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Edited Transcript of EXEL earnings conference call or presentation 1-May-19 9:00pm GMT

Q1 2019 Exelixis Inc Earnings Call

SOUTH SAN FRANCISCO May 13, 2019 (Thomson StreetEvents) -- Edited Transcript of Exelixis Inc earnings conference call or presentation Wednesday, May 1, 2019 at 9:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Christopher J. Senner

Exelixis, Inc. - Executive VP & CFO

* Gisela M. Schwab

Exelixis, Inc. - President of Product Development & Medical Affairs and Chief Medical Officer

* Michael M. Morrissey

Exelixis, Inc. - CEO, President & Director

* Patrick J. Haley

Exelixis, Inc. - SVP of Commercial

* Susan Hubbard

Exelixis, Inc. - EVP of Public Affairs & IR

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Conference Call Participants

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* Asthika Goonewardene

Bloomberg Intelligence - Senior Biotech Analyst

* Edward Andrew Tenthoff

Piper Jaffray Companies, Research Division - MD & Senior Research Analyst

* George Farmer

BMO Capital Markets Equity Research - Analyst

* Justin Hayward Burns

RBC Capital Markets, LLC, Research Division - Senior Associate

* Kyuwon Choi

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Michael Werner Schmidt

Guggenheim Securities, LLC, Research Division - Senior Analyst & Senior MD

* Peter Richard Lawson

SunTrust Robinson Humphrey, Inc., Research Division - Director

* Silvan Can Tuerkcan

Oppenheimer & Co. Inc., Research Division - Associate

* Stephen Douglas Willey

Stifel, Nicolaus & Company, Incorporated, Research Division - Director

* Tsan-Yu Hsieh

William Blair & Company L.L.C., Research Division - Senior Research Analyst

* Yaron Benjamin Werber

Cowen and Company, LLC, Research Division - MD & Senior Biotechnology Analyst

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Exelixis First Quarter 2019 Financial Results Conference Call. My name is Gigi, 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.

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Susan Hubbard, Exelixis, Inc. - EVP of Public Affairs & IR [2]

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Thank you, Gigi, and thank you all for joining us for the Exelixis' First Quarter 2019 Financial Results Conference Call.

Joining me on today's call are Mike Morrissey, our President and CEO; Chris Senner, our Chief Financial Officer; P.J. Haley, our Senior Vice President of Commercial; and Gisela Schwab, our Chief Medical Officer, who will together review our corporate, financial, commercial and development progress for the first quarter ended March 31, 2019. Peter Lamb, our Chief Scientific Officer, is with us as well and will be joining for the Q&A portion of the call.

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 clinical, regulatory, commercial, financial and strategic matters. Actual events or results could, of course, differ materially. We refer you to the documents we file from time to time with the SEC, which under the heading Risk Factors identify important factors that could cause actual results to differ materially from those expressed by the company verbally and in writing today, including without limitation, risks and uncertainties related to product, commercial success, market competition, regulatory review and approval processes, conducting clinical trials, compliance with applicable regulatory requirements, our dependence on collaboration partners and the level of costs associated with commercialization, research and development, business development and other activities.

Now with that, I'll turn the call over to Mike.

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Michael M. Morrissey, Exelixis, Inc. - CEO, President & Director [3]

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All right. Thank you, Susan, and thanks to everyone for joining us on the call today. Exelixis is off to a strong start in 2019 with important progress from a clinical, commercial and financial perspective. As you will hear from the team today, new patient starts, demand, product revenue and cash all grew in the first quarter, as we executed on our strategy to make CABOMETYX the #1 TKI in RCC and launching the new second-line HCC indication.

We maintained strong momentum to move aggressively throughout 2019 to grow the CABOMETYX business, initiate the next wave of cabozantinib pivotal trials and add new agents to our oncology pipeline from internal and external sources.

We're pleased to see that the CABOMETYX business grew in the first quarter in the face of anticipated seasonal headwinds from both inventory drawdowns and higher gross to net fees.

Our first quarter results support the projection that cabozantinib's best-in-class TKI profile can drive strong growth in the face of emerging competition from ICI-based combination therapies in RCC and a broad offering of both TKIs and ICIs in HCC.

Our first quarter results are notable in the context of the RCC competition, where first quarter 2019 U.S. revenues for SUTENT and VOTRIENT declined compared to fourth quarter 2018, as was the case with most other oral oncology products that have been reported on this quarter.

I'll begin today by providing a brief summary of our key first quarter milestones and then turn the call over to Chris, P.J. and Gisela for details on our Q1 financials, the commercial performance of CABOMETYX and finally, cabozantinib's development activities.

Key highlights for the first quarter 2019 include first, the significant growth in new patient starts; demand and product revenue in the face of higher gross to net fees; and an inventory drawdown.

Net cabozantinib franchise revenue for the first quarter was approximately $180 million. Non-GAAP first quarter net income was approximately $85 million. Non-GAAP diluted earnings were $0.27 per share. And we exited the first quarter with greater than $1 billion in cash and investments. Chris will cover the full first quarter financials shortly.

Second, the continued strong performance of the CABOMETYX business where we maintained its leadership position as the best-in-class TKI for advanced RCC and initiated sales and marketing activities in HCC. CABOMETYX continued to gain additional RCC market share throughout the first quarter. And we're pleased with our initial launch in HCC where we see notable traction in the second and third-line setting.

The depth and breadth of the METEOR and CABOSUN data in RCC and the CELESTIAL data in HCC continues to differentiate CABOMETYX from all other TKIs approved in these indications. Notably, CABOMETYX is the only TKI with a pronounced and statistically significant overall survival advantage in both RCC and HCC.

Third, we continue to advance our cabozantinib development program as we aggressively pursue the next wave of cabozantinib late-stage clinical trials. Four pivotal trials highlight the important progress in this area, including CheckMate 9ER with the CaboNivo combo in first-line RCC, COSMIC-311 with single-agent cabozantinib in second-line DTC, COSMIC-312 with the cabo atezo combination in the first-line HCC and with today's announcement, COSMIC-313 with the triplet CaboNivo-ipi combination in first-line RCC.

And fourth, our integrated discovery development and BD team is employing a combination of internal efforts and external collaborations to build the deep portfolio development candidates that we can efficiently evaluate in the clinical setting.

Our progress throughout the early months of 2019 highlights the team's performance across all components of our business during a dynamic time where both the RCC and HCC treatment landscapes are rapidly evolving.

Our overall strategic goals remain the same. We seek to grow revenues, manage expenses carefully and reinvest free cash into the business to build long-term sustainable growth. Through focused determination and teamwork, we strive to deliver on our goals every single day for patients and shareholders.

So with that, I'll turn the call over to Chris, who will provide more details on our first quarter 2019 financials.

