U.S. Markets close in 3 hrs 34 mins

Edited Transcript of EXEL earnings conference call or presentation 31-Jul-19 9:00pm GMT

Q2 2019 Exelixis Inc Earnings Call

SOUTH SAN FRANCISCO Aug 6, 2019 (Thomson StreetEvents) -- Edited Transcript of Exelixis Inc earnings conference call or presentation Wednesday, July 31, 2019 at 9:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* 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

* Peter Lamb

Exelixis, Inc. - Executive VP of Scientific Strategy & Chief Scientific Officer

* Susan Hubbard

Exelixis, Inc. - EVP of Public Affairs & IR

================================================================================

Conference Call Participants

================================================================================

* George Farmer

BMO Capital Markets Equity Research - Analyst

* Jeff Hung

Morgan Stanley, Research Division - Equity Analyst

* Jennifer Shen

Needham & Company, LLC, Research Division - Research Analyst

* Kennen B. MacKay

RBC Capital Markets, LLC, Research Division - Co-Head of Biotechnology Research

* 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

* 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

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good day, ladies and gentlemen, and welcome to the Exelixis Second Quarter 2019 Financial Results Conference Call. My name is Gigi, and I will be your operator for today. As a reminder, this call is being recorded for replay purposes.

I would now like to turn the call over to your host, for today, Ms. Susan Hubbard, Executive Vice President of Public Affairs and Investor Relations. Please proceed.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Thank you, Gigi, and thank you all for joining us for the Exelixis Second 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; Peter Lamb, our Chief Scientific Officer; Gisela Schwab, our Chief Medical Officer, and P.J. Haley, our Senior Vice President of Commercial, who will together review our corporate, financial, research, development and commercial progress for the second quarter ended June 30, 2019. We'll keep our comments relatively brief to allow for questions at the end 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 include statements about possible developments regarding discovery, product development, regulatory, commercial, financial and strategic matters. Actual events or results could, of course, differ materially. We refer you to the documents we file, from time to time, with the SEC, which under the heading Risk Factors identify important factors that could cause actual results to differ materially from those expressed by the company verbally and in writing today, including without limitation, risks and uncertainties related to products' commercial success, market competition, regulatory review and approval processes, conducting clinical trials, compliance with applicable regulatory requirements, our dependence on collaboration partners and the level of cost associated with the discovery, product development, business development and commercialization activities.

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

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

All right. Thank you, Susan, and thanks to everyone for joining us on the call today. Exelixis had a strong Q2 with important progress across all components of our business. We maintained strong momentum as we grow CABOMETYX revenues, advance our cabozantinib development program and diversify our oncology pipeline with new agents from internal and external sources.

I'll begin today by providing a brief summary of our Q2 milestones and then turn the call over to Chris, Peter, Gisela and P.J., to review important components of our business.

Key highlights for Q2 2019 include first, net cabozantinib franchise revenue of approximately $194 million. Non-GAAP Q2 net income was approximately $91 million and non-GAAP diluted earnings were $0.29 per share. Our Q2 results confirm that cabozantinib's best-in-class TKI profile can drive strong growth in the face of competition from 3 different ICI-based combinations in RCC.

Second, our cabozantinib development program continues to move forward aggressively as we advance 4 ongoing pivotal trials and highlight important progress in the prostate cancer and ICI refractory non-small cell lung cancer cohorts of the COSMIC-021 trial. And third, today's announcement of a broad multi-target collaboration with Aurigene, that complements our efforts to build a diversified early-stage pipeline.

Our progress throughout Q2 highlights the company's performance across all components of our business, during a dynamic time for both RCC and HCC indications. Our overall strategic goals remain the same, we seek to grow revenues, manage expenses carefully and reinvest free cash to build a diversified business capable of long-term sustainable growth.

So with that, I'll turn the call over to Chris, who will provide more details on our Q2 2019 financials.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Thanks, Mike. I'm very pleased to review our strong results for the second quarter 2019. For the quarter, the company reported total revenues of $240.3 million. Total revenues for the second quarter included cabozantinib net product revenues of $193.7 million. Total revenues also included the recognition of $46.6 million in collaboration revenues from the company's commercial collaboration partners, Ipsen, Takeda and Daiichi Sankyo.

On a sequential quarter basis, CABOMETYX net product revenue increased by approximately $13.1 million or approximately 8% and was primarily driven by an increase in product volume. The CABOMETYX wholesale inventory at the end of the second quarter 2019 was essentially flat when compared to the first quarter of 2019.

Total revenues for the quarter ended June 30, 2019, also included collaboration revenues of $46.6 million. These collaboration revenues include a $20 million milestone from Daiichi Sankyo for the commercial launch of MINNEBRO tablets as a treatment for patients with hypertension in Japan. Collaboration revenues also included $14.9 million of royalties earned from approximately $66.5 million of cabozantinib sales by Ipsen.

Our total cost and expenses for the second quarter 2019 were $148.3 million compared to $130.9 million in the first quarter of 2019. R&D expenses are the primary driver of the increase in total cost and expenses, which increased by $18.6 million and were significantly impacted by the license agreement we signed with Iconic during the second quarter, under which we provided $12.6 million in an upfront payment and initial R&D funding for the program. Income taxes for the quarter ended June 30, 2019, was $20.7 million and an effective tax rate for the quarter was approximately 20.8% compared to $900,000 and 1%, respectively, for the comparable period of 2018.

The company reported GAAP net income of $79 million or $0.25 per share on a fully diluted basis for the second quarter of 2019. The company also reported non-GAAP net income of $90.7 million or $0.29 per share on a fully diluted basis. Non-GAAP net income excludes the impact of approximately $12 million of stock-based compensation expense and adjusts for the related income tax effect. Cash and cash equivalents, short- and long-term investments and long-term restricted cash and investments totaled approximately $1.16 billion at June 30, 2019 compared to approximately $1.02 billion at March 31, 2019.

Now turning to our financial guidance. The company is updating 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 $330 million and $350 million, and includes noncash expense related to stock-based compensation of approximately $25 million. This updated guidance reflects the increase in expenses associated with the 2 recent business development transactions, Iconic and Aurigene.

