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Exelixis Inc (EXEL) Q2 2019 Earnings Call Transcript

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Exelixis Inc (NASDAQ: EXEL)
Q2 2019 Earnings Call
Jul 31, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Exelixis Second 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.

Susan T. Hubbard -- Executive Vice President, Public Affairs and Investor Relations

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 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 driving these measures from our GAAP results. During the course of this presentation, we will be making forward-looking statements regarding future events and the future performance of the company. This includes statements about possible developments regarding discovery, product development, regulatory commercial financial and strategic matters.

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 cost associated with the discovery, product development, business development, and commercialization activities. Now with that, I will turn the call over to Mike.

Mike Morrissey -- President and CEO

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 PJ to review important components of our business.

Key highlights for Q2 2019 include first nets 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 three different ICI based combinations in RCC. Second, our cabozantinib development program continues to move forward aggressively, as we advance for ongoing pivotal trials and highlight important progress in the prostate cancer and ICI refractory non-small cell lung cancer cohorts of the COSMIC 0.21 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, lots of parts 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 we 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 -- Executive Vice President

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, 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 wholesaler 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 include 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.

Our total cost and expenses for the second quarter of 2019 were $148.3 million compared to $130.9 million in the first quarter of 2019. R&D expense is a primary driver of the increase in total costs 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 our effective tax rate for the quarter was approximately 20.8% compared to $900,000 and 1% respectively for the comparable period in 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 exclude the impact of approximately $12 million of stock-based compensation expense and adjust 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 expect to be between $330 million and $350 million and includes non-cash expense related to stock-based compensation of approximately $25 million.

This updated guidance reflects the increase in expenses associated with the two recent business development transactions iconic and origin. Selling general and administrate expense is expected to be between $220 million and $240 million and includes non-cash 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 -- Executive Vice President, Scientific Strategy and Chief Scientific Officer

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 six programs, including three internally developed Aurigene programs that are either at preclinical development of lead optimization stage and three 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 therapeutic 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 have developed expertise in the optimization of covalent inhibitors and the novel approaches to induce 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 a biology and chemistry point of view.

With respect to our own internal discovery efforts, the build out 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 Exelixis compound rates that we retained from our original discovery group meaning that we now once again have a fully integrated discovery operation from identification through the preclinical development. With that, I'll turn the call over to Gisela.

Gisela M. Schwab -- President, Product Development and Medical Affairs and Chief Medical Officer

Thank you, Peter. I will focus today's development update on cabozantinib 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 1b study of cabozantinib in the atezolizumab. The study is accruing of patients actively across 20 expansion cohort and we are beginning to see encouraging early results and different tumor indications. As a reminder, the key objective of the expansion cohort is objective response rate or ORR for resist version 1.1. Notably, early data from the castration-resistant prostate cancer cohort or CRPC cohort in patients who have received one novel hormonal therapy and could have received probably [Indecipherable] in the hormone-sensitive stage has resulted in expansion of this cohort.

Additionally, our steady 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 the early evidence of activity seen among the first 30 patients enrolled. Additionally, we are adding 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 one prior novel hormonal therapy and could have received prior docetaxel for hormone-sensitive disease and the other for patients meeting these criteria and 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 two 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 one prior NHT and could received a prior docetaxel for hormone-sensitive disease. We are excited about the progress in the trial, but also working hard on advancing the product of intervention in late stage development that may include future Phase 3 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 the three pivotal Phase 3 studies and these Phase 3 studies are now actively enrolling patients globally.

As a reminder, these studies for cabozantinib include a single agent cabozantinib placebo-controlled Phase 3 trial and radioiodine refractory DTC patients, who have previously received VEGFR inhibitors, our COSMIC-311 trial. A phase 3 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 3 trial and 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 has been initiated.

COSMIC-313, this first trial using the approved nivolumab and ipilimumab combination as a comparator. And lastly, as reported previously, CheckMate 9ER the Phase 3 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 to 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 and the treatment of patients with advanced RCC during the quarter and we look forward to supporting our partners throughout the regulatory process. And with that, I will turn the call over to PJ.