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Christopher J. Senner, Exelixis, Inc. - Executive VP & CFO [4]

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Thanks, Mike. I'm very pleased to share with you our strong financial results for the first quarter of 2019.

The company reported total revenues of $215.5 million in the first quarter of 2019. Total revenues for the quarter included cabozantinib net product revenues of $179.6 million. Total revenues also included the recognition of $35.9 million in collaboration revenues from the company's commercial collaboration partners, Ipsen and Takeda.

On a sequential quarter basis, CABOMETYX net product revenues increased by approximately $4.3 million. This result included increases of approximately $4.5 million in CABOMETYX product volume and $9.2 million due to the first quarter price increase and was offset by a decrease in trade inventory of approximately $2.3 million and deductions from gross sales, which increased to 19.8%. The increase in deductions from gross sales for the first quarter was $7.2 million and was 2.4 percentage points higher when compared to the fourth quarter of 2018, which was 17.4%.

The CABOMETYX wholesaler inventory at the end of the first quarter 2019 was approximately 2.6 weeks on hand as compared to approximately 2.9 weeks on hand at the end of the fourth quarter 2018. The increase in our deductions from gross sales is primarily related to increases in our Public Health Services or PHS utilization. CABOMETYX had higher growth in PHS utilization than experienced in overall patient demand, a segment of our payer mix which is subject to much higher discount requirements than other payer segments.

Additionally, our Medicare coverage gap liability increased significantly when compared to the fourth quarter of 2018, which can be attributed to both a relative increase in Medicare patient utilization and the increase in the Medicare Part D discount from 50% in 2018 to 70% in 2019. Taking into consideration these various components of our payer mix, we project that our CABOMETYX deductions from gross sales will be 19% and 20% for the full year of 2019.

Total revenues also include collaboration revenues of $35.9 million for the quarter ended March 31, 2019. These collaboration revenues include the recognition of $9.4 million of a $10 million milestone from our commercial collaboration partner, Takeda for their CABOMETYX filing in Japan for advanced RCC. Collaboration revenues also include $14 million of royalties earned from approximately $63 million of cabozantinib sales by Ipsen; $2.5 million of profit share and royalties earned under the cobimetinib collaboration with Genentech-Roche and $10 million of additional license, research and development and product supply revenues that were recognized from the company's collaborations.

Our total cost and expenses for the first quarter of 2019 were $130.9 million compared to $117 million in the fourth quarter of 2018. Within total cost and expenses, R&D expenses increased by $6 million and is primarily the result of increases in the clinical trial spend as we invested in the next wave of CABOMETYX pivotal trials and to a lesser degree, increases in licenses and royalty spend primarily from an Invenra project fee.

Selling, general and administrative costs increased by approximately $7.8 million. The increase in SG&A expense was primarily related to increasing expenses for corporate giving, personnel, branded prescription drug fee and marketing.

Income taxes for the quarter ended March 31, 2019 was $14.9 million, and our effective tax rate for the quarter was approximately 16.4% compared to $2.5 million and 2.1%, respectively, for the comparable period in 2018. The 16.4% income tax rate in the first quarter is below our guidance range for 2019 and was favorably impacted by certain discrete deductions that occurred in the quarter.

The company reported GAAP net income of $75.8 million or $0.24 per share on a fully diluted basis for the first quarter of 2019. The company reported non-GAAP net income of $85.5 million or $0.27 per share on a fully diluted basis. Non-GAAP net income excludes the impact of approximately $10 million of stock-based compensation net of the tax effect.

Cash and cash equivalents, short and long-term investments and long-term restricted cash and investments totaled approximately $1 billion at March 31, 2019 compared to $851.6 million at December 31, 2018. The increase in our cash reflects approximately $90 million of cash flow from operations, the receipt of $60 million of milestone payments from our collaboration partner Ipsen and approximately $18 million of royalty and reimbursements from our collaboration partners.

Now turning to our financial guidance. The company is maintaining its financial guidance for 2019. Cost of goods sold is expected to be between 4% and 5% of net product revenues. Research and development expense is expected to be between $285 million and $315 million and includes noncash expenses related to stock-based compensation of approximately $20 million. Selling, general and administrative expenses are expected to be between $220 million and $240 million and includes noncash expenses related to stock-based compensation of approximately $35 million. Guidance for the effective tax rate in 2019 is between 21% and 23%.

And finally, over the last several quarters, we have experienced increasing variability in our deduction from gross sales and wholesale inventory levels that should be considered when modeling future revenue trends.

As I mentioned earlier, we project that our deductions from gross sales for CABOMETYX will be between 19% and 20% for the full year 2019. Also, we expect increased quarterly variability in wholesaler buying patterns, which can lead to variability in how much inventory wholesalers hold, as we and other biopharmas experienced in the second half of 2018. Some of this inventory variability can be attributed to the implementation of new price transparency regulations and can provide wholesalers the opportunity to buy extra supply in advance of anticipated price increases.

And with that, I'll turn the call over to P.J.

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Patrick J. Haley, Exelixis, Inc. - SVP of Commercial [5]

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Thank you, Chris. I'm very pleased to discuss in detail with you today the strong performance of CABOMETYX in the first quarter. In Q1, CABOMETYX built on the position of being the #1 TKI for new prescriptions in RCC and became the leading TKI in total prescriptions or TRx in RCC. Additionally, the approval and launch of CABOMETYX in HCC is off to an encouraging start across a variety of metrics that I will touch on in these remarks. In Q1, we saw positive trends in the business in terms of demand, new prescriptions and expansion of the CABOMETYX prescriber base.

Patient demand grew by 33% year-over-year and 3% quarter-over-quarter. And this growth was driven by both RCC and HCC.

New prescriptions, or NRx, were up by 17% in Q1 relative to the fourth quarter of 2018. The growth in new prescriptions in Q1 was driven equally by RCC and HCC. We're pleased to see the growth in demand and new prescriptions coming from both of the new tumor types for which CABOMETYX is indicated. This underscores healthy fundamentals for both parts of the franchise and I will go into more detail for each momentarily.

Additionally, the prescriber base grew by 10% quarter-over-quarter and 53% year-over-year from 2018. This growth was driven by new community prescribers for both RCC and HCC as well as new academic prescribers within HCC.

CABOMETYX net revenue grew to about $176 million, representing an increase of 36% year-over-year and 2.5% quarter-over-quarter. As Chris mentioned, net revenue in Q1 was impacted by increased PHS utilization, increased Medicare donut hole expenditures and a drawdown of inventory following 2 successive quarters of inventory build. Inventory is now on the low end of the range that we historically observed for CABOMETYX. Furthermore, inventory was built across the industry in Q4 last year and that appears to be the case for the RCC oral tyrosine kinase inhibitor market as well.