Selling, general and administrative expense is expected to be between $220 million and $240 million and includes noncash expenses related to stock-based compensation of approximately $40 million. Guidance for the effective tax rate in 2019 is between 21% and 23%.

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

--------------------------------------------------------------------------------

Peter Lamb, Exelixis, Inc. - Executive VP of Scientific Strategy & Chief Scientific Officer [5]

--------------------------------------------------------------------------------

Thanks, Chris. So we're very happy to announce a new oncology discovery collaboration with Aurigene, a small molecule drug discovery company based in Bangalore, India. This is a broad collaboration involving a total of 6 programs, including 3 internally developed Aurigene programs that are either at preclinical development or lead optimization stage and 3 additional de novo programs around mutually agreed targets.

In all cases, Aurigene will be responsible for discovery and preclinical development activities with Exelixis having the right to license the programs at IND stage. Exelixis will then be responsible for global clinical development and commercial efforts, except in India and Russia, where Aurigene will retain rights. This collaboration builds on our previous small molecule and biotherapeutic deals with StemSynergy, Invenra and Iconic and shares the same philosophy of modest upfront payments with more substantial success-based milestones downstream.

Aurigene has a proven track record of advancing compounds with diverse mechanisms of action into the clinic, and has over 100 scientists focused on oncology discovery. Aurigene's small molecule approach and experience effectively complements our own internal discovery efforts.

In particular, they've developed expertise in the optimization of covalent inhibitors and with novel approaches to induced protein degradation. As such, this collaboration gives us access to approaches and targets that we would not necessarily pursue internally and expands our small molecule preclinical pipeline and capabilities from both the biology and chemistry point of view.

With respect to our own internal discovery efforts, the buildout of our Alameda lab space is near completion, and we are actively advancing compounds in multiple areas. Of particular note, we've now resumed screening the Exelixis compound library that we retained from our original discovery group, meaning that we now once again have a fully integrated discovery operation from hit identification through the preclinical development.

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

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Thank you, Peter. I will focus today's development update on cabozantinib's next wave of trials, as we've made encouraging progress in this area. As announced a few weeks ago, we are making excellent progress on our COSMIC-021 trial, a Phase Ib study of cabozantinib and atezolizumab. The study is accruing patients actively across 20 expansion cohorts, and we are beginning to see encouraging early results in different tumor indications.

As a reminder, the key objective of the expansion cohorts is objective response rate or ORR per RECIST version 1.1. Notably, early data from the castration-resistant prostate cancer cohort or CRPC cohort in patients who have received 1 novel hormonal therapy and could've received prior docetaxel in the hormone sensitive stage has resulted in expansion of this cohort.

Additionally, our study oversight committee has recently recommended expansion of the immune checkpoint inhibitor, progressive non-small cell lung cancer cohort. This cohort includes patients who have received and failed prior standard chemotherapy and prior immune checkpoint inhibitor, together or in sequence.

Both cohorts are now open to adding an additional 50 patients to further evaluate the early evidence of activity seen among the first 30 patients enrolled. Additionally, we are adding a further 4 cohorts of CRPC patients to the study, bringing the total number of cohorts in this study to 24. Two cohorts evaluating the combination of cabozantinib and atezolizumab are being added. One for metastatic CRPC patients with visceral disease or measurable extra pelvic lymph nodes and rapidly rising PSA, who have received 1 prior novel hormonal therapy and could've received prior docetaxel for hormone sensitive disease.

And the other, for patients meeting these criteria and who have also received prior docetaxel for metastatic castration-resistant prostate cancer.

To characterize the single agent activity of cabozantinib or atezolizumab, we are also adding 2 single agent cohorts to the trial, both in patients with metastatic CRPC with visceral disease or measurable extra pelvic lymph nodes and rapidly rising PSA, who have received 1 prior NHT and could could've received a prior docetaxel for hormone sensitive disease. We are excited about the progress in the trial, while also working hard on advancing the product cabozantinib late-stage development that may include future Phase III trials in various indications, including the mentioned CRPC and non-small cell lung cancer settings, if warranted by the data.

In late 2018 and early 2019, we have initiated 3 pivotal Phase III studies, and these Phase III studies are now actively involving patients globally. As a reminder, these studies for cabozantinib include a single agent cabozantinib placebo-controlled Phase III trial in radio iodine-refractory DTC patients who have previously received VEGFR inhibitors, our COSMIC-311 trial. A Phase III trial comparing the combination of cabozantinib and atezolizumab with sorafenib in first-line HCC, our COSMIC-312 trial. And most recently during the second quarter, COSMIC-313, our Phase III trial in first-line RCC in patients with intermediate- or poor-risk disease for IMDC criteria comparing the triplet of cabozantinib and nivolumab plus ipilimumab to the combination of nivolumab and ipilimumab is -- has been initiated. COSMIC-313 is the first trial using the approved nivolumab and ipilimumab combination as a comparator.

And lastly, as reported previously, CheckMate 9ER, the Phase III trial comparing cabozantinib plus nivolumab with sunitinib in first-line RCC, including all risk groups has completed enrollment earlier this year, and we are looking forward at the results in early 2020.

So the cabozantinib development program is making great progress and I look forward to updating you further at the appropriate time. On the regulatory side, further progress has been made for cabozantinib worldwide. Our partner in Japan, Takeda completed an NDA filing with the Japanese regulatory authority for cabozantinib in the treatment of patients with advanced RCC during the quarter. And we look forward to supporting our partner throughout the regulatory process.

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

--------------------------------------------------------------------------------

Patrick J. Haley, Exelixis, Inc. - SVP of Commercial [7]

--------------------------------------------------------------------------------

Thank you, Gisela. I am very pleased to discuss in detail with you today the commercial performance of CABOMETYX in the second quarter. CABOMETYX demand grew by 26% in Q2 2019 relative to Q2 2018 and grew sequentially by 9% in Q2 2019 relative to Q1 2019.

Both RCC and HCC demand grew in Q2 with the majority of the growth coming from RCC. Additionally, the prescriber base grew by 45% year-over-year for Q2 and by 8% in Q2 relative to Q1. This growth was driven by new community prescribers for both RCC and HCC as well as new academic prescribers within HCC.