P.J. Haley -- Senior Vice President, Commercial

Thank you, Gisela. I'm 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 number one prescribed TKI in the RCC market. The performance of CABOMETYX remains strong despite the recent first line approvals of various immune checkpoint inhibitor or ICI combinations. According to brand impact, CABOMETYX second line RCC market share increased as more patients progress on ICI combination therapy in the front line setting.

Also, according to brand impact, CABOMETYX continues to capture the vast majority of patients who progressed on nivo-ipi, the 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 brand impact and other resources, we are starting to see divergent trends in regards to the utilization of new PD1 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 maintain 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 continue 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 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 continue 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 and solid tumor oncology that represent potential future commercial opportunities for CABOMETYX.

With our current ongoing clinical 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 long 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 number one 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 will turn the call over back to Mike.

Mike Morrissey -- President and CEO

All right. Thanks, PJ, 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 continue 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 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.

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 developing 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

[Operator Instructions] Your first question comes from the line of Andy Hsieh from William Blair. Your line is now open.

Andy Hsieh -- William Blair -- Analyst

Great. Thanks for taking my questions and congratulations on kind of building the cabo franchise into a blockbuster drug. So in terms of HCC, so, Peter, you kind of talked about the various setbacks of the ICI trials notably KEYNOTE-240 and CheckMate 459. Just curious about how has that dynamic changed the dialog between Exelixis sales reps and also the treating physician. And also do you see any sort of changing in prescribing pattern, so physicians becoming more selective in their use of checkpoint inhibitors in HCC?

Peter Lamb -- Executive Vice President, Scientific Strategy and Chief Scientific Officer

Hi, 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 then those results. We'll see it has moved, so I think with regards to what we're seeing and hearing in the marketplace that data not been 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 a perception of ICI's to begin with. And I think the 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 as well.

With regards to Cabo, we're seeing strong performance in our labeled indication of second-line plus setting and that's really being driven by strong efficacy data in 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.

Andy Hsieh -- William Blair -- Analyst

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 we have at least a partial response or a complete response?

Gisela M. Schwab -- President, Product Development and Medical Affairs and Chief Medical Officer

Yeah. This is Gisela. Thank you for the question. We are including both in the exploratory expansion cohort and 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. The upcoming conference to be determined still.

Andy Hsieh -- William Blair -- Analyst

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

Christopher J. Senner -- Executive Vice President

So, Andy, it's Chris. So I guess just starting from the beginning here, I mean we've been tracking this in both -- the developments in Congress, and also within the administration pretty closely. There are a lot of different proposals out there, lot of moving pieces and not wise for me to speculate about what the outcome would be at this point or what it 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.

Andy Hsieh -- William Blair -- Analyst

Okay. Yeah, that's super helpful. Thank you very much for answering all my questions.

Gisela M. Schwab -- President, Product Development and Medical Affairs and Chief Medical Officer

Right Andy. Thank you.

Operator

Thank you. And our next question is from Michael Schmidt from Guggenheim. Your line is now open.

Michael Schmidt -- Guggenheim -- Analyst

Hi guys, congrats on the progress. And thanks for taking my questions. I just had a follow-up on the market dynamics in kidney cancer. PJ, you mentioned that you're still seeing basically the majority, the vast majority of patients coming off of [Indecipherable] going on to Cabo upon progression and I was just wondering if it would be fair to assume a similar dynamic once the Keytruda, the pembro-axi again some more share in the frontline setting, especially when you may be considering the PFS a little bit longer there for the IO combo?