I will now turn to more specifics of the RCC marketplace, which continues to become increasingly competitive. We have long anticipated the approval of PD-1/TKI combinations in RCC. And very recently, the combination of pembrolizumab and axitinib was approved in the first-line setting.

To get a better sense for the evolving competitive dynamics through Q1, we analyzed the IQVIA data for the RCC oral TKI inhibitor or TKI market comprised of sunitinib, pazopanib, axitinib and CABOMETYX.

As you can see from this analysis of publicly available data, CABOMETYX became the leading TKI in total prescriptions in Q1, surpassing VOTRIENT and gaining 3 share points for a TRx market share of 34%.

We're pleased that CABOMETYX continued to grow in Q1 despite the competitive marketplace. This represents significant progress and a share point increase of 3% relative to the last quarter and a growth rate of 8% in TRx relative to Q4 2018.

Additionally, these data show that CABOMETYX became the #1 TKI for total prescriptions in the RCC market.

Turning to NRx, you may recall that CABOMETYX became the leading TKI in RCC for new prescriptions in Q4 and the CABOMETYX NRx share continued to increase in Q1 to 36%. Also encouraging is the NRx growth trend in Q1 relative to Q4, showing that CABOMETYX NRx grew at 17%, outpacing the TRx growth rate of 8% Q-over-Q. Both growth rates were higher in Q1 relative to Q4.

The RCC market will continue to be driven largely by the sequencing of therapeutic options, and we feel good about cabo's place in the market as sequencing evolves.

Most patients will have the opportunity to receive either CABOMETYX followed by ICI therapy or an ICI combination followed by cabo in sequence. The number of second-line patients who've progressed on the combination of nivo/ipi increased again in Q1, and we expect this gradual trend to continue in the coming quarters as there are many frontline nivo/ipi patients that have yet to progress. CABOMETYX is well positioned to be the treatment of choice for these patients as well as patients who progress on

pembro/axi.

Market research continues to indicate that approximately 90% of key opinion leaders surveyed would chose CABOMETYX as their therapeutic option after a first-line ICI combination, whether it is nivo/ipi or a PD-1/TKI. The RCC business has strong momentum heading into Q2.

According to data from IQVIA brand impact, CABOMETYX new patient market share was stable in the first line and increased in the second line in Q1. Furthermore, since the approval of nivo/ipi in April, the vast majority of the patients who have progressed on this combination have received CABOMETYX as their second-line treatment. In fact, data from IQVIA brand impact suggests that CABOMETYX captured the vast majority of market share patients in Q1 who have progressed on nivo/ipi, consistent with our market research just mentioned.

We continue to see broad utilization across academic and community settings, lines of therapy and clinical risk groups. Given the patient flow dynamics and the strength of the CABOMETYX data, we expect RCC demand to continue to grow in 2019.

In addition to the continued momentum of CABOMETYX in RCC, we're excited to also drive growth in the newly received indication in HCC, representing a third tumor type and fourth indication for the cabozantinib franchise. Our team began executing on the launch immediately upon receiving approval for the second-line HCC indication on January 14, and we're pleased with the progress made.

We're still in the early days of the launch, but the key metrics indicate that we're exceeding our expectations. As we have stated for some time, HCC is a market that will need to be built as new therapies become available for these patients. This is consistent with external market research, which indicates that the HCC market will grow in the coming years. Our market research indicates that CABOMETYX is already achieving significant awareness relative to the other TKIs in HCC.

If aware of the CELESTIAL data, the majority of physicians indicate that they intend to prescribe CABOMETYX consistent with its approved labeling. Initial market research indicates that cabo will be the TKI of choice in pretreated HCC patients and we're seeing this in the market as cabo is already taking share from regorafenib.

We view these collective observations as encouraging and consistent with the initial HCC market trends we're seeing in terms of both new prescriptions and demand. As I mentioned earlier in my remarks, we're seeing HCC contribute to approximately half of cabo's demand growth and half of the brand's growth in new prescriptions in the first quarter. We're pleased that HCC and RCC are growing with regards to both of these metrics.

Based on the fact that CABOMETYX has demonstrated a survival benefit in a second tumor type, the HCC indication seems to have generated additional confidence in cabo among the physician community and other synergies for the CABOMETYX brand.

Importantly, the HCC approval has increased account access for our sales force and facilitated not only productive HCC discussions, but has increased the number of meaningful RCC discussions and interactions with prescribers as well. In fact, our pre-approval RCC sales footprint covered approximately 95% of the combined RCC and HCC market potential. And we began calling on the remaining HCC-specific prescribers immediately following approval.

While early days, external share of voice data is validating our strategic approach to the market, as CABOMETYX has the leading share of voice in second line plus HCC, while maintaining the leading share of voice in the RCC market.

Our established footprint in community oncology and community physician familiarity with CABOMETYX is aiding the uptake within HCC. Our market research had indicated that there would be an increased interest in prescribing CABOMETYX for HCC, if the physician had previous experience using cabo in RCC. This is playing out in the market as approximately 80% of HCC prescribers in Q1 have previously written cabo and the other 20% are largely academic-based. We're pleased to see this uptake for HCC in both the academic and community segments of the market.

We're also pleased with the results of Q1, but believe that many more RCC patients and now HCC patients could benefit from CABOMETYX. CABOMETYX grew in Q1 in terms of new prescription and demand in both RCC and HCC. The HCC approval continues to augment the overall positive perception of the brand and gives our customers more options as they strive to help patients with difficult-to-treat cancers.

CABOMETYX is now the #1 prescribed TKI in RCC, and we look forward to building on this momentum in RCC, HCC and other potential future indications as the cabozantinib development program expands.

Our team is focused and motivated to compete every day to bring the benefit of CABOMETYX to every eligible patient as we continue to build the franchise.

With that, I'll turn the call over to Gisela.

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Gisela M. Schwab, Exelixis, Inc. - President of Product Development & Medical Affairs and Chief Medical Officer [6]

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Thank you, P.J. I'm pleased to provide an update on the progress of the cabozantinib development program and will start with an overview of our combination trials of cabozantinib with immune checkpoint inhibitors.

Our clinical collaboration with BMS, combining cabozantinib with nivolumab alone or cabozantinib with nivolumab and ipilimumab is making great progress. The ongoing Phase III CheckMate 9ER study in treatment-naïve RCC patients comparing cabozantinib in combination with nivolumab versus sunitinib has completed enrollment recently, with the last few patients in Japan going through the screening period before randomization.

This study is sponsored by BMS and co-funded by ourselves and our partners Ipsen and Takeda, together with BMS. We are very pleased with this progress and are expecting data from this study early next year as BMS commented on their recent quarterly call. We look forward to the event-driven analysis and will provide further updates when available.