We are pleased that CABOMETYX continues to be the #1 prescribed TKI in the RCC market. The performance of CABOMETYX remained strong despite the recent first-line approvals of various immune checkpoint inhibitor or ICI combinations.

According to BrandImpact, CABOMETYX second-line RCC market share increased as more patients progress on ICI combination therapy in the frontline setting. Also, according to BrandImpact, CABOMETYX continued to capture the vast majority of patients who progress on nivo/ipi. The number of second-line patients who have progressed on the combination of nivo/ipi increased again in Q2, and we expect this gradual trend to continue in the coming quarters as this combination regimen now has been approved for over 15 months.

Based on data from BrandImpact and other sources, we are starting to see divergent trends in regards to the utilization of new PD-1 TKI combinations in Q2. The uptake of first-line pembro/axi appears rapid and is predominantly coming at the expense of nivo/ipi in the community segment.

The avelumab-axitinib combo appears to be getting very little traction in the marketplace. Sunitinib and pazopanib are losing market share in terms of TRx, as axitinib share increases. We continue to be encouraged that CABOMETYX TRx grew by 6% in Q2 and maintained the leading TKI market share of 34%, while the other TKIs lost ground to axitinib. Internal market research indicates that CABOMETYX first-line market share continued to remain stable in Q2.

CABOMETYX is well positioned to be the treatment of choice for patients who progress on nivo/ipi or pembro/axi. Market research continues to point to CABOMETYX remaining the agent of choice in the second-line setting after any ICI combination in both the academic and community settings, which we believe is largely due to the fact that it's the only TKI with a strong overall survival benefit per the label in the second-line population.

We are pleased with the HCC launch in business, which is in line with our expectations. Demand continues to grow driven by increasing awareness and favorable physician perception of CABOMETYX efficacy data in the CELESTIAL trial. In Q2, HCC continued to account for approximately 5% of the growing CABOMETYX business. As we've long stated, HCC is a market that will need to be built over time as new therapies become available for these patients.

As many of you know, the CheckMate 459 frontline nivolumab versus sorafenib trial run by Bristol-Myers Squibb was not positive, and this result likely delays the potential introduction of ICI therapies into the first-line HCC setting. Future expansion of the HCC market will likely be driven by combination therapies being evaluated in the first-line setting, pending positive data and regulatory approvals in the coming years.

There are many areas of significant unmet medical need in solid tumor oncology that represents potential future commercial opportunities for CABOMETYX. With our current ongoing pivotal trials in first-line RCC, first-line HCC and refractory DTC, we remain optimistic, pending positive data and regulatory approvals about the potential of cabozantinib, both as a single agent and in combination with immune checkpoint inhibitors to generate revenues and drive Exelixis forward.

Furthermore, prostate cancer represents a significant commercial opportunity as novel hormonal therapies move up into the castration sensitive setting and leave a void in the castration-resistant setting. Similarly, non-small cell lung cancer patients who have progressed on an ICI-containing regimen also need better options to control their disease.

As Gisela mentioned, we're excited to see the expansion of a lung and prostate tumor cohorts in the COSMIC-021 trial. The market research our team has conducted in both lung and prostate cancer indicates that these malignancies have the potential to be significant future commercial opportunities for cabo.

We are pleased with the results of Q2 and strongly believe that many more eligible patients could benefit from CABOMETYX. CABOMETYX remains 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 and progresses.

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

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

--------------------------------------------------------------------------------

Michael M. Morrissey, Exelixis, Inc. - CEO, President & Director [8]

--------------------------------------------------------------------------------

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

Notably, we continued to see strong revenue growth in Q2, both quarter-over-quarter and year-over-year, due to the strength of the CABOMETYX business and our ex U.S. deals with Ipsen and Takeda. It's notable that the cabozantinib franchise achieved more than $250 million in global net product revenue for the first time in 2Q '19.

With this momentum, Exelixis provides a compelling opportunity for potential long-term growth as we continue to invest in R&D with future additional cabozantinib label enabling trials and potential new product candidates.

And I want to thank everyone in Exelixis for their dedication and commitment as we navigate the opportunities and challenges that lie ahead. The entire team has a sense of urgency and focus to make 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.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Great. Congratulations on kind of building the cabo franchise into a blockbuster drug. So in terms of HCC, so P.J. you kind of talk about the various setbacks of the ICI trials, notably KEYNOTE-240 and CheckMate 459. Just curious about how has that dynamic changed the dialogue between Exelixis sales rep -- sales reps and also the treating physician? And also, do you see any sort of changing in prescribing patterns, so physicians becoming more selective in their use of checkpoint inhibitors and HCC?

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Andy, thanks for the question. I'll try to take both of those, one at a time. As you mentioned, in addition to the KEYNOTE-240 trial being negative recently, it was announced that the frontline 459 trial of nivo versus sorafenib was not positive and those results we'll see at ESMO. So I think, with regards to what we're seeing and hearing in the marketplace that data not being published yet, I think it's still kind of early days to speculate on what we're seeing there. Every, I think, malignancy is different with regards to kind of perception of ICIs to begin with. And I think, HCC will continue to evolve and potentially be built as these agents over the long term, as we mentioned, move into the frontline in combination therapy. So I think we'll continue to see how that evolves as we see the data at ESMO. With regards with cabo, we're seeing strong performance in our labeled indication of second-line plus setting and that's really being driven by a strong efficacy data and the overall survival benefit that physicians are seeing in the data. From CELESTIAL, we're seeing awareness increase. That's really driving our business and we're excited about the launch and look forward to the continued momentum there.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Great. And so kind of moving back to the basket 021 study, in terms of the expansion cohorts in non-small cell lung cancer. Just to clarify, are you both looking at ICI refractory and also relapse patients? Or just looking at the relapse patients, so basically they have, at least, a partial response or a complete response.