P.J. Haley -- Senior Vice President, Commercial

Yeah, 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-ipi 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 still, the majority of patients who were on nivo-ipi now, who have received and 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 pre-treated patients is 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 leads on PFS or treatment free survival that type of thing. I think what we're hearing in the marketplace and from KOLs and advisory boards is that we'll continue to be the second-line treatment of choice, regardless of whether they receive PD-1 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 over the same with both of the regimen is really, all three 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 Schmidt -- Guggenheim -- Analyst

Great. Thanks. And then maybe one for Gisela, obviously great to see the continued expansion of the cost may go to one study. Just wondering maybe bigger picture wise, how do you think about the potential development path forward for cabo [Indecipherable] specifically in lung and prostate cancer, for example, what would you say are potential benchmarks success here to advance those into pivotal trial study?

Gisela M. Schwab -- President, Product Development and Medical Affairs and Chief Medical Officer

Yeah, 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 in patients who have received for ICI and chemotherapy. I think the cohort expansions will allow us to further evaluate activity in this switching and 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 Schmidt -- Guggenheim -- Analyst

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

Peter Lamb -- Executive Vice President, Scientific Strategy and Chief Scientific Officer

Yeah, this is Peter. I can comment generally about that, yes, you're correct. The entire deal encompasses six programs, of which three programs are preexisting Aurigene program and then as I commented, there'll be three new programs, which will begin around mutually agreed targets. So the pre-existing programs in terms of their status that we either in preclinical 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 specifically what those targets. 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 value of this collaboration to us is the complementarity with our internal discovery group. I think some of the experience Aurigene has 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.

Michael Schmidt -- Guggenheim -- Analyst

Okay. Thanks for taking my questions.

Gisela M. Schwab -- President, Product Development and Medical Affairs and Chief Medical Officer

Thank you, Michael.

Operator

Thank you. Our next question is from Kennen MacKay from RBC Capital Markets. Your line is now open.

Kennen MacKay -- RBC Capital Markets. -- Analyst

All right. Thanks for taking the question and congrats on the quarter. Maybe a quick one for Mike or Gisela. Just thinking about the -- the baseline patient characteristics for CheckMate 9ER and think about how that compares to the recent avelumab plus axi trial and the pembro plus axi trial, how should we think about the control, I'm 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 -- President, Product Development and Medical Affairs and Chief Medical Officer

Yeah. 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 our risk groups of patients with RCC are included per the IMDC criteria, and obviously you 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 MacKay -- RBC Capital Markets. -- Analyst

Okay. Got you. Thank 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 for the requirement to sort of step-up in the 30 to 50-patient expansions, you've mentioned in CRPC non-small cell lung cancer of COSMIC-021? Thanks.

Gisela M. Schwab -- President, Product Development and Medical Affairs and Chief Medical Officer

Sure. So, in the exploratory expansion cohorts in the trial with the objective, the primary objective is to assess preliminary activity and we're doing so by evaluating objective response rate curve traditional resist criteria, which is 1.1, the Study Oversight Committee has flexibility to expanding cohorts based upon activity profile and safety profile observed in a given cohort and they think that in context of 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 cohort. 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 MacKay -- RBC Capital Markets. -- Analyst

Got you. Thank you very much Gisela. And Chris, I actually don't have my usual inventory housekeeping questions for you. I do come around. I just wanted to complement you on your slides and mention that I love slide-9 of other members impacting growth, you're really making my life easy. Thanks so much.

Gisela M. Schwab -- President, Product Development and Medical Affairs and Chief Medical Officer

Our pleasure, Kennen.

Christopher J. Senner -- Executive Vice President

We try hard.

Operator

Thank you. Our next question is from Yaron Werber from Cowen. Your line is now open.

Yaron Werber -- Cowen -- Analyst

Hi, thank you and thanks for taking the question and congrats on the good showing despite competition. So I have a couple of question 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 in this quarter, or about 9 million, but last quarter was about 50% of the growth or 2 to 3 million. So I am trying to triangulate those numbers sort of jive with what you're seeing in the marketplace So far.