Also, as announced today, we're initiating a further Phase III trial COSMIC-313, evaluating the triplet of cabozantinib in combination with nivolumab and ipilimumab versus nivolumab and ipilimumab in first-line RCC. We are the study sponsor and BMS is collaborating with us in providing nivolumab and ipilimumab free of charge.

The primary endpoint of the 676-patient trial is PFS and secondary endpoint includes overall survival and objective response rate. Despite the significant progress in the treatment of RCC during the last few years, further improvements are needed. This study further builds on the positive outcome of our CABOSUN study in first-line RCC that cabozantinib demonstrated superior PFS compared to sunitinib in patients with intermediate-or poor-risk RCC as well as the positive CheckMate-214 trial that demonstrated superior overall survival with a combination of nivolumab and ipilimumab as compared to sunitinib.

Both of these trials have led to regulatory approval for the respective compounds. So we're excited to move these agents with proven activity in first-line RCC forward in combination as we believe that cabozantinib's target profile resulting in a more immune-permissive environment paired with immune checkpoint inhibition and results in further improvement of important outcomes in the first-line RCC, including the depth of response, [the heart rate] as well as duration of PFS and OS.

This is the first trial to compare a TKI checkpoint inhibitor combination to be approved in checkpoint inhibitor combination of nivolumab and ipilimumab in the first-line RCC.

The preliminary activity and tolerability of both the combination of cabozantinib and nivolumab and the triplet combination, including ipilimumab has been previously evaluated in a Phase Ib study chaired by Dr. Andrea Apolo.

In this Phase Ib trial conducted in previously treated patients with advanced GU tumors, including RCC, a tolerable dose of [40] milligrams per kg of cabozantinib together with either 3 milligrams per kilogram nivolumab alone or 3 milligrams per kilogram nivolumab plus 1 milligram per kilogram ipilimumab every 3 weeks for the first [4] administrations were established.

We're also making great progress in our collaboration with Genentech Roche in our combination Phase Ib trial of cabozantinib and atezolizumab. The COSMIC-021 Phase Ib trial is actively enrolling patients across 20 expansion cohorts in various solid tumor settings. And our Phase III trial COSMIC-312 in patients with previously untreated advanced hepatocellular cancer is enrolling patients in the United States and abroad. For our COSMIC-021 and COSMIC-312, we're collaborating with Genentech Roche who are providing atezolizumab and our partner Ipsen is co-funding the study.

Further late-stage checkpoint inhibitor combination studies in indications including potentially bladder cancer and non-small-cell lung cancer and promising tumor types from the COSMIC-021 trial are also anticipated and we will provide more details as we get ready to initiate these trials.

And separately, on the regulatory side for cabozantinib, in late breaking news announced just a few days ago, Takeda, our partner for cabozantinib in Japan filed an NDA for cabozantinib for the treatment of advanced RCC with the Japanese regulatory authority.

In addition to the very active cabozantinib development program, we're working on expanding our development pipeline. Late in quarter 4 2018, we filed a new IND for a next-generation tyrosine kinase inhibitor targeting VEGFR and MET. And the Phase I trial for XL092 is now actively enrolling patients. If warranted by the data, we plan on advancing this compound quickly through dose finding and disease-specific single agent cohort expansion as well as combination approaches, setting the stage for late-stage development.

I'll close with a brief update on cobimetinib, 2 Phase III pivotal trials in previously untreated melanoma have been enrolled fully last year. These include IMspire150 or TRILOGY, evaluating cobimetinib plus vemurafenib plus atezolizumab in BRAF mutation-positive patients, locally advanced or metastatic disease. And IMspire170 that evaluates cobimetinib and atezolizumab in BRAF wild-type metastatic disease.

Per Roche's full year 2018 results call in January of 2019, potential regulatory filings are planned later this year, if data are supportive.

And finally, we are busy preparing for the annual ASCO conference starting at the end of the month in Chicago. We're looking forward to the conference where 9 cabozantinib and 2 cobimetinib related abstracts will be presented and to the opportunity to connect in person with key opinion leaders and partners.

So in summary, I'm very pleased with the progress made in our development program and with the important milestones reached during this quarter and look forward to updating you in the future.

And with that, I will hand the call back to Mike.

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Michael M. Morrissey, Exelixis, Inc. - CEO, President & Director [7]

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All right. Thanks, Gisela. I'll close by saying that Exelixis has maintained strong momentum in the first quarter of 2019. And we are excited about the growth potential of our company across all aspects of our business.

Notably, our Q1 results highlight that we continue to grow the business quarter-over-quarter and year-over-year due to the strength of the CABOMETYX launch, our ex U.S. deals with Ipsen and Takeda and disciplined expense management.

Cabozantinib is vectoring towards $1 billion per year global run rate and has helped literally tens of thousands of patients with RCC and now HCC to live longer and recover stronger. The strength of our business provides a compelling opportunity for potential long-term growth, as we continue to invest in R&D with future additional cabozantinib late-stage trials and new product candidates through both internal and external R&D efforts.

I want to thank the entire Exelixis team for their dedication and commitment as we navigate the opportunities and challenges that lie ahead of us. As I said previously, we have a team and culture that is focused, energized and extremely resilient. We remain committed to making every day count as we discover, develop and commercialize the next generation of our medicines for cancer patients in need of better and more effective therapies. We look forward to updating you on our progress.

Thank you for your continued support and interest in Exelixis. And we're now happy to open the call for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from the line of Andy Hsieh from William Blair.

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Tsan-Yu Hsieh, William Blair & Company L.L.C., Research Division - Senior Research Analyst [2]

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Congratulations on the quarter. So impressive 17% NRx growth rate. I'm just wondering, is there any -- among patients who have previously been treated with Opdivo-Yervoy in a frontline setting, are you seeing any sort of pattern there in terms of patients going on cabo? Are they rapid progressers? Are they stable disease, patients who have failed after a short period of time? Any sort of trend lines that you can provide there?

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Patrick J. Haley, Exelixis, Inc. - SVP of Commercial [3]

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Yes, Andy, thanks for the question. This is P.J. We're certainly pleased that what we're seeing in the market research data, the brand impact data is that we're getting the vast majority of the patients in the last couple of quarters progressing off nivo/ipi. We're really -- what we're seeing because it is kind of 90% range, we're really getting all types of patients who are progressing on nivo/ipi across the board and that's been approved, as you know, now for over a year. We see the kinetics of kind of those patients progressing continue to increase, which is, I think, logical given the timing and given their data.

And furthermore, our market research continues to indicate that we should really capture the vast majority of those patients progressing on either nivo/ipi or PD-1/TKI. So we're seeing that broadly. We're pleased with that. And certainly, we'll continue to really ensure that those patients have the opportunity to benefit from CABOMETYX.