--------------------------------------------------------------------------------

Gisela M. Schwab, Exelixis, Inc. - President of Product Development & Medical Affairs and Chief Medical Officer [5]

--------------------------------------------------------------------------------

Yes. This is Gisela. Thank you for the question. We were including both in the exploratory and expansion cohort, and are certainly collecting the data that you alluded to with respect to prior response or not to a checkpoint inhibitor containing regimen and are assessing the data, so stay tuned. We'll look forward to reporting the data at the appropriate time at an upcoming conference to be determined still.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Okay. So final question. From a policy perspective, there has been some movements in Washington regarding the Medicare Part D reimbursement. I understand, it's a subject that's subject to very substantial changes over time. But could you help us understand the potential impact as we work out probably different outcomes or various scenarios?

--------------------------------------------------------------------------------

Christopher J. Senner, Exelixis, Inc. - Executive VP & CFO [7]

--------------------------------------------------------------------------------

So Andy, it's Chris. So I guess just starting from the beginning here. I mean we've been tracking in -- what the developments in Congress and also the in this -- within the administration pretty closely. There are a lot of different proposals out there. A lot of moving pieces and not wise for me to speculate about what the outcome would be at this point or what could become law. But I would say that is -- from a Medicare perspective, about 30% to 40% of our current business is in the Medicare Part D segment.

--------------------------------------------------------------------------------

Operator [8]

--------------------------------------------------------------------------------

And our next question is from Michael Schmidt from Guggenheim.

--------------------------------------------------------------------------------

Michael Werner Schmidt, Guggenheim Securities, LLC, Research Division - Senior Analyst & Senior MD [9]

--------------------------------------------------------------------------------

Congrats on the progress. I just had a follow-up on the market dynamics in kidney cancer. P.J., you mentioned that you're still seeing basically the majority -- the vast majority of patients coming off of Opdivo-Yervoy going on to cabo upon progression. I was just wondering, if it would be fair to assume a similar dynamic. Once the KEYTRUDA, the pembro/axi combo gains more share in the frontline setting, especially when you may be considering the PFS is a little bit longer there than for the I/O combo for...

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Yes. Michael, thanks for the question. I'm happy to elaborate. I guess, as we mentioned, we are getting the vast majority of the patients, as you mentioned, excuse me, coming off ICI combination certainly nivo would be in the second-line setting and that's driving our continued growth in market share there. With regards to the dynamic of the patients, we think it's still the majority of patients who are on nivo/ipi now or who have received it, I should say, since launch and yet to progress. So we view that sort of second-line segment of the market in terms of ICI pretreated patients as continuing to grow. With regards to pembro/axi coming into the marketplace, I think, we're really expecting more of the same, without sort of going into the weeds on PFS or treatment-free survival that type of thing.

I think what we're hearing in the marketplace then from KOLs and advisory boards is that we'll continue to be the second-line treatment of choice regardless of whether they've received PD1 TKI or nivo/ipi in the first-line. So we just kind of expect that dynamic to continue to play out and we've seen it now as I kind of mentioned for about 15 months, and I think it will really just be more of the same with both of the regimens -- really all 3 of the regimens, now approved in the first-line. And I think what we expect is that's being driven by the totality of the cabo data and significantly, the overall survival benefit that we demonstrate in the second-line.

--------------------------------------------------------------------------------

Michael Werner Schmidt, Guggenheim Securities, LLC, Research Division - Senior Analyst & Senior MD [11]

--------------------------------------------------------------------------------

Great. And then maybe one for Gisela. Obviously, great to see the continued expansion of the COSMIC-021 study. Just wondering, maybe bigger picture-wise. How do you think about the potential development path forward for cabo and atezo specifically in lung and prostate cancers, for example? What would you say are potential benchmarks of success here to advance those into pivotal trial studies?

--------------------------------------------------------------------------------

Gisela M. Schwab, Exelixis, Inc. - President of Product Development & Medical Affairs and Chief Medical Officer [12]

--------------------------------------------------------------------------------

Yes. Thanks for the question. We certainly are encouraged by the signs of activity in the initial cohorts, both in the CRPC cohort and the non-small cell lung cancer cohort, and patients who have received prior ICI and chemotherapy. I think the cohort expansions will allow us to further evaluate activity in this setting. And yes, we're certainly excited about thinking about development path into future studies, but it's a little bit too early to speak to that at this current time.

--------------------------------------------------------------------------------

Michael Werner Schmidt, Guggenheim Securities, LLC, Research Division - Senior Analyst & Senior MD [13]

--------------------------------------------------------------------------------

Okay. Great. And maybe one last one on the Aurigene collaboration. Just wondering if you could comment some more on the, I think there are 3 pre-existing programs that you mentioned, if you could comment a little bit more about what area that is. And then maybe how far along those are in development?

--------------------------------------------------------------------------------

Peter Lamb, Exelixis, Inc. - Executive VP of Scientific Strategy & Chief Scientific Officer [14]

--------------------------------------------------------------------------------

Yes, this is Peter. I can comment generally about that. Yes, you're correct. The entire deal encompasses 6 programs, of which 3 programs are pre-existing Aurigene programs. And then as I commented, there'll be 3 new programs which will begin around mutually agreed targets. For the pre-existing programs, in terms of their status they're either in pre-clinical development or what I would call late lead optimization right now. I think beyond that, I'm not going to give specific guidance about when or if they might kind of advance into the clinic or on specifically what those targets are and I think consistent with the way we've discussed our internal programs, but for competitive reasons at this point, we're not specifying what the targets are.

I think as I commented, one of the advantages of this collaboration to us is the complementarity with our internal discovery group. I think some of the experience already in-house in some of the areas I highlighted, like covalent inhibitors and induced protein degradation, just broadens the spectrum of kind of interesting targets that we can address as well as just giving additional firepower on the chemistry and biology side.

--------------------------------------------------------------------------------

Operator [15]

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Kennen B. MacKay, RBC Capital Markets, LLC, Research Division - Co-Head of Biotechnology Research [16]

--------------------------------------------------------------------------------

Congrats on the quarter. Maybe a quick one for Mike or Gisela. Just thinking about the pace -- the baseline patient characteristics for CheckMate 9ER. And think about how that compares to the recent avelumab plus axi trial or the pembro plus axi trial, how should we think about the control arm sort of potentially performing in CheckMate 9ER versus those trials? Is this something where the PFS event rate accumulation would maybe look more like the control arm in the avelumab/axi trial or the pembro/axi trial, obviously, some dramatic differences there.