P.J. Haley -- Senior Vice President, Commercial

Yeah. Thanks for the question Yaron, this is PJ. With regards to the 5%, we're thinking about it in terms of really overall demand or volume, which 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're not breaking it 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, three 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 Werber -- Cowen -- Analyst

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

P.J. Haley -- Senior Vice President, Commercial

Well, I think the way we've always talked about predominantly the RCC market, 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 is 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, the overall survival positioning cabo wealth and all the feedback we get to continue to be the leading agent in that population and getting the vast majority of those patients.

Yaron Werber -- Cowen -- Analyst

Okay. And then question on XL092, so the ongoing studies 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 design in that segment and I'm trying to get a sense of your overall trial design for 092.

Gisela M. Schwab -- President, Product Development and Medical Affairs and Chief Medical Officer

Sure, I'd be happy to describe it in more detail. So it is a dose escalation study, cohort dose escalation study in the three plus three design, where patients with advanced malignancies can be included as we evaluate rising doses of 092 and then we have added to the steady expansion course, so begin once the recommended phase 2 dose or maximum tolerated dose has been again to fight and that allows us to look at initial activity of single agent 092 in currently in non-small cell lung cancer and in CRPC. So that's the basic set up.

Yaron Werber -- Cowen -- Analyst

Terrific. Thank you.

Gisela M. Schwab -- President, Product Development and Medical Affairs and Chief Medical Officer

Thanks, Yaron.

Operator

Thank you. Our next question is from Jennifer Shen from Needham. Your line is now open.

Jennifer Shen -- Needham

Hi, thank you for taking my question. This is -- 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 kind of give us some color on the HCC growth in terms of TRx in the community. If you have that number. Thank you so much.

P.J. Haley -- Senior Vice President, Commercial

Hi Jennifer. This is PJ, happy to answer and thanks for the question. In RCC, I think what we've seen and talked about is over time, as I've mentioned, it's really mature markets, so certainly it's heavy community utilization overall, not really specifically sharing exact numbers, but I think it's I'd call them 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, 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 regard to TRX in HCC, the IMS doesn't break out that data, so what I would say though is that we're seeing growth really across the board, in terms of our demand in HCC as its early days and launch, we're seeing continued adoption and new prescriber adoption in both academia and the community as we continue to build on the momentum here.

Jennifer Shen -- Needham

Thank you so much for your answer.

Operator

Thank you. Our next question is from Peter Lawson from SunTrust. Your line is now open.

Peter Lawson -- SunTrust -- Analyst

Okay, this is Peter. Chris, just on as we're thinking about the Q3 numbers. Is there anything either the last year or this quarter, we should be thinking about that could be setting up difficult comps for cover.

Christopher J. Senner -- Executive Vice President

Peter, it's Chris. I wouldn't say anything specific that is in Q3. Have 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 not -- we're not providing guidance on milestones at this point in time. So yeah, I don't think there is anything unique Q3 versus Q2.

Peter Lawson -- SunTrust -- Analyst

Got you. Thank you. And then are we seeing any kind of I guess off label use of cabo with PD1 if any comments you can make around that and then the proportion of post IO RCC patients you're seeing, is that still around 90% .

P.J. Haley -- Senior Vice President, Commercial

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

Peter Lawson -- SunTrust -- Analyst

Got you. Thank 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?

P.J. Haley -- Senior Vice President, Commercial

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

Peter Lawson -- SunTrust -- Analyst

Great. Okay. Thanks a bunch. I'll jump back into the queue.

Operator

Thank you. Our next question is from George Farmer from BMO Capital Markets. Your line is now open.

George Farmer -- BMO Capital Markets -- Analyst

Hi, thanks for taking my question. I'd like to talk about the data on slide 30 again. Regarding the share of scripts for the various TKIs, so it looks like the ICI-TKI combo is gaining steam really kind of at the expense of pazopanib and sunitinib and that cable looks steady, but if your second line share is stable, then should you be losing something on the front line, and is that kind of a trend that you think is going to continue?

P.J. Haley -- Senior Vice President, Commercial

Hi, yeah George, this is PJ. 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 a few caveats as to why, so this is 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 is other things. So I think it's a very good anchor for us, as we look at competition and benchmark ourselves to a 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 Ivo-ipi, which really since is encouraging to us, as we think about the potential for the cabo-nivo trial in 90 arc is clearly PD1, TKI is being received well in the marketplace, and particularly in the community setting.