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Tsan-Yu Hsieh, William Blair & Company L.L.C., Research Division - Senior Research Analyst [4]

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Great. That's helpful. So moving on to HCC. I'm just wondering, based on the conversations you have on the field with physicians, following the setback with KEYNOTE-240, are you seeing a decrease or, I guess, hesitancy in terms of prescribing checkpoint inhibitors for HCC patients there?

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Patrick J. Haley, Exelixis, Inc. - SVP of Commercial [5]

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Yes. Thanks for the question, Andy. P.J. again. Definitely interesting sort of times and data in HCC as that market's expanding and new options are becoming available. I'd say it's kind of early days to really understand any potential impact of that announcement of the KEYNOTE data. But what we really are seeing, and I think every tumor type is different, is that the perspective of physicians treating HCC is quite positive towards TKIs. And I think with cabo coming to market here, we're seeing really good feedback on the CELESTIAL data.

We're seeing excellent uptake with regards to taking market share in both the second and third lines, predominantly at the expense of regorafenib. And I think that momentum and demand growth and new prescription share growth, I think, really sets us up with good momentum heading into the rest of 2019.

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Tsan-Yu Hsieh, William Blair & Company L.L.C., Research Division - Senior Research Analyst [6]

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Great. Okay. And a regulatory question in terms of HCC. I guess, the question is for Gisela. What other studies or conversations does Takeda need to have in order to have that approved in Japan? Obviously, that's a very, very large market there for HCC.

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Gisela M. Schwab, Exelixis, Inc. - President of Product Development & Medical Affairs and Chief Medical Officer [7]

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Yes. I won't comment for Takeda. Obviously they have to address these questions and just would suggest to address them for -- to our partner. And typically, what one would do in indication to where a positive Phase III study exists and it was conducted internationally averaging study could be -- that have been conducted, but I won't address Takeda question.

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Operator [8]

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Our next question is from Yaron Werber from Cowen.

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Yaron Benjamin Werber, Cowen and Company, LLC, Research Division - MD & Senior Biotechnology Analyst [9]

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A couple of things. Number one, maybe -- I don't know who wants to take this one on. When I look at -- I'm trying to get a handle of how the long-term HCC is going so far in terms of maybe a little bit more absolute numbers. So when you're referring to about half the growth of the brand coming from HCC, are you referring sort of on a quarter-over-quarter basis, let's say, of the 5 sort of million quarter-over-quarter? Is that sort of the way we should think about that, maybe half of that?

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Patrick J. Haley, Exelixis, Inc. - SVP of Commercial [10]

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Yaron, this is P.J. Let me take that. So with regards to the growth, I was referring to kind of the new prescription growth and the demand growth are approximately half and half RCC, HCC. But with respect to your question and trying to talk about the overall business, what we saw in Q1 is approximately 4% to 5% of the business was driven from HCC. And what I'll say about that is, as is often the case in oncology, prior to Q1, there was some unsolicited off-label utilization of CABOMETYX and HCC. This is something we've seen years ago with regards to COMETRIQ being used in RCC. It's certainly something we didn't promote off-label, but that's how you get to kind of the 4% to 5% of the business being HCC in Q1.

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Yaron Benjamin Werber, Cowen and Company, LLC, Research Division - MD & Senior Biotechnology Analyst [11]

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Got it. Okay. So maybe kind of $7 million to $8 million roughly is a -- that's a absolute sales on HCC, but maybe of that, $2 million to $3 million is the growth quarter-over-quarter in HCC?

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Patrick J. Haley, Exelixis, Inc. - SVP of Commercial [12]

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Yes. We're not going to address specific numbers, but I think hopefully that helps you kind of frame it with all the other data we provided.

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Yaron Benjamin Werber, Cowen and Company, LLC, Research Division - MD & Senior Biotechnology Analyst [13]

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Yes. And then just moving to 9ER more and the powering of the study on both PFS but more importantly on survival. So the study has now about 650 patients. And certainly, unquestionably well-powered for PFS. Just comparing it to some of the other studies that have been done recently, they're sort of in the 850 range. I'm talking about 101 and obviously KEYNOTE-426. How were you -- how did you arrive with Bristol at that study size from a survival standpoint and then s powering standpoint if you can give us a sense as to how you got there?

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Gisela M. Schwab, Exelixis, Inc. - President of Product Development & Medical Affairs and Chief Medical Officer [14]

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Yes. Just in general to comment, the 9ER study is designed to address both endpoints, primary and secondary endpoints in overall survival. The study did involve about 650 patients. When you look at other trials in this space the -- that mentioned the [tentative] endpoints, you see that some of these trials achieved that with relatively few events in number. And I think with our own experience when it comes to down to the METEOR trial, just to remind you that it was 658 patients strong and it met both PFS and OS endpoints. And maybe lastly, another point to consider is that cabozantinib and also nivolumab individually are -- as single agent met overall survival endpoints in their respective registration studies. Did that help, Yaron?

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Yaron Benjamin Werber, Cowen and Company, LLC, Research Division - MD & Senior Biotechnology Analyst [15]

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Yes. Absolutely.

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Operator [16]

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Our next question is from Michael Schmidt from Guggenheim.

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Michael Werner Schmidt, Guggenheim Securities, LLC, Research Division - Senior Analyst & Senior MD [17]

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I just wanted to dig in a little bit more into the 1Q '19 CABOMETYX sales figures. So I think when I look at -- understanding inventory moments and some of the gross to net impact, but looking just the pure volume growth, I think you said there was about 3% sequential growth in volume. Some of it driven in 8 -- by HCC, which is obviously less than what you had in the fourth quarter. And in the third last year, I think you had 4 -- or 5% and 6% volume growth, respectively, sequentially back then. Can you just help us understand how we should think about growth dynamics, in particular in RCC going forward, over the rest of the year? Is that a growth rate that we should look at from a forward-looking point of view?

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Patrick J. Haley, Exelixis, Inc. - SVP of Commercial [18]

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Michael, this is P.J. A couple of things. So we're not going to provide guidance on specific growth for the remainder of the year, but what I would say is that we're certainly pleased with the fact that we had growth in Q1 from both RCC and HCC. And what I'd say beyond that, some of which is industry-wide, is we saw really nice sort of kinetics in the demand over the course of the quarter, certainly in the later part of the quarter with regards to that demand and demand growth.

Another thing I'd kind of point to here, as I mentioned, we saw strong growth in NRx new patient starts in Q1. So certainly pleased with that, both on the RCC side and the HCC side, which are both driving that approximately equally.

And then looking forward, as I've kind of mentioned in my prepared remarks, in RCC, we see continued demand growth over 2019 and that's primarily driven by more patients progressing on ICI combinations and CABOMETYX continuing to capture the vast majority of them in the second line. And we certainly see the potential for demand growth in HCC as we're in the very early stages of that launch, and all the metrics are very positive. So I think that's what I'd say with regards to that on the overall perspective.