--------------------------------------------------------------------------------

Gisela M. Schwab, Exelixis, Inc. - President of Product Development & Medical Affairs and Chief Medical Officer [17]

--------------------------------------------------------------------------------

Yes. I think it's always difficult to compare between independently performed trials, because as you said, patient populations vary a little bit. That said though, in CheckMate 9ER all risk groups of patients where RCC are included per the IMDC criteria. And obviously, I can't go into great detail here. We're still looking forward to results in early 2020. And so we'll see the data at that point and can describe it in more detail.

--------------------------------------------------------------------------------

Kennen B. MacKay, RBC Capital Markets, LLC, Research Division - Co-Head of Biotechnology Research [18]

--------------------------------------------------------------------------------

Okay. Got you, Gisela. And then maybe another one for you, just wondering if you could help us understand what the efficacy bar was or range was or the requirement to sort of step up from the 30 to 50 patient expansions you mentioned in CRPC and non-small cell lung cancer of COSMIC-021?

--------------------------------------------------------------------------------

Gisela M. Schwab, Exelixis, Inc. - President of Product Development & Medical Affairs and Chief Medical Officer [19]

--------------------------------------------------------------------------------

Sure. So in the exploratory expansion cohorts and the trial, the objective -- the primary objective is to assess preliminary activity and we're doing so evaluating objective response rate per traditional RECIST criteria, RECIST 1.1. The study oversight committee has flexibility to expand in cohorts, based upon activity profile and the safety profile observed in a given cohort and placing that in context what is known, in general, in the patient population. And so that's how decisions are being made in a relatively flexible way for expansion of cohorts. So I can't speak to the numeric numbers of objective responses in an ongoing trial. But I think that sort of paints the picture.

--------------------------------------------------------------------------------

Kennen B. MacKay, RBC Capital Markets, LLC, Research Division - Co-Head of Biotechnology Research [20]

--------------------------------------------------------------------------------

Got you. Chris, I actually don't have my usual inventory housekeeping questions for you this time around. I just -- I wanted to complement you on your slides and mention that I love Slide 9 of all the numbers impacting cabo's growth, you're really making my life easy.

--------------------------------------------------------------------------------

Christopher J. Senner, Exelixis, Inc. - Executive VP & CFO [21]

--------------------------------------------------------------------------------

We try hard.

--------------------------------------------------------------------------------

Operator [22]

--------------------------------------------------------------------------------

Our next question is from Yaron Werber from Cowen.

--------------------------------------------------------------------------------

Yaron Benjamin Werber, Cowen and Company, LLC, Research Division - MD & Senior Biotechnology Analyst [23]

--------------------------------------------------------------------------------

Congrats on a good showing despite competition. So I have a couple of questions. And one is, just a little bit of understanding. So it sounds like the way you're communicating the HCC portion, if I heard correctly, is approximately 5% of the total sales this quarter or about $9 million, but last quarter it was about 50% of the growth or $2 million to $3 million. So I'm trying to triangulate does those numbers sort of jive with what you're seeing in the marketplace so far?

--------------------------------------------------------------------------------

Patrick J. Haley, Exelixis, Inc. - SVP of Commercial [24]

--------------------------------------------------------------------------------

Yes. Thanks for the questions, Yaron. This is P.J. With regards to the 5% we're thinking about in terms of really overall demand or volume -- obviously can track pretty closely to revenue there. We have the 9% growth in demand this quarter. We continue to be pleased with the reception both in RCC and HCC, really driven by the overall survival benefit. In both these tumors, we are not breaking out -- to answer your question specific growth rates in RCC and HCC this quarter, but we are seeing the majority of the growth coming from RCC, which we're certainly pleased with as you mentioned in the face of a lot of competition, 3 ICI combinations. So seeing that growth in RCC is encouraging and seeing continued growth in the early days of the launch in HCC is as well .

--------------------------------------------------------------------------------

Yaron Benjamin Werber, Cowen and Company, LLC, Research Division - MD & Senior Biotechnology Analyst [25]

--------------------------------------------------------------------------------

And are you seeing net market growth right now in RCC? Or is it that you're retaining share and there's competition among the other regimens?

--------------------------------------------------------------------------------

Patrick J. Haley, Exelixis, Inc. - SVP of Commercial [26]

--------------------------------------------------------------------------------

Well, I think -- the way we've always talked about predominantly the RCC market is it's a pretty mature market. Now there's over a dozen regimens approved for RCC. So the market overall is stable except for the sense that with, obviously, combinations being approved, there's more drugs being used now per patient. So the way I'd really frame it though, is we see a stable business in the first-line in the face of the new competition and then we really see continued growth in the second-line and anticipate that patient population of ICI-experienced patients continuing to grow as those patient dynamics flow for the coming quarters. And as I mentioned previously, the totality of our data and the overall survival position in cabo, [well] from all the feedback we get to continue to be the leading agent in that population and getting the vast majority of those patients.

--------------------------------------------------------------------------------

Yaron Benjamin Werber, Cowen and Company, LLC, Research Division - MD & Senior Biotechnology Analyst [27]

--------------------------------------------------------------------------------

Okay. And then question on XL092, so the ongoing study specifically selecting for renal carcinoma, non-small cell and then the malignant solid neoplasms as well. So in that third bucket, are you -- what are you expecting? Are you hoping to get essentially more prostate patients into that bucket? And sort of have a fast follow-on strategy to the original cabo design in that segment? I'm trying to get a sense of your overall trial design for 092.

--------------------------------------------------------------------------------

Gisela M. Schwab, Exelixis, Inc. - President of Product Development & Medical Affairs and Chief Medical Officer [28]

--------------------------------------------------------------------------------

Sure. Sure. I'd be happy to describe it more in detail. So the study is a dose escalation study, cohort dose escalation study in a 3-plus-3 design, where patients with advanced malignancies can be included as we evaluate rising doses of 092. And then we have added to the study expansion cohorts that will begin once the recommended Phase II dose or the maximum tolerated dose has been identified and that allows us to look at initial activity of single agent 092, and currently in non-small cell lung cancer and CRPC, so that's the basic setup.