George Farmer -- BMO Capital Markets -- Analyst

Okay. That makes sense . And then, I have a question about the origin collaboration. You mentioned that it was the around two 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 as your deal around, any one particular class weighted in particular over the other?

Peter Lamb -- Executive Vice President, Scientific Strategy and Chief Scientific Officer

Yeah. This is Peter. I wouldn't characterize it like that. I kind of highlighted those as technologies that they have that are complementary to us and I think they both have their attractions, but I also shouldn't necessarily think that everything we do with them might fall into one of those two classes, so kind of agnostic, it's all -- it's all driven by the data as the program advances to as to which way which 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 -- our own internal programs.

George Farmer -- BMO Capital Markets -- Analyst

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

Peter Lamb -- Executive Vice President, Scientific Strategy and Chief Scientific Officer

It's possible. I don't know. Let me leave it at that.

George Farmer -- BMO Capital Markets -- Analyst

Okay. Great. Thanks very much.

Gisela M. Schwab -- President, Product Development and Medical Affairs and Chief Medical Officer

Sure, George. Thank you.

Operator

Thank you. Our next question is from Stephen Willey from Stifel. Your line is now open.

Stephen Willey -- Stifel -- Analyst

Yeah. Thanks for taking the questions and 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 is collected out of the now recently expanded cohort, but also based I guess upon what the Roche is currently doing in Phase 3, where I believe they're having atezo-enzalutamide combo in the refractory setting right now.

Gisela M. Schwab -- President, Product Development and Medical Affairs and Chief Medical Officer

Yeah. I think it's a broad question, of course, of 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 activity seen and the efficacy seen and 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 fee docetaxel use in the hormone-sensitive stage based upon the charted study. So overall, the treatments are being utilized earlier. In terms of the Roche atezolizumab-enzalutamide study, I guess I'd refer it to Roche to understand where that stands, because obviously we won't make comments on their studies and proprietary information. So I think I'll leave it at 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're expanding upon that actually involve more patients.

Stephen Willey -- Stifel -- Analyst

Okay. And then maybe just a follow-up on COSMIC. I know bladder was one of the cohorts that was pre-specified is one of the initial tumor types of interest and the NIH data would suggest that you have some pretty interesting synergy in combination with PD1 inhibition and I think Mike, you've 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 and long, 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. Thanks.

Mike Morrissey -- President and CEO

Yeah, Steve. Thanks for the question. Yeah, I would frame it at a 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 three components of the analysis. So there's lots of work that goes was into that, there is -- 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. 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 to your 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 IO 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.

Stephen Willey -- Stifel -- Analyst

All right. Appreciate the color. Thanks for taking the questions.

Operator

Thank you. Our next question is from Paul Choi from Goldman Sachs. Your line is now open.

Paul Choi -- Goldman Sachs -- Analyst

Thank you and let me add my congratulations as well on the consistent execution. My first question is for PJ on the commercial side, can you maybe remind us what portion of your commercial side business, your non-government 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 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?

P.J. Haley -- Senior Vice President, Commercial

Yeah, Paul, this is PJ. 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 -- Executive Vice President

And Paul, it's Chris. So on the gross to net for this year, I commented last quarter that gross to 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 best answer I can give at this point in time for the gross to net for next year.

Paul Choi -- Goldman Sachs -- Analyst

Okay. Thanks for that. And then maybe one for Peter. Peter, can you maybe go a little bit more into detail about what you found attractive with regard to Aurigene's capabilities, as I'm looking at the programs, it seems like they have some well-identified targets that are -- will be somewhat familiar to investors. So what did you see as points of differentiation there? And then on a related note, can you maybe tell us for the three identified programs and the six programs in total, what kind of potential buyer box might be involved in terms of total consideration?

