innings here as we're still building new patient share and obviously only approved at the very end of March. A lot of opportunity for these patients to get refill and continue, you know, the business with regards to, you know, demand going forward. You know, as we think about ZANZA in the long term, it's just a very different study in terms of having an active comparator. And it's, you know, really designed to position that, you know, very competitively and upfront in the market, but that's far down the road. I think in the near term, there's just so much room for Cabo and Nets to really become a key player there.

One moment for our next question. And that will come from the line of Sudan Loganason with Stevens. Your line is open.

Hi, thank you for taking my question. Apologies that this was already asked in a different capacity, but I believe I heard that the other subgroup part of the dual primary endpoint for Stella 303 might only come to maturity, maybe sometime early next year. Yeah, with the NDA submission that you guys are planning for by year 2025, could we still expect like a broad label for CRC, including both subgroups to be in play? Or will there be some sort of rolling submission that needs to happen to include that cohort of the primary endpoint? And then just secondly, a follow-up, was the need for both subgroups being split up as a result of guidance from regulators, you know, to achieve having both of those non-Livermets and Livermets included on the initial label for ZANSA? Thanks.

Sure. Thanks for the question. This is Dana. So, we can file and we will file based on the single hit on one of the dual primary endpoints in the ITT population. And I just want to clarify, the ITT population is not a subpopulation. It is the entire population of the trial. So that would give us, in our view, the broadest label. The NLM subgroup is a subpopulation within the trial. It's just a second dual endpoint, primary endpoint in the trial. So we're proceeding with our filing, and as we said, we expect to get that in very soon pending the government reopening for business.

And one moment for our next question. That will come from the line of Yaron Werber with TD Cowan. Your line is open.

Hi, guys. Congrats on the quarter. This is Sarah on for Yaron. quick question from us on your early stage pipeline. I know you mentioned you have an R&D day coming up, but if you could just give us a quick sneak peek of, you now have four phase one programs. Can you maybe prioritize among them which one you expect to transition next into pivotal development? And maybe if you could speak a little bit on XB371 in particular, which is your tissue factor topo-1 ADC, maybe just discuss a little bit how it's differentiated from other topo-1s. Thank you.

Sure. Thanks for the question. You know, I don't want to preempt too much around what we're going to say next month. What I can tell you is that 309 and 010, 309 is our USP1 inhibitor, 010 is our 5T4 targeting ADC. Those have been in the clinic longer, so those have accrued more patients, obviously. XB628, our bispecific IO molecule targeting PD-L1 and NKG2A started its phase one trial a few months ago, so that's been enrolling well. And then 371, which is, as you mentioned, the tissue factor targeting ADC with the topoisomerase-1 inhibitor payload, that is our most recent IND filing. That phase one trial got up and running very recently, but it's already enrolling patients. And what's exciting about that molecule, since you asked specifically about what differentiates it, it utilizes a differentiated antibody that has no impact on the coagulation cascade and also has the tandem mechanism release linker that we licensed from Catalan. to release the payload. So it's sort of a belt and suspenders approach for stabilizing the payload and circulation. So it requires both glucuronidase cleavage and then a tandem cleavage by a peptidase inside the cells for payload release. We think that's what differentiates it. Plus, we also feel that we are kind of ahead of any others in terms of investigating a molecule like this in the clinic.

One moment for our next question. And that will come from the line of Michael Schmidt with Guggenheim. Your line is open.

Hi, guys. Thanks for taking my questions. I had one on Zanz. Specifically, the opportunity based on a stellar 304 study. Just help us understand the size of this commercial opportunity in non-clear cell RCC and how much cap use is driven in non-clear cell right now. And then lastly, just the minor delay to mid-2026 from the first half. Is that based on event rate slowdown or is there something else going on there? Thanks so much.