--------------------------------------------------------------------------------

Operator [29]

--------------------------------------------------------------------------------

Our next question is from Jennifer Shen from Needham.

--------------------------------------------------------------------------------

Jennifer Shen, Needham & Company, LLC, Research Division - Research Analyst [30]

--------------------------------------------------------------------------------

This is Chad's associate. I have questions about the different distribution between the community versus academic physicians in terms of the percentage of prescriber for RCC, and perhaps and kind of give us some color on the HCC growth in terms of TRx in the community, if you have that number.

--------------------------------------------------------------------------------

Patrick J. Haley, Exelixis, Inc. - SVP of Commercial [31]

--------------------------------------------------------------------------------

Jennifer, this is P.J. Happy to answer, and thanks for the questions. In RCC, I think what we've seen and talked about is over time, as I have mentioned, it's a really mature market. So certainly, it's heavy community utilization overall, not really specifically sharing exact numbers, but I think -- I'd call it in that 70% to 80% range roughly in that marketplace, which we're very pleased with, because we've seen great traction in the community there over time. And then subsequently, the -- I think the progress we've made in RCC and kind of the brand perception has really helped us then in the HCC launch as we now -- physicians have responded really favorably to seeing really the overall survival benefit in both tumors as they think about CABOMETYX for their patients. With regards to TRx in HCC, the IMS doesn't break out that the data. So what I would say though, is that we're seeing growth really across the board. In terms of our demand in HCC, it's early days in launch and we are seeing continued adoption and new prescriber adoption in both academia and the community as we continue to build on the momentum here.

--------------------------------------------------------------------------------

Operator [32]

--------------------------------------------------------------------------------

Our next question is from Peter Lawson from SunTrust.

--------------------------------------------------------------------------------

Peter Richard Lawson, SunTrust Robinson Humphrey, Inc., Research Division - Director [33]

--------------------------------------------------------------------------------

This is Peter. Chris, just on -- as we're thinking about our Q3 numbers. Is there anything in like either last year or this quarter we should be thinking about that could be setting up difficult comps for you for cabo?

--------------------------------------------------------------------------------

Christopher J. Senner, Exelixis, Inc. - Executive VP & CFO [34]

--------------------------------------------------------------------------------

Peter, it's Chris. I wouldn't say there's anything specific that's is in Q3 -- that happened in Q3 last year compared to Q2 last year that would happen this year. I mean, from a business perspective. Q3 last year, I think, we had some milestones. But we're are not providing guidance on milestones at this point in time. So yes, I don't think there's anything unique to Q3 versus Q2.

--------------------------------------------------------------------------------

Peter Richard Lawson, SunTrust Robinson Humphrey, Inc., Research Division - Director [35]

--------------------------------------------------------------------------------

Good. And then are seeing kind of, I guess, off-label use of cabo with PD-1? If in -- any comments you can make around that? And then the proportion of post-I/O RCC patients that you're seeing. Is that still around 90%?

--------------------------------------------------------------------------------

Patrick J. Haley, Exelixis, Inc. - SVP of Commercial [36]

--------------------------------------------------------------------------------

Peter, this is P.J. Wouldn't want to comment or speculate on any off-label utilization of cabo. I don't think that's appropriate. What we are seeing is really the vast majority of patients in that setting in terms of post-ICI combinations. Getting CABOMETYX, we were very pleased with that and as I mentioned, it's kind of driven by the totality of the data and the strong perceptions of efficacy in overall survival in the marketplace. And all the indicators we have is that, that will continue and that sort of segment in the marketplace will continue to gradually grow in the coming quarters.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Got you. And then what's going to be, do you think, the effect on the duration of treatment for cabo if it's following I/O plus TKI?

--------------------------------------------------------------------------------

Patrick J. Haley, Exelixis, Inc. - SVP of Commercial [38]

--------------------------------------------------------------------------------

I think -- this is P.J. again. Peter, I don't think we'd want to speculate on the potential impact of duration, it's obviously very early days too in kind of how this market dynamic is evolving in terms of sequencing. We're pleased that we have the traction and the momentum we have, but I think it's too early to comment on any duration.

--------------------------------------------------------------------------------

Operator [39]

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

George Farmer, BMO Capital Markets Equity Research - Analyst [40]

--------------------------------------------------------------------------------

I'd like to talk about the data on Slide 30 again, regarding the share trend of scripts for all the various TKIs. So it looks like that the ICI-TKI combo is gaining steam, really kind of at the expense of pazopanib and sunitinib, but sunitinib cable looks steady. But if you're second-line share is stable then shouldn't you be losing something on the frontline, is that kind of a trend that you think is going to continue?

--------------------------------------------------------------------------------

Patrick J. Haley, Exelixis, Inc. - SVP of Commercial [41]

--------------------------------------------------------------------------------

Yes, George, this is P.J. I'll be happy to provide some context on that. So I think, I would be -- I guess, caution against sort of reading into this data sort of that sort of way and I'll give you few caveats as to why. So this overall prescription data, first of all, so for all the drugs is comprised of any indications of utilization. It's also just the TKI market and not the other agents. So there's third-line components, there's other things. So I think it's a very good anchor for us as we look at competition and benchmark ourselves to it relative to the other TKIs. But we have a variety of sources we use and pretty sophisticated analytics behind all of this.

So I wouldn't interpret it that way. But as I did mention, the totality of what we're seeing is pem/axi taking share primarily from nivo/ipi, which really in a sense is encouraging to us as we think about the potential for the cabo/nivo trial in 9ER because clearly PD-1 and TKIs is being received well in the marketplace and particularly in the community setting.

--------------------------------------------------------------------------------

George Farmer, BMO Capital Markets Equity Research - Analyst [42]

--------------------------------------------------------------------------------

Okay. That makes sense. And then I have a question about the Aurigene collaboration. You mentioned that was it around 2 different types of compounds, covalent inhibitors and protein degraders. Which one are you guys focused on? Do you like -- do you prefer one over the other? And is your deal around any one particular class weighted over the other?