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Michael Werner Schmidt, Guggenheim Securities, LLC, Research Division - Senior Analyst & Senior MD [19]

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Okay. And then you said that more growth than historically was driven by patients in the government reimbursement channel, which had a -- which contributed to the increase in gross to net. Just wondering if this is something that's driven by disease type or maybe -- could you maybe comment how payer mix compares between RCC and HCC? And if this is a trend that we should keep an eye on going forward?

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Christopher J. Senner, Exelixis, Inc. - Executive VP & CFO [20]

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Yes, this -- Michael, this is Chris. So like I mentioned, we did see increased utilization in PHS, which is greater than demand, as you pointed out. And I said that phenomenon has been going on for the last couple of quarters. We do continue to see a significant portion of our business on the commercial side and we do see that we increased utilization on the Medicare Part D side. And also, that utilization was coupled with the higher discount rate that we had to take, which was legislated at the beginning of 2018.

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Michael Werner Schmidt, Guggenheim Securities, LLC, Research Division - Senior Analyst & Senior MD [21]

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Okay. And then last question. We saw there was an ASCO presentation -- actually from an investigator-funded study [in gist]. And I was just wondering if you could help us with some more comments here around expectations for how big is the study? Is it something that could potentially end up in [end-to-end] guidelines? Any guidance, that would be helpful.

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Gisela M. Schwab, Exelixis, Inc. - President of Product Development & Medical Affairs and Chief Medical Officer [22]

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Yes. This will be presented at ASCO. This study is a Phase II trial conducted by EORTC and it will be presented by Patrick Schöffski. I can't obviously speak at this point to results, but it is a regular-sized Phase II study and results are forthcoming. So happy to talk about that at ASCO.

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Operator [23]

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Our next question is from Silvan Tuerkcan from Oppenheimer.

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Silvan Can Tuerkcan, Oppenheimer & Co. Inc., Research Division - Associate [24]

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Congrats on the quarter. Could you tell me a little bit more about the new COSMIC-313 trial that you initiated? How do you -- what is the importance of that trial compared to 9ER? Are you confident in both trials? And what would be the time line? Will it be -- is it almost the same patient number as 9ER? Would it be kind of like a same time line here?

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Gisela M. Schwab, Exelixis, Inc. - President of Product Development & Medical Affairs and Chief Medical Officer [25]

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Yes. We are very excited, obviously, to start in this study. I think it's an important study in the first line space in RCC. And it is the first triplet combination with cabozantinib, nivolumab and ipilimumab going into the Phase III comparison versus the approved nivolumab/ipilimumab combination and that is set apart from other trials in this space.

I think I spoke earlier to the scientific rationale, why we are excited about it. And I hope and I believe that there is an opportunity for cooperative or synergistic activity between cabozantinib, which results in more new -- permissive environment and a checkpoint inhibitor. And I think, in RCC, even though there is a lot of progress we can look at [announced] that has been made in the last several years, there is still opportunity for improvement with deepening of response and the extension of time-driven endpoints.

Regarding time line, we hope to initiate the study and patient enrollment shortly. And we're working on that. With respect to readout, it is too early at this point and I won't speculate at this point.

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Silvan Can Tuerkcan, Oppenheimer & Co. Inc., Research Division - Associate [26]

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Great. And how will this study impact your spending? I saw you reaffirmed your guidance for this year. Going forward, will there be a significant impact from adding this study or not?

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Christopher J. Senner, Exelixis, Inc. - Executive VP & CFO [27]

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Silvan, this is Chris. We've included COSMIC-313 and future studies in our guidance numbers so -- for 2019. So it's fully included.

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Operator [28]

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Our next question is from Kennen MacKay from RBC Capital Markets.

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Justin Hayward Burns, RBC Capital Markets, LLC, Research Division - Senior Associate [29]

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This is Justin on for Kennen. A couple quick ones on 313 from us. Just wondering if you have an idea of the efficacy part. Do you think the FDA is expecting to see for approval here? And additionally, what interim analyses are built in here, if any?

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Gisela M. Schwab, Exelixis, Inc. - President of Product Development & Medical Affairs and Chief Medical Officer [30]

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So as I described earlier in the prepared remarks, I talked about the design of the study as being a randomized study comparing the approved checkpoint inhibitor combination [in nivo-ipi] versus the triplet. Primary endpoint of PFS, secondary endpoint includes overall survival. In terms of analyses, obviously we're conducting interim analysis of overall survival around about the time of the final analysis of PFS. And beyond that, I can't really provide further color.

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Justin Hayward Burns, RBC Capital Markets, LLC, Research Division - Senior Associate [31]

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Okay. And one quick one on the impact of the payer/patient shift for cabo in Q1. Is this something you expect to continue going forward throughout the quarter? Or is this just sort of a onetime seasonality and that you're not expecting to repeat for the year?

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Christopher J. Senner, Exelixis, Inc. - Executive VP & CFO [32]

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Yes, Justin. This is Chris. I guess the way to look at it is we did provide guidance or provided a projection here that gross to net would -- between 19% and 20% for 2019. And the way to look at it is we've -- what we've seen in 2018 and 2017 is that we usually start the year with a higher gross to net. It goes down as part -- during the year and then comes back up at the end of the year. So the expectation is all -- that will all be within the projection that I provided earlier in my prepared remarks.

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Operator [33]

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Our next question is from Ted Tenthoff from Piper Jaffray.

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Edward Andrew Tenthoff, Piper Jaffray Companies, Research Division - MD & Senior Research Analyst [34]

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Congrats on a solid quarter. I'm trying to get a sense for beyond RCC liver. Great progress here in terms of expanding the label. Obviously, a focus on advancing cabo in combination with different I/O therapies. What are the next kind of most exciting indications we should be looking for and paying attention to?

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Gisela M. Schwab, Exelixis, Inc. - President of Product Development & Medical Affairs and Chief Medical Officer [35]

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So we are actively working on design to -- for the trials. And I mentioned some of the indications of interest. It's too early to speak about initiation time frames, but we certainly look forward to updating you on that. So -- but in general, indications include bladder cancer, lung cancer as well as a promising indication that may emerge from the COSMIC-021 study that is ongoing and [as assets evolve].

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Operator [36]

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Our next question is from Peter Lawson from SunTrust Robinson Humphrey.

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Peter Richard Lawson, SunTrust Robinson Humphrey, Inc., Research Division - Director [37]

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Just -- I may have missed this but the gross to net, was that higher this year versus last year Q1? And was there a larger-than-expected impact from the whole this quarter versus last year's Q1?