Peter Lamb -- Executive Vice President, Scientific Strategy and Chief Scientific Officer

Yes. So, thanks for the question. So yeah, I think the things that we found -- or I found compelling about Aurigene really is they have a -- I think a very good track record in terms of discovery collaborations, they've advanced 14 partnered programs into clinical trials and there are still ongoing US clinical trials, we certainly have critical mass on the discovery side in both biology and chemistry, and also well established pre-clinical development capabilities. Obviously, we like to the targets that they were working on in terms of the kind of pre-existing programs. Our view was they kind of fell into the category of being interesting, well-validated, at least pre-clinically, but still certainly with kind of room to run and differentiate on the -- from a clinical point of view. I mentioned a couple of times now, a couple of approaches that they applied historically that we certainly don't have experience in respect to the covalent and innovation and protein degradation. So that also was the feature.

From a financial point of view, as we say it was pulled into the same bucket philosophically is our previous collaborations kind of modest up fronts, we're paying 10 million upfront for the three pre-identified programs and then for each de novo program will be another $2.5 million upfront payment. Certainly beyond that, we're providing some research funding as an option exercise fee and then some of the usual clinical, regulatory and commercial milestones. I'm going to step through them all, but for anyone who is interested, I would point you to our 10-Q filing for all the information.

Paul Choi -- Goldman Sachs -- Analyst

Okay. Thanks for that. And congrats again on the quarter.

Gisela M. Schwab -- President, Product Development and Medical Affairs and Chief Medical Officer

Thank you, Paul.

Operator

Thank you. [Operator Instructions] And our next question is from Jeffrey Hung from Morgan Stanley. Your line is now open.

Jeffrey Hung -- Morgan Stanley -- Analyst

Thanks for taking the questions. 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 -- Executive Vice President

Yeah, Jeff, it's Chris. So, yeah, our inventory level, I mean from an absolute basis is essentially flat from weeks on hand perspective, it was down as the math works with the volume increase in same and virtually the same, absolute inventory number year we've spent hand comes down. So it's in the 2.5 range right now. We've tried 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 inventory that's, that is relevant at this point.

Jeffrey Hung -- Morgan Stanley -- Analyst

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

Mike Morrissey -- President and CEO

Yeah, 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 I think over the last several quarters like 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 four collaborations combined plus what we've got internally so -- 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 six to nine 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 a 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 lead stage components. So as we get those done, stay tuned, will talk about them in more detail.

Jeffrey Hung -- Morgan Stanley -- Analyst

Great. Thanks. And then one quick clarification on the Aurigene collaboration. Are the option payments relevant for all six projects or only for the three new discovery programs?

Mike Morrissey -- President and CEO

I know that there will be option exercise payments for all six programs.

Jeffrey Hung -- Morgan Stanley -- Analyst

Okay. Great. Thank you.

Operator

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

Susan T. Hubbard -- Executive Vice President, Public Affairs and Investor Relations

Thank you, Gigi. 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

[Operator Closing Remarks].

Duration: 64 minutes

Call participants:

Susan T. Hubbard -- Executive Vice President, Public Affairs and Investor Relations

Mike Morrissey -- President and CEO

Christopher J. Senner -- Executive Vice President

Peter Lamb -- Executive Vice President, Scientific Strategy and Chief Scientific Officer

Gisela M. Schwab -- President, Product Development and Medical Affairs and Chief Medical Officer

P.J. Haley -- Senior Vice President, Commercial

Andy Hsieh -- William Blair -- Analyst

Michael Schmidt -- Guggenheim -- Analyst

Kennen MacKay -- RBC Capital Markets. -- Analyst

Yaron Werber -- Cowen -- Analyst

Jennifer Shen -- Needham

Peter Lawson -- SunTrust -- Analyst

George Farmer -- BMO Capital Markets -- Analyst

Stephen Willey -- Stifel -- Analyst

Paul Choi -- Goldman Sachs -- Analyst

Jeffrey Hung -- Morgan Stanley -- Analyst

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