--------------------------------------------------------------------------------

Peter Lamb, Exelixis, Inc. - Executive VP of Scientific Strategy & Chief Scientific Officer [43]

--------------------------------------------------------------------------------

Yes. This is Peter. I wouldn't characterize it like that. I kind of highlighted those as technologies that they have that are complementary to ours, and I think they both have their attractions. But I also shouldn't necessarily think that everything we do with them might fall into 1 of those 2 classes.

So kind of agnostic. It's all driven by the data as the programs advance as to which way we go. And -- this is going to be a collaboration where we're very much involved and we're going to be applying the same kind of standards and quality metrics to what Aurigene is doing as we do to our own internal programs.

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

All right. So do you think we could see Exelixis someday developing a protein degrader, is that possible?

--------------------------------------------------------------------------------

Peter Lamb, Exelixis, Inc. - Executive VP of Scientific Strategy & Chief Scientific Officer [45]

--------------------------------------------------------------------------------

It's possible. Let me leave it at that. But I'm not guaranteeing it.

--------------------------------------------------------------------------------

Operator [46]

--------------------------------------------------------------------------------

Our next question is from Stephen Willey from Stifel.

--------------------------------------------------------------------------------

Stephen Douglas Willey, Stifel, Nicolaus & Company, Incorporated, Research Division - Director [47]

--------------------------------------------------------------------------------

Congratulations on the quarter. Just a quick question on the recent prostate expansion. I guess, just looking at the competitive landscape there, just kind of curious as to how a decision to move forward into a potential registrational trial will be informed not only by the data that's collected out of the now-recently expanded cohort, but also based, I guess, upon what Roche is currently doing in Phase III where I believe they have an atezo-enzalutamide combo in the refractory setting right now?

--------------------------------------------------------------------------------

Gisela M. Schwab, Exelixis, Inc. - President of Product Development & Medical Affairs and Chief Medical Officer [48]

--------------------------------------------------------------------------------

Yes. I think it's a broad question, of course, of how the prostate cancer treatment landscape is evolving in a way. And I think I'd offer a couple of thoughts; one, being that based upon the activities seen and the efficacy seen in -- with various novel hormonal agents in the castration sensitive state of the disease, a lot of therapies are moving up in the line of -- in the treatment of prostate cancer. Likewise, for patients with high-volume disease, more patients see docetaxel used in the hormone sensitive stage based upon the CHAARTED study. So overall, the treatments are being utilized earlier.

In terms of the Roche's atezolizumab-enzalutimide study. I guess I'd refer you to Roche to understand where that stands because, obviously, we won't make comments on their studies and proprietary information. So I think, I'd leave it there. I think in terms of our own data, as I mentioned earlier on the call, we are very encouraged by the observations that we've made in the initial expansion cohort, in particular, in patient population with measurable disease and so we are expanding upon that as we involve more patients.

--------------------------------------------------------------------------------

Stephen Douglas Willey, Stifel, Nicolaus & Company, Incorporated, Research Division - Director [49]

--------------------------------------------------------------------------------

Okay. And then maybe just to follow up on COSMIC. I know bladder was one of the cohorts that was prespecified as one of the initial tumor types of interest. And the NIH data would suggest that you have some pretty interesting synergy in combination with PD-1 inhibition. And I think Mike, you previously talked a little bit about how the dynamic competitive landscape in bladder maybe caused you a little bit of hesitation with respect to deciding to move forward there.

But I guess, how do you think about that dynamic landscape relative to what's becoming probably maybe an even more competitive landscape in lung. Certainly some of the changes that were just mentioned occurring in prostate, you've got commercial infrastructure in place already on the GU side, just kind of curious as to if thoughts of revisiting bladder have changed at all?

--------------------------------------------------------------------------------

Michael M. Morrissey, Exelixis, Inc. - CEO, President & Director [50]

--------------------------------------------------------------------------------

Yes. Steve, thanks for the question. Yes, I would frame it high-level in the context of data, commercial opportunity and competition. And really understand especially with the cohorts, the widening cohorts and the deepening cohorts within 021, where we have room to maneuver and where we think we can win, and potentially win big based upon those 3 components of the analysis. So there's lots of work that goes into that, there's -- it's not a simple answer.

But the algebra that we have to do to make sure that we're making the right investments in a very thoughtful and pragmatic fashion, really include those different components. So -- but I think what you're seeing is that we're moving forward at least in terms of expanding 021 in a way that we think makes sense based upon those different components. And I think you'll see that continue over time, data pending, right?

So a fair question about bladder. Lots going on there, still waiting for frontline I/O or PD-1 chemo data. Certainly some of the ADCs look really encouraging in the post-I/O setting. So that space is certainly not getting less complicated as well. So I think, we're doing the right work clinically, commercially and from a CI point of view or IC point of view, and looking to make sure that we, again, invest wisely and thoughtfully based upon the totality of data.

--------------------------------------------------------------------------------

Operator [51]

--------------------------------------------------------------------------------

Our next question is from Paul Choi from Goldman Sachs.

--------------------------------------------------------------------------------

Kyuwon Choi, Goldman Sachs Group Inc., Research Division - Equity Analyst [52]

--------------------------------------------------------------------------------

Let me add my congratulations as well on the consistent execution. My first question is for P.J. on the commercial side. Can you maybe remind us what portion of your commercial side business, your nongovernment business is contracted for? And if anything is potentially up for renewal or renegotiation in the near term? And then on the gross to net side, as you think about potential -- the growing cabo business and potential expansion next year with a positive CheckMate 9ER trial. How are you thinking about that, maybe changing over the intermediate term?

--------------------------------------------------------------------------------

Patrick J. Haley, Exelixis, Inc. - SVP of Commercial [53]

--------------------------------------------------------------------------------

Yes. Paul, this is P.J. With regards to sort of our contracting and payer strategy. We've certainly never spoken about that publicly and don't think it's really appropriate to do so for a variety of reasons, not the least of which is just the competitor -- competitive nature of the industry. So I wouldn't want to speculate on that.