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Christopher J. Senner, Exelixis, Inc. - Executive VP & CFO [38]

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Yes, Peter. This is Chris. So yes, it's higher this year versus Q1 last year and it's also higher versus Q4 last year. I would say that it's not necessary -- the impact of Medicare [Durable] is not necessarily larger than we expected. It was what we expected, but it is larger than prior periods partly because of the utilization, but also to a large degree based on the fact that the discount to beneficiaries that went up from 50% to 70%.

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Peter Richard Lawson, SunTrust Robinson Humphrey, Inc., Research Division - Director [39]

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Is there any way of quantifying that in dollar terms?

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Christopher J. Senner, Exelixis, Inc. - Executive VP & CFO [40]

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No. I wouldn't want to give that level of detail at this point.

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Peter Richard Lawson, SunTrust Robinson Humphrey, Inc., Research Division - Director [41]

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Okay. And then just on the liver launch, just kind of the ability to target medical oncologists versus interventional radiologists, has there been any traction there or any change in the way you're thinking?

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Patrick J. Haley, Exelixis, Inc. - SVP of Commercial [42]

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Yes. Peter, this is P.J. So we've really been preparing the strategy to target not only medical oncologists, but the key multidisciplinary teams certainly at the top institutions, which includes the interventional radiologists as well as the hepatologists. Typically, we're seeing good momentum and feedback from those whole teams. We know some hepatologists are also writing for CABOMETYX, which is encouraging. And I think that's all leading to what we're seeing in terms of having a really nice awareness this early in the launch and as well as sort of those new prescription and the market share uptake we're seeing and taking shares quickly from regorafenib.

So I think the team has got a good strategy in targeting that multidisciplinary team and really balancing the RCC business where we're getting some -- really some synergy and having incremental account access and RCC discussions as well, which is just sort of creating synergy for the business.

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Operator [43]

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Our next question is from George Farmer from BMO Capital Markets.

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George Farmer, BMO Capital Markets Equity Research - Analyst [44]

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See, I had the opportunity to dig up some early data that you had with nivo, ipi and cabo. I guess that was from ASCO GU last year. I don't know if this data that we have is stale, but it doesn't look like PFS had been hit in that study. Has it been hit? Because I think it was a Phase I study.

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Gisela M. Schwab, Exelixis, Inc. - President of Product Development & Medical Affairs and Chief Medical Officer [45]

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So the Phase I study that you're referring to is the Andrea Apolo tiered trial and indication in a mixed population of patients with advanced GU tumors. And this has been reported various times. And just to focus on, for instance, the RCC population and previously treated RCC patients, she had observed with the combination 50% response rate. And these were durable responses. PFS wasn't reported at that time, but the patients were on treatment for extended periods of time.

I think it would be urothelial cancer experience. She did report PFS and that was in previously treated patients in the order of 13 months or so.

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George Farmer, BMO Capital Markets Equity Research - Analyst [46]

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Right. So there hasn't been any other updates since, right?

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Gisela M. Schwab, Exelixis, Inc. - President of Product Development & Medical Affairs and Chief Medical Officer [47]

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Not at this time, no.

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George Farmer, BMO Capital Markets Equity Research - Analyst [48]

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Okay. And to confirm, I don't know if you said this, the -- your new Phase III, the COSMIC-313, is that going to be with low-dose ipi?

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Gisela M. Schwab, Exelixis, Inc. - President of Product Development & Medical Affairs and Chief Medical Officer [49]

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Yes. The dose was established in the Phase Ib and the ipilimumab dose is 1 milligram per kilogram every -- and [in the approved schedule].

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George Farmer, BMO Capital Markets Equity Research - Analyst [50]

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Great. And then with the KEYNOTE results and the excitement generated by combining a checkpoint with TKI, we've been hearing from some physicians that there may be a reason why one would want to swap out INLYTA and replace with CABOMETYX. Do you have any feel for that? Have you done any of your own polling with physicians to see if they may just combine pembro with cabo instead of -- or maybe soon thereafter with INLYTA in the event of some adverse -- more serious adverse events with that combination?

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Michael M. Morrissey, Exelixis, Inc. - CEO, President & Director [51]

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Yes, George. It's Mike. Yes, a fair question. Obviously, that's something that we don't want to engage in relative to an unapproved use for cabo. So we've heard that chatter too, but we'll just stay out of it because we're not labeled for that so...

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Operator [52]

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Our next question is from Stephen Willey from Stifel.

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Stephen Douglas Willey, Stifel, Nicolaus & Company, Incorporated, Research Division - Director [53]

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Thanks for all the color around HCCs. That's helpful. Maybe just a question for P.J. regarding HCC. Can you talk a little bit maybe just about what the physician feedback is like with respect to your ability to take market share from regorafenib in the second line? Is that a perception around safety, efficacy? Are these patients who, for whatever reason, just haven't seen prior sorafenib? Just curious as to kind of what's driving the uptake there.

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Patrick J. Haley, Exelixis, Inc. - SVP of Commercial [54]

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Yes, Stephen, and I'm happy to talk about that a bit. As I mentioned for the research, we're pleased with the awareness already, and the feedback generally we're getting on the CABOMETYX profile and the CELESTIAL data is very favorable. And kind of in terms of looking at the efficacy feedback, it's tracking very well relative to the other TKIs. I think the differentiation point has really always been the broad data set from CELESTIAL, all the different subgroups. The patients did not need be tolerant to prior sorafenib. So I think physicians are really looking at it as a drug they can use very flexibly. And that feedback is very strong and we're seeing that translate into new prescriptions, as I mentioned, significantly sort of -- or I should say the majority of which are coming from regorafenib at this point.

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Stephen Douglas Willey, Stifel, Nicolaus & Company, Incorporated, Research Division - Director [55]

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Okay. That's helpful. And then just looking now at the COSMIC-021 study, and I guess you've got 20 expansion cohorts, I think some of which have been totally enrolled for a while now. Can you maybe just give us a little bit of color around just how you are thinking about the communication strategy? And should we be expecting to see presentations related to all of these at some point? Should we be expecting to see presentations related to just those indications that you're planning to move forward with? I guess, any characterization, that would be helpful.

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Michael M. Morrissey, Exelixis, Inc. - CEO, President & Director [56]

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Yes, Steve. It's Mike. As we've said previously, we're going to speak to and present data from 021 as we have fully enrolled cohorts with long enough follow-up time, we'll be able to present stable data. As Gisela has alluded to many times, we also have the ability to expand cohorts based upon signs of activity that we think are encouraging. So it's a study that is enrolling rapidly and is one that we're certainly very excited in from the standpoint of existing cohorts, but also adding additional cohorts.

As we've said previously, we're in a situation today where we're really focused on presenting mature, stable data. We're not -- we're trying to avoid a situation where we're kind of leaking out data every meeting 3 or 4 times a year, having response rates change, et cetera. We think that's something that we can -- at our current state, we should just avoid based upon kind of our -- the overall maturity of our organization.