Yeah. Hi, Michael. This is PJ. You know, certainly excited about the opportunity, you know, to get a readout from Stellar 304 and then the potential to get manzo approved in the kidney cancer space. Obviously, a space we know really well. Non-clear cell, you know, accounts for approximately 20 to 25 percent of the patients in the space. And, you know, Cabo has utilization there, as do many other that, you know, certainly we think that a phase three study, you know, having a positive result would really move the needle in that space to demonstrate, you know, with greater level of evidence and support benefit for patients.

One moment for our next question. That will come from the line of Jason Gerberry with Bank of America. Your line is open.

Hey, guys. Thanks for taking my question. And, Susan, you'll be missed. Thank you, Jay. My question is on the net HABA launch. Just wondering, you know, a pretty impressive share of, I guess it's second-line oral therapies. We're just curious, are orals getting a greater share relative to Lutathera, or is the dynamic between orals and Luta in second-line relatively stable? And if I could just squeeze one in, the MSN patent appeal, is there a timeline on that? Thanks.

Yeah. With regard, this is PJ. Thanks for the question, Jason. As you mentioned, we're very pleased with the net launch. And as we look at the second line plus oral share, we've already exceeded, you know, 40% new patient share there, which we're pleased with. You know, as I mentioned, those are patients just coming on therapy, so we think certainly have room to benefit from the duration of therapy that those patients would achieve. And we think we can continue to, we believe we can continue to grow, share in the space. You know, with regards to Lutathera in the second line plus setting broadly, orals constitute a greater portion of that market. But, you know, where Lutathera is utilized, CABA really is the preferred therapy treatment post-lutathera, as ours is really the only study that had patients in it who were pre-treated with lutathera, which is why that sort of broad study base in a contemporary setting is really benefiting us in the marketplace.

Yeah, Jason, it's Mike on the topic. Don't have anything to offer up on that today, okay? Okay.

One moment for our next question. And that will come from the line of Leonid Timashev with RBC. Your line is open.

Hey, thanks for taking my question. I wanted to ask a little bit on the meningioma opportunity. Just curious sort of how you're thinking about the emerging investigator-sponsored data with CABO and how that applies to ZANSA and your confidence there, and then ultimately what you think the size of that opportunity may be. Thanks.

Sure, this is Dana. Thanks for the question. Regarding what was seen with CABO, so you probably know the story, but there's a published case report where a patient with thyroid cancer treated with CABO had an angioma, and they noticed a very substantial reduction in the size of that tumor, and that's not a common occurrence. with targeted therapies. A number of different studies noted response rates for targeted therapies, especially VEGF or VEGFR target therapies, in the single-digit range, you know, 3% or less. So, these investigators got very excited and launched an investigator-sponsored trial where they looked at a number of patients treated with CABO, and they saw response rates depending on the criteria that are used anywhere in the 25 to 75% range. So that was quite exciting to us and showed the impact of target profile of CABO. And as we've said, we feel that ZANs is sort of a best-in-class molecule with a CABO-like target profile. So it was a natural progression for us to look at for a white space targeting trial with ZANZA. So we're very excited about that trial, and as I indicated, we expect that trial to get up and running in 2026.

One moment for our next question. And that will come from the line of Stephen Willey with CIFL. Your line is open.

Yeah, good afternoon. Thanks for taking the question. Maybe a similar question just on the planned phase three trial and post-chemo adjuvant CRC. So I guess when I look at the stellar 303, the ZANZA dose intensity, I guess it was pretty low and just curious if you're intending to do any additional dose exploration work just to make sure that dose intensity doesn't become a rate-limiting factor in the setting. where tolerability tends to be prioritized. Thanks.

Yeah, so this is Dan. I'll take that. Yeah, so in the, our plans for further exploration in colorectal were really, you know, this really comes from the result from Stellar 303. It's the first demonstration of a positive result in non-MSI high patients with an IO-containing regimen. So it's natural for us to want to bring that earlier in lines of therapy for patients. And this is some white space in colorectal cancer that we identified as high unmet need. So in patients with high-risk recurrence, the median disease-free survival is in the six-month range. So we think we can get an answer from this study quite quickly. Now, in terms of dose, it's natural. And as we've seen with other agents, for example, with CAVO, that as you move up earlier lines of therapy, you often will look at other doses. So we certainly are intending to look at other doses with ZANSA and just, I would just say, stay tuned for more information around that when we finally, you know, kind of launch the trial and divulge more details.

One moment for our next question. And that will come from the line of Jay Olson with Opco. Your line is open.

Oh, hi, this is John on the line for Jay. Thanks for taking the question and congrats on the quarter. Also want to thank Susan for all the help in the past years and congrats on the retirement. You just like wondering about the sort of thing like several bites that the program are not actually being developed in the first line CRC. So how are you thinking about the potential impact of those like novel agents and how will that impact the later line uptake of the Atezo Plus sensor? And if I just make one clarification question, for the serial tracing system file based on IGP population, just wondering why couldn't you file earlier because the top line results were like a few months ago? Thank you.

Yeah, we're having a hard time understating you. We're filing, again, nobody's filing new NDAs right now with the government being closed. So you should be aware of that. And whether it be a new NDA or a new BLA, there's no filings currently with the government shutdown. So just Keep that in mind, and we're hoping to file ASAP when the government reopens. In terms of the bispecifics and that emerging landscape, certainly interesting science, early clinical data, kind of hard to opine on how that's going to change the marketplace without pivotal trials even being started, much less reading out. So I think we should just stay tuned on that and understand that It's a moving landscape across the board, and obviously data drives the process, and we'll keep our data certainly moving as well, and we'll always be able to layer in our data with whatever emerging data is available.

One moment for our next question. And that will come from the line of Ash Verma with UBS. Your line is open.

Oh, hi. Thanks for taking our questions. So I just wanted to come back on the CRC market dynamic that you mentioned that terms of plus PEGA is roughly one-third of this third-line market right now. But just the position feedback that we've been getting is that that is a growing part. So by the time that you get to the market with Zanza or Tizo, like, what is your assumption that what – How much would that share be? And then, yes, there is some subtle difference in the sunlight study based on the prior BEVA exposure, but has that been slowing down the adoption of that regimen? Thanks.

Yeah, thanks for the question. You know, I'll say we've been conducting market research in CRC for quite some time. And I will say that what we've seen is that the, share of the sunlight regimen has actually been relatively stable. So, you know, if that continues moving forward, the market certainly remains fragmented, as I said, about a third sunlight, a third TKI, a third other, which really represents great opportunity for us, particularly in that our research with, you know, numerous physicians, and we're talking, when we do research, we're talking over 100 physicians, in the community as well as academia to get a really good sample size. And we're seeing, we're hearing from them that we'll get uptake, you know, in this third line plus setting and take share from all competitors. So we're optimistic about that. This is why we're increasing, you know, one of the reasons in addition to driving more net with Cabo, why we're increasing our sales force because CRC is treated heavily in the community. This is a very common tumor type So, you know, lots of prescribers here, so we're going to get ahead of that and really be able to have a strong reach into the community setting.

One moment for our next question. And that will come from the line of Christopher Liu with Lucid Capital Markets. Your line is open.

Hey, guys. Thanks for the question. Maybe one that is more around capital allocation and financial strategy with The share buybacks that have already been done and that are planned going forward, how are you thinking about incremental buybacks versus things like business development or clinical investment opportunities? And do you feel like there's going to be a point where share buybacks would be less favored for some of these other potential value generators?

Yeah, this is Chris. So, you know, generally we think of capital allocation in the three elements, right? It's R&D, it's business development, and share repurchases. And, you know, we think with the revenue growth we're generating and with the continued prudent expense management, including R&D expense in the billion-dollar range, we think that we'll be able to fund all three of those elements, and we'll continue to invest in R&D and invest in BD and invest in share repurchase.

Thank you. At this time, there are no further questions, and so I will turn the call over to today's host, Susan Hubbard. Ms. Hubbard?

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

Thank you. This concludes today's program. Thank you all for participating. You may now disconnect.