--------------------------------------------------------------------------------

Christopher J. Senner, Exelixis, Inc. - Executive VP & CFO [54]

--------------------------------------------------------------------------------

And Paul, it's Chris. So on the gross to net, for this year, I commented last quarter that gross net would be between 19 -- we're projecting it to be between 19% and 20%. And I wouldn't want to project out next year gross to net, since we haven't even given revenue guidance at this point in time. So that's it, i mean that's the answer that I can give at this point in time for the gross to net for next year.

--------------------------------------------------------------------------------

Kyuwon Choi, Goldman Sachs Group Inc., Research Division - Equity Analyst [55]

--------------------------------------------------------------------------------

Okay. And then maybe one for Peter. Peter, can you maybe go a little bit more into detail about what you found attractive with regards to Aurigene's capabilities? As I am looking at their programs, it seems like they have some well-identified targets that are -- will be somewhat familiar to investor, so what did you see as points of differentiation there? And then on a related note, can you maybe tell us for the 3 identified programs and the 6 programs in total, what kind of potential bio bucks might be involved in terms of total consideration?

--------------------------------------------------------------------------------

Peter Lamb, Exelixis, Inc. - Executive VP of Scientific Strategy & Chief Scientific Officer [56]

--------------------------------------------------------------------------------

Yes. So thanks for the question. So yes, I think the things that we found or I found compelling about Aurigene really is they have, I think, a very good track record in terms of discovery collaborations. They've advanced 14 partnered programs into clinical trials and there are 10 ongoing U.S. clinical trials. They certainly have critical mass on the discovery side in both biology and chemistry, and also, well-established preclinical development capabilities.

Obviously, we liked the targets that they were working on in terms of the kind of pre-existing programs. They kind of fell into the category of being interesting, well validated at least preclinically, but still certainly with kind of room to run and differentiate on a -- from a clinical point of view. I've mentioned a couple of times now, a couple of approaches that they've applied historically that we certainly don't have experience in respect to the covalent, and innovation and protein degradation. So that also was a feature.

From a financial point of view, as I always say, this falls into the same bucket philosophically as our previous collaborations, kind of modest upfront. We're paying $10 million upfront for the 3 preidentified programs and then for each de novo program will be another $2.5 million upfront payments. Certainly beyond that, we're providing some research funding. There's an option exercise fee and then some of the usual clinical regulatory and commercial milestones. I (inaudible) step through them all, but for anyone who's interested I would point you to our 10-Q filings for all the information.

--------------------------------------------------------------------------------

Operator [57]

--------------------------------------------------------------------------------

(Operator Instructions) And our next question is from Jeff Hung from Morgan Stanley.

--------------------------------------------------------------------------------

Jeff Hung, Morgan Stanley, Research Division - Equity Analyst [58]

--------------------------------------------------------------------------------

Last quarter inventory was on the lower end of the historical range. Can you provide any color on what led to the slight decrease in wholesaler inventory? And how should we think about the appropriate level for inventory weeks on hand as the year continues?

--------------------------------------------------------------------------------

Christopher J. Senner, Exelixis, Inc. - Executive VP & CFO [59]

--------------------------------------------------------------------------------

Yes, Jeff. It's Chris. So yes, we -- our inventory level, I mean, from an absolute basis was essentially flat. From weeks on hand perspective, it was down as the math works with the volume increasing the same -- virtually the same. Absolute inventory number here, weeks on hand comes down. So it's in that 2.5 range right now. We try to ensure that inventory is in that 2.5- to 3-week range, that's all based on demand that the wholesalers think that's coming through their channel. Beyond that, there is no other real aspects to wholesale inventories that's -- that is relevant at this point.

--------------------------------------------------------------------------------

Jeff Hung, Morgan Stanley, Research Division - Equity Analyst [60]

--------------------------------------------------------------------------------

Okay. Great. And then you've made strides establishing agreements such as with Iconic or Aurigene to expand your pipeline beyond cabo. So given the amount of cash that you have, do you think that there is still need to strike additional partnerships or deals? And if so, has the profile of the potential outside programs such as stage of development changed as you've made the recent agreements?

--------------------------------------------------------------------------------

Michael M. Morrissey, Exelixis, Inc. - CEO, President & Director [61]

--------------------------------------------------------------------------------

Yes. Jeff, it's Mike. Thanks for the question. I think our strategy here and certainly our communication on the topic has been pretty consistent. So we have been looking to rebuild our pipeline in terms of generating early-stage, mid-stage, late-stage assets that give us a diversified portfolio of potential products. So we've done and I think over the last several quarters -- I think a pretty good job of developing collaborations that allow us to build those early-stage assets.

I think the total right now in terms of shots on goal is, what, 15 or so. If you look at the 4 collaborations combined plus what we've got internally. So that's a good start there. And obviously, they're all not going to make it and we expect some attrition and normal kinds of things there. But certainly, we've got a strong stable of really interesting targets and pathways and modalities now to be able to pursue early-stage.

As we've said, consistently over the last 6, 9 months is that we're looking for mid- to late-stage to even potentially commercial assets, and that search continues with the goal to be able to again, diversify our late-stage product portfolio as well. So those are more involved, obviously. Certainly, much more diligence is involved and certainly, much more expensive. But we're looking to, again, do the right deal at the right time for the right value across those later stage components. So as we get those done, stay tuned, we'll talk in more detail.

--------------------------------------------------------------------------------

Jeff Hung, Morgan Stanley, Research Division - Equity Analyst [62]

--------------------------------------------------------------------------------

Okay. And then one quick clarification on the Aurigene collaboration. Are the option payments relevant for all 6 projects or only for the 3 new discovery programs?

--------------------------------------------------------------------------------

Peter Lamb, Exelixis, Inc. - Executive VP of Scientific Strategy & Chief Scientific Officer [63]

--------------------------------------------------------------------------------

I know that there'll be option exercise payments for all 6 programs, if they get that far.

--------------------------------------------------------------------------------

Operator [64]

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Susan Hubbard, Exelixis, Inc. - EVP of Public Affairs & IR [65]

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Operator [66]

--------------------------------------------------------------------------------

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