That being said, you're liable to see us start additional late-stage trials based on the data from 021 probably before you actually see the data supporting that. A good example is liver where we started 312 recently. Just because we're seeing data on a regular basis, we understand how to make it all fit with the competition and with the value we could bring and the temporal aspects of that. And then as that data matures, we'll get that out.

So lots of moving pieces here. We're excited about the combination. Certainly, the validation in first line in renal looks really encouraging, and we're going full speed ahead.

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Operator [57]

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Our next question is from Paul Choi from Goldman Sachs.

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Kyuwon Choi, Goldman Sachs Group Inc., Research Division - Equity Analyst [58]

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Mike, I wanted to ask you, now that you have $1 billion plus in cash and investments building up here, just your latest thoughts with regard to business development and either finding strategic assets or entering into partnerships and additional clinical collaborations here? And just thoughts on diversifying the revenue base with respect to other assets potentially besides cabozantinib?

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Michael M. Morrissey, Exelixis, Inc. - CEO, President & Director [59]

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Yes. I mean, the answers are yes, yes and yes. I mean, we are very interested in doing all those things. We talked about that pretty extensively in the past. We have -- as I mentioned in my prepared remarks, we've got a pretty broad effort between research, development, BD, commercial, finance, strategic thoughts as well about how we go about doing this. We have a pretty high bar for what we're looking for in terms of data, in terms of franchise opportunity, whether it be an early-stage asset or a late-stage asset. But yes, we have a lot of momentum there and I think the right balance of urgency and energy and focus, along with being very pragmatic and very thoughtful.

And you're right. We've generated $1 billion in cash and we've earned that, right? And we want to make sure that we maximize its potential going forward in terms of, again, building up a broad early-stage pipeline, diversifying across modality, diversifying across pathways and different approaches as well as looking at late-stage, mid-stage and early-stage assets. So we've got a lot going on.

And again, I don't feel any pressure to do a deal just to do a deal to spend that money. It's the contrary. We want to make sure that we maximize the value of those -- that hard-earned cash that we've got and that we can then catalyze that to grow the business going forward.

So a lot going on. As we finish some of these transactions and there's many in the queue, we'll be sure to update you on why them and what we like about them as well as how we think that will fit into our portfolio.

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Kyuwon Choi, Goldman Sachs Group Inc., Research Division - Equity Analyst [60]

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Okay. And then I had, I guess, a clinical question. With regard to COSMIC-313, you are focusing on the poor and intermediate-risk population, similar to what was studied as a priority in the CheckMate 214 study. But just with regard to testing this triple combination in a favorable risk population, I was wondering if you could give your thoughts there?

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Gisela M. Schwab, Exelixis, Inc. - President of Product Development & Medical Affairs and Chief Medical Officer [61]

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Yes. We focused on the poor and intermediate-risk population for exactly the reason that you're stating. The approval for both 214 was -- that was achieved by the 214 study when we were in ipi is in this patient population and so we wanted to build upon this outcome. And also I think it's fair to say that for the intermediate-risk population obviously it's a greater need, if you will, of additional effective therapy. So that's really the rationale.

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Kyuwon Choi, Goldman Sachs Group Inc., Research Division - Equity Analyst [62]

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And any thought to test the triplet in the favorable risk population?

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Gisela M. Schwab, Exelixis, Inc. - President of Product Development & Medical Affairs and Chief Medical Officer [63]

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Not immediately, but that may come in the future.

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Operator [64]

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Our next question is from Asthika Goonewardene from Bloomberg Intelligence.

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Asthika Goonewardene, Bloomberg Intelligence - Senior Biotech Analyst [65]

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So looking at 426 and JAVELIN, we saw some slight differences in the PFS and the OS on the landmark analyses, particularly upfront on the analyses there between the 2 studies. I asked this question last quarter and like you said, you're going to need to see the data to really comment. And now that we've seen the data, I wanted to get your view on in which of these 2 trials does the SUTENT behave more like what you'd expect in a real-life setting? And I have a follow-up after.

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Gisela M. Schwab, Exelixis, Inc. - President of Product Development & Medical Affairs and Chief Medical Officer [66]

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Yes. You're asking current trial comparisons and those are obviously difficult and fraught with errors and issues. I think importantly, one would look at the composition of the patient population, and in particular the risk categories and they were not identical. You look at these 2 studies. In terms of what one would expect, of course, [you mentioned] I think the range of expectation, of course, and I think we look forward to the outcome of the CheckMate 9ER study and now on [pem -- PNS with pem]. So we won't comment on the specifics of outcome here.

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Asthika Goonewardene, Bloomberg Intelligence - Senior Biotech Analyst [67]

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Okay. And then, of course, the percentage between PD-1 and PKIs, what makes the combo with cabo particularly attractive, but then when we add cabo to nivo and CaboNivoIpi, you obviously will expect more toxicity. I'm curious to know what are the -- what kind of dose reductions are allowed -- were allowed in a 9ER and that you plan on allowing on 313? And then also maybe what gives you the confidence that if you do a lot of these dose reductions in cabo, what gives you confidence that this low dose of cabo has enough exposure to generate these hypothetical synergistic effects with PD-1?

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Gisela M. Schwab, Exelixis, Inc. - President of Product Development & Medical Affairs and Chief Medical Officer [68]

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Yes. It's certainly a very detailed question. In the standard protocols, as one would expect, there are provisions for dose reductions in order to safeguard patients and they are very much in line with what one would expect. When it comes to intolerable adverse events, there are dose reductions for those folks we're seeing and the same goes also in terms of those folks for the checkpoint inhibitor. So I won't go into all this detail of the protocol, but I think that's the general approach.

Regarding cabozantinib exposure, we've presented and published exposure response analyses for single agent cabozantinib and know that even though a dose of cabozantinib maintain activity. So I think appropriate dose management for adverse events is expected to maintain activity.

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Michael M. Morrissey, Exelixis, Inc. - CEO, President & Director [69]

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Yes. And I would just add that based on the Phase Ib experience where we see high response rates, long, durable response with the doublet, the triplets, et cetera, we feel pretty comfortable starting at 40 and then being able to see a response and then maintain that response as patients move forward in their treatments if a dose reduction or hold is needed. The data would support they can still maintain that response. So got good data there. We feel good about that and very excited to get the -- get 313 going and also see the results from 9ER.

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Operator [70]

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

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Susan Hubbard, Exelixis, Inc. - EVP of Public Affairs & IR [71]

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Thank you, Gigi, and thank you all for joining us today. We certainly welcome your follow-up calls with any questions that we were unable to address in today's call.

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Operator [72]

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Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect.