Exelixis Inc

NASDAQ:EXEL

Earnings Call Transcript 2019-Q4

[Operator]

Good day, ladies and gentlemen, and welcome to the Exelixis' Fourth Quarter and Full Year 2019 Financial Results Conference Call. My name is Towanda, 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. You may begin.

[Susan Hubbard, EVP, Public Affairs & IR]

Thank you, Towanda, and thank you all for joining us for the Exelixis' Fourth Quarter and Full Year 2019 Financial Results Conference Call. Joining me on the call today are Mike Morrissey, our President and CEO; Chris Senner, our Chief Financial Officer; P.J. Haley, our Executive Vice President of Commercial; and Gisela Schwab, our Chief Medical Officer; who will together review our corporate, financial, commercial and development progress for the fourth quarter ended December 31, 2019. Peter Lamb, our Chief Scientific Officer, is also with us and will be joining us for the Q&A session following our prepared remarks.

During the call today, we will refer to financial measures not calculated according to generally accepted accounting principles. Please refer to today's press release, which is posted on our website for an explanation of our reasons for using such non-GAAP measures as well as tables deriving these measures from our GAAP results.

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

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

[Michael Morrissey, CEO, President & Director]

All right. Thank you, Susan, and thanks to everyone for joining us on the call today. Exelixis is off to a strong start in 2020, and we're pleased to provide additional perspective on our 2019 performance, as we build off the momentum from our JPMorgan presentation and recent data updates at ASCO-GI and GU to frame 2020 and beyond. We'll keep our prepared remarks short and address your questions as the main part of today's update.

Please see our press release that was issued an hour ago for an extensive list of our 2019 highlights, including the achievement of more than $1 billion of global net revenue for the cabozantinib franchise across the renal cancer, liver cancer and medullary thyroid cancer indications.

As introduced back in January, we expect the 2020 to 2021 time frame to be a period of focused execution across all components of our business. During 2020, we expect to have 12 cabozantinib label-enabling trials enrolling and 6 top line data readouts that could lead to 4 new potential indications for cabo in 2021.

We also expect to advance XL092 into immune checkpoint inhibitor, or ICI, combination cohorts and file up to 3 new INDs for compounds from internal or collaborative efforts. Recent data presented for our cabo ICI combinations at ASCO-GI for HCC and at ASCO GU for metastatic CRPC, highlight encouraging data in these important indications and provide a potential read through to cabozantinib's differentiated activity, which has been previously documented in the METEOR, CABOSUN and CELESTIAL trials.

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

[Christopher Senner, EVP & CFO]

Thanks, Mike. For the fourth quarter 2019, the company reported total revenues of $240.3 million. Total revenues for the quarter included cabozantinib net product revenues of $194.9 million. CABOMETYX inventory units held at our customers declined by approximately 200 units, which from a weeks on hand perspective was flat at 2.6 weeks when compared to the third quarter of 2019.

CABOMETYX net product revenue was approximately $5 million lower than the preliminary results from the quarter that Exelixis provided on January 12, 2020. This is due to an increase in the estimated accruals for chargebacks associated with net product revenues identified during the company's annual financial audit.

COMETRIQ revenues were higher than they have previously trended due to a clinical trial purchase of approximately $9.4 million. Total revenues also include the recognition of $45.4 million in collaboration revenues for the company's -- from the company's commercial collaboration partners, Ipsen Takeda and Genentech.

Our total operating expenses for the fourth quarter of 2019 were $163 million compared to $156.1 million in the third quarter of 2019. SG&A expense was the primary driver of the increase in total operating expenses, which increased by $6.8 million and was primarily related to FTE expenses.

Income taxes for the fourth quarter of 2019 were $16.3 million, and our effective tax rate for the quarter was approximately 19.1% compared to $25.2 million and 20.5% for the third quarter of 2019.

The company reported GAAP net income of $68.7 million or $0.22 per share on a fully diluted basis for the fourth quarter of 2019. The company also reported non-GAAP net income of $81 million or $0.26 per share on a fully diluted basis. Non-GAAP net income excludes the impact of approximately $12.3 million of stock-based compensation expense net of the related income tax effect.

Cash and investments totaled approximately $1.4 billion at December 31, 2019, compared to approximately $852 million at December 31, 2018. Now turning to our financial guidance, which we previewed at the JPMorgan Conference in January 2020. Total revenues are expected to be in the range of $850 million and $900 million. Net product revenues are projected to be in the range of $725 million and $775 million. Cost of goods sold is expected to be between 4% and 5% of net product revenues. Research and development expense is expected to be in the range of $460 million and $500 million and includes noncash expenses related to stock-based compensation of approximately $25 million.

Selling, general and administrative expense is expected to be in the range of $230 million and $250 million and includes noncash expenses related to stock-based compensation of approximately $30 million. Guidance for the effective tax rate in 2020 is between 20% and 22%.

And finally, we are projecting cash and investments to be in the range of $1.5 billion and $1.6 billion. This cash and investments guidance does not include the impact of any potential new business development activities.

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

[Patrick Haley, EVP, Commercial]

Thank you, Chris. I'm pleased to review the commercial performance of CABOMETYX for the fourth quarter of 2019. CABOMETYX continues to be the number one prescribed TKI and RCC, which is notable in the context of 3 recent first-line launches of immune checkpoint inhibitor, or ICI combinations.

CABOMETYX demand grew by 11% in Q4 2019 relative to the fourth quarter in 2018 and grew by 3% in Q4 2019 relative to Q3 2019. The prescriber base of CABOMETYX continued to increase and grew by 35% in Q4 2019 relative to Q4 2018 and grew by 6% in Q4 2019 relative to the prior quarter. CABOMETYX continues to be used broadly in RCC across academic and community settings, clinical risk groups and lines of therapy.

The first-line RCC market has been very dynamic throughout most of 2019, given the launch of two additional first-line ICI combinations in the second quarter. As we mentioned on our last call, the first-line RCC market began to stabilize at the end of Q3 and continued in Q4. CABOMETYX's first-line new patient share has remained steady, and ICI combos continue to capture the majority of the first-line new patient market share.

Turning to second line RCC. Market research continues to point to CABOMETYX remain the agent of choice in the second-line setting after any ICI combination, primarily due to the fact that it's the only TKI with a strong OS benefit per the label in the second line population. In fact, this support was reinforced at the recent GU ASCO meeting from KOLs and meetings as well as from the podium. We are pleased to see this continue to play out in the marketplace as CABOMETYX new patient market share in second line RCC is increasing, and CABOMETYX continues to capture the majority of patients who progress on first-line ICI combinations.

Furthermore, CABOMETYX continues to be the #1 prescribed TKI in RCC based on the IQVIA prescription data. Year-over-year for Q4, CABOMETYX TRx volume was up 11%, and Q4 over Q3 TRx volume was stable. CABOMETYX outperformed the other TKI monotherapy, Sutent and VOTRIENT, in Q4.

Turning to HCC. We expect the combination of atezolizumab and bevacizumab will get approval in first-line HCC. Subsequently, the HCC landscape will likely evolve in a similar fashion to what we saw in the RCC market, with ICI combination therapy moving to the front line, which could be an important new standard of care for untreated liver cancer patients and serve to expand the first-line market. We anticipate this will, in turn, increase TKI monotherapy utilization in the second-line setting as second line ICI monotherapy use decreases over time.

We strongly believe that many more eligible patients could benefit from CABOMETYX. CABOMETYX remains the #1 prescribed TKI and RCC, and we look forward to building on this momentum in RCC, HCC and other potential future indications, such as prostate and lung, as the cabozantinib development program expands and progresses.

Future growth for cabo in RCC, HCC and beyond may be driven by the outcome of our trials evaluating cabo in combination with immune checkpoint inhibitors, including CheckMate 9ER, which will be the first of these Phase III cabo ICI combination studies to read out.

As Mike highlighted, the Exelixis team had a significant presence at ASCO GU, which took place 2 weeks ago. In addition to positive support for cabo and RCC, in prostate cancer, KOLs view cabo in combination with atezolizumab with optimism.

This regimen has the potential to address a significant unmet medical need in the early mCRPC setting and appears to have the potential to be well differentiated according to many key opinion leaders that we heard from at an advisory board in numerous other meetings at GU ASCO. Our team remains highly 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 maximize its clinical and commercial potential.

With that, I will turn the call over to Gisela.

[Gisela Schwab]

Thank you, P.J. I'm happy to provide a brief update on our development and regulatory progress in the quarter. I'll start with our current Phase III program for cabozantinib as a single agent or in combination with immune checkpoint inhibitors, which includes 12 ongoing or planned potentially label-enabling late-stage study, including company as well as industry partners and CTEP-sponsored studies.

First and most advanced is CheckMate 9ER, the Phase III trial comparing cabozantinib plus nivolumab with sunitinib in first-line RCC in all IMDC risk groups. The study completed enrollment earlier in 2019, and as previously reported, we are looking forward to results in the first half of this year. We're trying to prepare with the BMS team, our clinical development partners who are executing the study, to enable expeditious future regulatory filings once top line results are available and if warranted by the data.

At the recent ASCO-GI conference in mid-January via our development partner, BMS reported encouraging results in HCC from the Phase Ib cohort of CheckMate 040 of cabozantinib in combination with new volume up plus/minus ipilimumab. The 71-patient study in first-line and second line HCC patients yielded RECIST response rates of 19% and 29% for the duplet and triplet combination, respectively. The disease control rates were 75% for the duplet and 83% for the triplet combination. And importantly, encouraging of our survival data we reported with median OS of 21.5 months and not reached for the duplet and triplet combinations, respectively.

The combination showed an acceptable safety profile with no unexpected safety signals observed. We believe that these data in a mixed population of first and second line HCC patients bode well for the combination of cabozantinib with checkpoint inhibitors in this disease. Three additional pivotal Phase III studies have been initiated in the past year or so, including, importantly, combinations with checkpoint inhibitors, such as the COSMIC-312 trial in first-line HCC with atezolizumab and the COSMIC-313 trial in first-line RCC with nivolumab and ipilimumab and also, the single-agent cabozantinib COSMIC-311 trial in differentiated thyroid cancer. These studies are making excellent progress and are actively enrolling patients globally.

As we have guided, we anticipate top line results from both COSMIC-311 and dependent on events also COSMIC-312 as early as during the second half of this year. And I'm happy to report that we have reached the milestone of enrolling 100 patients in our COSMIC-311 study in DTC, and data from this population will support the analysis of the co-primary endpoint of objective response rate of ORR once all patients have been followed for a minimum of 6 months.

So the broader ongoing cabozantinib late-stage development program is really making great progress, and we are working on further Phase III concepts and I'll speak to those plans in a minute. First, I'd like to focus on the COSMIC-021 trial, a Phase Ib study of cabozantinib and atezolizumab that continues to make excellent progress. And the study has been accruing patients actively with more than 550 patients enrolled by year-end 2019 across a 24 expansion cohorts. And we're seeing encouraging early results in different tumor types and settings.

As a reminder, the key objective of the expansion cohorts is objective response rate per registration 1.1. And notably, early data from the mCRPC cohort 6 has resulted in expansion of this cohort to a total of 130 patients. And at the recent ASCO GU Conference, we shared the results for the first 44 patients involved in this cohort for the first time.

This mCRPC cohort enrolled patients with measurable disease per RECIST version 1.1, who had progressed on prior novel hormonal therapy and could have received prior docetaxel for hormone-sensitive disease. 44 patients were included in this interim analysis. The median follow-up was 12.6 months. The objective response rate per RECIST, the trial's primary endpoint was 32%, including 2 complete responses and 12 partial responses. Disease control rate was 80%.

The median duration of response for all responding patients was 8.3 months. Among 12 patients who had an objective response in at least one post-baseline prostate specific antigen evaluation, 67% had a PSA decline of at least 50%. And importantly, the combination of atezolizumab and cabozantinib has showed an acceptable safety profile with no unexpected safety signals.

Based on FDA feedback, we plan to pursue an accelerated approval path as warranted by the data from the expanded cohort 6 and from additional cohorts in the COSMIC-021 trial, evaluating single-agent activity of cabozantinib and atezolizumab.

Also, we had announced previously that we are expanding the cohort of patients with checkpoint inhibitor pretreated non-small cell lung cancer patients based on initial encouraging safety and antitumor activity. And as Mike highlighted during our presentation at JPMorgan in January, we look forward to presenting data from this and other cohorts from COSMIC-021 at various medical meetings over the course of this year.

Among other data, these observations from COSMIC-021 has led to a 50-50 co-development agreement with Roche announced late in 2019 for Phase III evaluation of the combination of cabozantinib and atezolizumab in 3 initial Phase III studies in metastatic CRPC, non-small cell lung cancer and renal cell cancer. And we will provide more details on these trials as they are being initiated.

And lastly, on the regulatory side, our partner in Japan, Takeda, completed an NDA filing with the Japanese regulatory authority for cabozantinib for the treatment of patients with previously treated HCC ipi/nivo January 2020. And we also look forward to updates on the regulatory progress on the application filed in April 2019 for cabozantinib in advanced RCC.

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

[Michael Morrissey, CEO, President & Director]

Okay. Thanks, Gisela. As I said in the interim, we're off to a strong start in 2020, and we expect a data-rich year as we advance cabo towards new potential indications and additional compounds into the clinic. We expect to continue to present new data throughout the year and look forward to building on the momentum from ASCO-GI and GU as we continue to illuminate our path to additional indications for cabo, emerging data for XL092, new drugs entering the clinic and new assets from our business development activities.

I'll close by thanking everyone at Exelixis for their consistent focus and superb leadership as we navigate the opportunities and challenges that we'll encounter in 2020. The entire team is committed to making every day count as we discover, develop and commercialize the next-generation of our medicines for cancer patients who need a 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 happy to now open the call for questions.

[Operator]

[Operator Instructions]. Your first question comes from the line of Asthika Goonewardene with SunTrust.

[Asthika Goonewardene, SunTrust Robinson Humphrey]

I want to say congratulations for all the progress you made this year. Certainly, we've been having a lot of fun keeping track of all the updates. A few questions, if I can, on the prostate cancer setting. So [indiscernible] increasingly talk about synergy. I'm curious at ASCO-GI and ASCO GU, when you're running your ad boards, if you got the docs talking about synergy almost unprompted. Is this something that they're reading out of the data? Also, I noticed an interview with Dr. Agro. He mentioned something about 70 patients already involved in cohort 6 and planning on the next analysis for 100 patients. I'm guessing this suggest maybe a second half 2020 update on cohort 6? Or am I being too ambitious to think that maybe something middle of 2020 is possible? And I have one more follow-up afterwards.

[Gisela Schwab]

Yes. This is Gisela. Thank you for the question. So I'll take them in, in turn. Regarding your question around synergy, certainly, the feedback we've heard at ASCO GU and the prostate cancer data was presented with that people were impressed with the response rate per RECIST of 32%. And keeping in mind that a single-agent response rate of cabozantinib in the low single digits and for atezolizumab the like very few and far between. So clearly, 32% stood out to people, and they saw a cooperative activity potential here.

Now with respect to the next data update, we'll certainly update you as we receive confirmation of presentation to medical meetings. And you can leave it at that for the time being. But I think we're very pleased with the active accrual in the Phase Ib study across the board, in particular, also in CRPC.

[Asthika Goonewardene, SunTrust Robinson Humphrey]

Great. And then a question for Chris here. Chris and Mike, how much of the sales force build would you need for promoting cabo in the prostate cancer setting? I'm wondering especially since you need -- I mean, send reps into the urologist office, what kind of a build-out can we expect in our models?

[Michael Morrissey, CEO, President & Director]

Yes, it's Mike. That's a great question. It's a little bit early to be opining upon that right now. Obviously, we have a pretty strong presence in the GU space and very strong commercial team across all components of that part of the business relative to being able to detail on label to the appropriate customers and then follow-up with the appropriate support from the rest of the commercial organization.

So how that works going forward? We have a full contingent of commercial people right now, and I would think about that as an incremental build, but we're going to a pretty detailed analysis. So why don't we hold off a little bit, and really speak to that once we have more definitive data and time lines around filings and those kinds of things, so we can put that in the proper context?

[Operator]

Our next question comes from the line of Andy Hsieh with William Blair.

[Andy Hsieh, William Blair & Company]

Great. Congratulations on all the progress and very compelling prostate cancer data, especially, it's been such a challenging field for IL agents. So just kind of thinking about the landscape here, do you think there is a positioning headwind for the cabo/atezo combo as novel hormonal therapy is going to move into castration-sensitive or non-metastatic/undetectable settings?

[Gisela Schwab]

So this is Gisela. I can start the response, and others can chime in, of course. So as you said, the prostate cancer landscape is certainly changing with more compounds being approved now in the hormone-sensitive state. And that is something that is of interest, of course, for our combination because we have collected the data now in patients, who have received at least one novel hormonal agent and could have received more than that in addition to potentially having received docetaxel for the hormone sensitive disease.

So it's a relatively earlier population compared to what we've studied some years back. And with that, we've seen really quite encouraging safety data and tolerability of the combination as well as, of course, the response rate and durable response rate that I've described earlier.

[Andy Hsieh, William Blair & Company]

Okay. So related to that, Gisela, just another question on the trial design. So for COSMIC-312, I think, recently, the number of patients were increased by 100 to 740 and the kind of -- given that it's a 3 ARM trial, the distribution also was altered a little bit. It used to be 63 to 1. Now it's 2 to 1 and 1. So taking everything together, I mean, obviously, the biggest change is really the single agent cabo now has 185 patients versus 64. So maybe do you mind sharing with us the kind of the rationale behind the change?

[Gisela Schwab]

Absolutely. Thanks for the question. As this COSMIC-312 study is, of course, the HCC first-line study that compares cabozantinib plus atezolizumab versus sorafenib as the primary endpoint, driving OS and PFS analysis. In addition, we have included a single agent cabozantinib arm really to address the contribution of components to the activity observed for the combination. And so in order to strengthen that evaluation, we have some back last year -- kind of say in the early part of last year enhanced the sample size, as you described and increased the sample size a little on the single agent cabozantinib.

[Andy Hsieh, William Blair & Company]

I see. Okay. And lastly, so at the ASCO GU, the design for Contact 3 was disclosed. I don't know if it's intentional or not. So two parters, if you don't mind. So what is -- if you look at the 021 study, the second line RCC for the combination of cabo and atezo was never

Formally tested. So just curious about why you chose the second line setting? And perhaps you can opine on, I think, Dr. Zhang at Duke shared her experience in kind of positioning in the second line, and she said, for fast progressors on IO or IO-IO or IO TKI, she might consider something different, which is monotherapy TKI. And then for slow progressors, she might continue on and maybe do something like a Contact 3 regimen atezo/cabo. So curious if you can kind of share with us your insight on these two parts of the question.

[Gisela Schwab]

Sure. So just to frame it a little bit in the overall context. Of course, we haven't announced the initiation of the Phase III program that is being conducted under a 50-50 collaboration with Roche and that extend across 3 Phase III studies. Now as you mentioned, at ASCO GU, on the podium we discussing in the oral RCC session showed a trial design that is evaluating a carbo as the backbone versus cabo plus atezolizumab in previously treated checkpoint inhibitor pretreated patients. And as you say, this is a new study.

Mikey highlighted that this is labeled contact free. So we would expect, of course, to go into much more detail when the study is actually being initiated. But just a few things to mention. First, I think it's very gratifying to see cabozantinib as the backbone now and the standard of care to be evaluated in randomized settings in the second-line treatment space. And so that is one point I wanted to make. The other is, of course,

That in patients who have been previously treated with checkpoint inhibitors, we've now not showing the data as yet, but taking the decision to expand the non-small cell lung cancer cohort. And of course, that was based on encouraging activity and safety observations, and we look forward to sharing those. And then lastly also in other settings that were described earlier in the call, the HEC and CRPC is seeing nice cooperative activity of the checkpoint inhibitor plus cabozantinib. So a lot of reasons to evaluate this particular setting where there is really at the current time only single-arm data available for other combinations in smaller studies.

And regarding the preferences of the investigator Tian Zhang from Duke with regard to fast progressors, I think, of course, patients with rapidly progressing disease benefit from rapid onset of clinical benefit and we're certainly seeing that with cabozantinib in this disease and in other diseases.

[Operator]

Our next question comes from the line of Michael Schmidt with Guggenheim.

[Michael Schmidt, Guggenheim Securities]

Congrats on all the progress. I had one regarding COSMIC-021. Regarding the potential opportunity in non-small cell lung cancer, I was just wondering how we should think about a potential path registration here? I think, as part of the Roche collaboration, you have -- you mentioned a Phase III trial. I was wondering if this is an indication where you could also potentially pursue and accelerate it pathway similar to what you've done in prostate cancer? And then I have a couple of follow-ups.

[Gisela Schwab]

Yes, thanks for the question. I think, clearly, we are seeing activity in non-small cell lung cancer and checkpoint inhibitor pretreated non-small cell lung cancer patients. And therefore, we are pursuing this path. As I mentioned, we've expanded this cohort to 80 patients. We look forward, of course, to the more in-depth evaluation in a broader patient population now. And the data thus far, we hope to present soon in the year have provided the springboard, if you will, to design a Phase III study. And we'll talk about the details of that study in much more detail when time comes to initiating the trial in collaboration.

[Michael Schmidt, Guggenheim Securities]

Okay. And then regarding COSMIC-311 in thyroid cancer, just wondering how you think about the potential opportunity here in this setting. Maybe relative to some of the selective RET inhibitors that are being looked at in this setting as well?

[Michael Morrissey, CEO, President & Director]

Yes. Michael, it's Mike. Maybe P.J. could address that real fast.

[Patrick Haley, EVP, Commercial]

Yes. Michael, this is P.J. I think we think about second-line plus DTC, we've said and Mike shared at JPMorgan about 4,000 patients in that setting. The RET inhibitors are primarily being studied in the medullary thyroid space. Certainly, with regards to our history of COMETRIQ and background at Exelixis, I think thyroid is a space that we know well and we know the customers on for many, many years now. So it's certainly a market we would be very excited to have the opportunity to commercialize and should everything play out appropriately. And I think one that could give us a lot of synergy, given our current team and experiences at the company.

[Michael Schmidt, Guggenheim Securities]

Great. And then maybe just a housekeeping question around the gross to net adjustment in the fourth quarter. Maybe, Chris, could you share that with us? And how do you think about that evolving in 2020?

[Christopher Senner, EVP & CFO]

Yes, Michael, thanks. It's Chris. So yes, during the course of our year-end financial audit, it was determined that we hadn't accrued enough as we modeled out our chargebacks. And so that was all related to trade inventory. So we increased the accrual accordingly. Look, on a go-forward basis, we're looking -- we had a gross debt around 23% in the fourth quarter. And for 2020, we're looking for gross to net in the 23% to 24% range.

[Operator]

Our next call comes from the line of Jason Gerberry with Bank of America.

[Jason Gerberry, Bank of America Merrill Lynch]

First one from me just on prostate. I'm curious, your discussions with the agency as we think about upcoming readouts for IO chemo, the ability of those types of combinations to leverage an accelerated review mechanism? Or was the relative toxicity profile of IO TKI, an important factor and enable -- being able to potentially leverage an accelerated review mechanism?

[Gisela Schwab]

Sure. While I can't really speak to the specific discussions with the FDA, I think as was mentioned a little bit earlier, but we're pursuing in terms of the development cost, which really a potential accelerated approval pathway based upon a response rate and durable responses observed for the combination in CRPC, as it has been seen in the cohort 6 evaluation, as you've just seen at ASCO GU. And I think the other consideration, of course, that has been discussed quite a bit in the area of combining therapies has been the contribution of components in that we, of course, looking at both efficacy as well as safety. And so in order to arrive at a proper evaluation of the risk-benefit profile, and the need for the other compound, if you will, or the combination. And so that is certainly an important aspect that we've also built into our development program, which we have designed the 021 study to not only evaluate the combination of the compounds, atezolizumab and cabozantinib, but also single-agent evaluation of each agent alone to address that particular question.

[Jason Gerberry, Bank of America Merrill Lynch]

Got it. And just as a follow-up. Can you comment -- as it pertains to the atezo/cabo studies in lung, what do you think is sort of a meaningful threshold for efficacy here? I think we've heard from some other competitors in this post-IO setting, something in the low mid-20% ORR range, durable, 100-plus patients. Just trying to get a sense of in terms of what we should be looking for?

And then just as a modeling question. As you think about the potential approval and launch of the IMbrave150 regimen in frontline liver cancer, how long you think before the second line market kind of opens up to TKI monotherapy?

[Michael Morrissey, CEO, President & Director]

Yes, Jason, it's Mike. I'll take the first question and then pass the mic over to P.J. for the IMbrave question. We got that question that general question a lot, and they run up to ASCO GU with prostate, and as you would imagine, a bit challenging to provide any kind of quantitative guidance on where the bar is relative to expectations from others and what we see in this space relative to other therapies as well. So we're excited about the data that we've got so far. In the first 30 patients, we're expanding aggressively here, including looking at single-agent cabo and that single-agent cohorts in 21. Again, as we get more data and it matures, we will present the data, and then you can be the judge for yourself and others in terms of -- does that kind of meet the expectations and pass the bar or not? But I just -- it's hard for us to do that right now before the fact and kind of show our cards, right, as I'm sure you can imagine. In regards to IMbrave in the second line, P.J., do you want to take that?

[Patrick Haley, EVP, Commercial]

Yes, sure. Jason, thanks for the question. So as I mentioned, we certainly expect atezolizumab to be approved in first-line HCC and really move the standard of care forward there with the doublet ICI sort of anti-angiogenic combination and potentially bring more first-line patients into that systemic treatment landscape of HCC.

As far as the timing, when it gets approved, obviously, that's up to the FDA, one would expect it to be relatively soon. And then those patients would have to receive that combination and progress. So it's obviously, it's difficult to forecast all that specifically. I think, generally speaking, HCC, it's a bit of a sicker population than RCC. So one might expect it to occur a little more quickly than RCC, but we're really have to wait and see there. But -- about half the second-line market is currently ICI monotherapy. So we do expect that TKI and monotherapy would expand into that portion of the marketplace.

[Operator]

Our next question comes from the line of Silvan Tuerkcan with Oppenheimer.

[Silvan Tuerkcan, Oppenheimer]

Congrats on the year, and congrats on the data in prostate cancer, which is very great. I just want to switch gears to a little bit to RCC. Have you seen -- or how have you seen the choice of therapy post-TKI PD-1 combo or PD-1 CTLA-4 evolving? Do you think that there's some more chance to eke out more volume in that setting? And second of all, scripts have been slowing down a little bit because I think we discussed it earlier that patients were held up by the longer PFS and frontline. Like, is there any news on when you think this could maybe reverse?

[Patrick Haley, EVP, Commercial]

Yes. Thanks for the question, Silvan. This is P.J. What we've seen in second line post-ICI combo is certainly all the market research indicates that CABOMETYX does and should continue to get the majority of those patients in that setting. And we're really seeing a market share there in the approximately mid-60s range in that post-ICI combination second-line setting for cabo, which we're very pleased with. I think beyond that, what I kind of referenced in the prepared remarks is that we've seen the first-line setting stabilize. We've seen the cabo market share stabilize in the sort of high single digits. So as those patients are flowing through, and we see more flowing through, we would anticipate continuing to get the majority of those patients in that setting. And what we've seen there is our market share increasing in the second-line setting overall and it's now sort of in that mid-30s range. And so as Gisela said, second-line cabo is really the standard of care for clinical trials. And the market share is strong there with potential to continue to grow volume, I think, as more of those patients flow-through from the first-line setting into that -- into the second line post-ICI combo setting, where, as I mentioned, our market share is in the mid-60s.

[Silvan Tuerkcan, Oppenheimer]

Great. And one more question, if I may, to Mike. Maybe just a big picture thinking, when is INLYTA going generic? And what do you think will be the impact on the RCC landscape of a generic INLYTA? And are you on track to potentially compensate top line -- changes to your top line with your 4 new indications by year-end 2021? Are you comfortable with that speed?

[Michael Morrissey, CEO, President & Director]

So the INLYTA time line for LOE isn't completely clear based upon both their composition of matter as well as probably more patents. So I don't want to speak to that per se relative to those time lines. What I will say is that right now, its label is focused exclusively in RCC. And obviously, the big goal for us outside of what's happening in RCC is to expand into other indications like prostate, like first-line liver, like lung, et cetera, right? So again, our focus is to expand indications for cabo in terms of either single agent or combinations to build a franchise really and reinforce the existing franchise that we've got in renal, liver and thyroid. And certainly, that is our main focus as we go forward.

[Operator]

Our next question comes from the line of Kennen MacKay with RBC Capital Markets.

[Kennen MacKay, RBC Capital Markets]

Maybe for Mike. I was wondering if you could help us understand the decision to give that eye brow raising 2025 guidance a little earlier this year, sort of what drove that, especially that given that some of the 2020 guidance looked quite conservative. And within that guidance, it looked like the team had seen potential for cabo to grow to $1.1 billion in sales in frontline RCC, that's obviously dependent on the CheckMate 9ER data, but wanted to just get a sense from you and the team, what needs to be seen in that data in order to realize that guidance?

[Michael Morrissey, CEO, President & Director]

Yes. So let me backtrack to where we were in -- at the end of last year and how we framed JPMorgan in the beginning of 2020. The majority of 2019 and a lot of 2018, there's been a clear myopic focus around 2 topics, both in terms of the buy side and the sell side around the Exelixis' story, and that focuses every Friday on IMS scripts and then a plethora of questions consistently around 9ER, which we thought ending last year really was -- it was a good time to reorient people around the Exelixis story and proverbially focus on the forest and not a couple of trees as our business has evolved really so dramatically over the last year or so in terms of all the work in progress that Gisela talked about today and previously and what you've seen at both ASCO-GI and ASCO GU.

So again, the goals that we outlined for 2020 and 2021, 12 label-enabling trials enrolling, 6 readouts in 2020, potentially four new indications, I think, speaks to that. The 2025 number that we put out there and the math that we showed, which supported that is really our attempt to show what success could look like. It's not a DCF. It's not a full [indiscernible] chart of the ramp of those revenues, but it really provides, I think, very clear picture both the buy side and maybe especially the sell-side for what the depth and breadth of our portfolio and efforts around cabo could look like if we're successful. So it was a clear signal that we're more than just 9ER, we're more than just weekly scripts. And we have a very ambitious plan and program to be able to maximize the value of cabo for patients and for our shareholders.

In regard to your question about frontline RCC, I'd remind you that the math that we showed on that slide at JPMorgan covered the complete frontline setting. So single agent cabo from CABOSUN and then the doublet from 9ER as well as potential triplet success in revenues from COSMIC-313. So that's a consolidation of 3 different, if you will, sub-streams of revenues coming in, in the frontline setting, but I think that's a reasonable number for what success could look like there if those trials provide competitive data.

[Kennen MacKay, RBC Capital Markets]

Got you. That's helpful. Maybe just to expand a little bit on sort of potential success of CheckMate 9ER. Coming out of ASCO GU, it strikes me that maybe there are sort of 2 ways to potentially more competitive, more efficacious than some of the Merck data, obviously, hitting on overall survival would be a massive win and one way to do it another way, potentially having sort of a better CR rate that's obviously what is driving the use of ipi/nivo in the frontline, despite having a survival hazard ratio that's lower than axi/pembro. I was wondering if that thinking is shared by the team? Or if there's something I'm missing there?

[Michael Morrissey, CEO, President & Director]

Yes, I think it's probably a statement of the obvious that's survival data from 9ER would be a good thing to have since we're competing with somebody that has that data in their labels. Certainly, we've seen the success of our ability to make cabo a second line standard of care by having survival in our label for METEOR. So we understand that. We acknowledge that. We embrace that. And I think we've been working with our partners, right, to be able to maximize the chance of that happening. And it's an experiment that's running, and we'll see. And I don't want to get ahead of that. But obviously, that's a very important component for us to generate competitive data.

Beyond that, we've done a lot of market research, asked, I think, a lot of very important questions around how different components of a data readout could provide additional benefits and additional momentum from a marketing point of view. There's many different levers there that we could pull. But again, to elaborate on that now beyond kind of the obvious, probably we have a bit of a stretch. So we'll get the data. We'll talk about the data. And then, obviously, I think we've got the team and the broad collaborations in place to be able to take the momentum that we've got from single-agent cabo and single-agent nivo in the case both compounds have been used as standard of care in the second-line setting for years. And that name recognition could really drive, I think, with the appropriate level of data, a very strong commercial approach.

[Operator]

Our next question comes from the line of Yaron Werber with Cowen.

[Lisong Ai, Cowen and Company]

Congrats on the quarter. This is Leo Ai in for Yaron Werber. Just to piggyback on the question earlier. It seems to me that some of the physicians coming out of the ASCO GU still prefer to use nivo/ipi just because of the long-term data they presented. I'm just trying to understand how this could potentially effect the ongoing competitive landscape in RCC? What new earnings to show in terms of beating the nivo/ipi or the IO/TKI combo? Also another question is on the mCRPC. Do you have a threshold in terms of durability, you want to beat for the FDA filings?

[Michael Morrissey, CEO, President & Director]

Why don't we have P.J. answer the first part of that question and then Gisela can talk about the CRPC question. So P.J.?

[Patrick Haley, EVP, Commercial]

Yes. Leo, thanks for the question. nivo/ipi been approved and on the market now for going on two years, and they did, as you mentioned, have sort of updated data at ASCO GU from the 214 trial. I think that market, as I kind of mentioned in the prepared remarks, with regards to the first-line, has really stabilized. We're seeing sort of a nivo/ipi and then pem/axi with the ICI combinations at about 70% to 75%, give or take, in the first-line market. So I think as I mentioned, cabo is in the high single digits there, but what we're seeing and what we would anticipate to continue is more and more of those patients sort of progressing into a second-line setting where cabo gets the vast majority of those patients. So I think that's an opportunity for us there.

With regards to the first-line setting, I think, as Mike said, we'll have to see the data. There's certainly a reason for optimism. And I think with cabo's track record and history in RCC, lots of opportunities for us to compete. But we'll certainly wait to see the data to figure out how to best do that.

[Michael Morrissey, CEO, President & Director]

Yes. Maybe I can just add that, obviously, we're talking about 9ER right now, but 313 is really designed to go head-to-head with the triplet cabo nivo/ipi versus nivo/ipi2. So we have a second shot here that's enrolling very quickly. We're really excited about generating a lot of enthusiasm globally for that trial. So we're -- again, we're very committed to advancing opportunities and potential standard of care for RCC. And we've got a great compound in the mix based upon all the single agent data. And as we get more combination data, we'll be able to move accordingly. So Gisela, how about prostate?

[Gisela Schwab]

Sure, sure. So in the mCRPC setting, patients who are previously treated, like I described in our patient population, the durability of response that we've seen was 8.3 months and the response rate of 32%, is certainly very encouraging in that against the backdrop of what you see estimated durability of benefit. And then maybe the PSA, a decrease or stabilization more so than actual response in -- with the second NHD, for example. So this data set that we have generated thus far, it's very encouraging with respect to durability of response.

[Operator]

Our next question comes from the line of Stephen Willey with Stifel.

[Stephen Willey, Stifel, Nicolaus & Company]

I guess, one first, just on lung cancer. I know that there's other I guess, competitive strategies out there looking at TKI and IO. And I think some of the companion TKIs have somewhat of an overlap in terms of the kinase profile as cabo, I guess, specifically with targets like AXL and VEGF and K. And just kind of curious as to how you think cabo kind of differentiates from some of those other TKIs that are currently being evaluated in some of those later stage studies in the post-IO setting?

[Michael Morrissey, CEO, President & Director]

Yes. Steve, I'll take a crack at that. I mean, our view is generally -- I'm talking kind of generally here, not necessarily lungs specifically. In fact, it's really the totality of the cabozantinib profile that we think makes it particularly attractive IO combination. So it's the inclusion of the MET. You mentioned AXL, the TAM family members, the VEGFR component, we all think kind of plays into its ability to kind of promote an immune permissive environment, and that's both from an adaptive immune cell point of view, as well as I think -- and I think this is quite important from the effect that it has on a variety of innate immune cell populations. If you add that to the fact that it has direct effects on the tumor cell, including the ability to induce tumor cell lysis in many settings, which then presents a lot more antigen to the immune system, it's really that kind of totality of the thing. And I'm just not aware of any data that really does a direct comparison between some of the TKIs [indiscernible] and cabozantinib. But I think it's the overall profile that's differentiating.

[Stephen Willey, Stifel, Nicolaus & Company]

Okay. That's fair. And then just a quick question on 9ER. I guess, should we expect that the sBLA that Bristol filed for Q4W dosing of nivo would apply to the 9ER regimen?

[Gisela Schwab]

Yes, I think that is really a question that you should ask to Bristol-Myers. No, we don't want to speculate on their regulatory strategies, of course.

[Stephen Willey, Stifel, Nicolaus & Company]

Okay. And then maybe just one quick follow-up. I know -- and I might have missed this if this was already discussed, so excuse me, but that can help. I notice, I guess, when you talk about longer-term growth being driven by future indications, and you talk about prostate is both front and second line. Just kind of curious where that frontline part of the equation comes into play? If you can provide any color on that?

[Michael Morrissey, CEO, President & Director]

Yes, Steve, it's Mike. Just again, just to frame it from the standpoint of NHTs are moving up in their line whether it'd be the hormone-sensitive and/or M0 population based upon the plethora data that's come out over the last few years. So again, a, it's maybe a matter of Symantec's first line, second line relative to castration sensitive versus castration resistant. Think about it as post the first NHT. I think that's probably the way to look at it, whereas the lines, first line, second line, blah, blah, gets complicated when you're looking across different levels of hormonal sensitivity.

[Operator]

Our next question comes from the line of George Farmer with BMO Capital Markets.

[George Farmer, BMO Capital Markets]

I'd like to ask more about the prostate cancer presentation. Could you elaborate as to whether you saw any responses in bone lesions at all in this trial?

[Gisela Schwab]

Yes, is focused on trial, of course, on RECIST responses and we have 2 patients to include in the trial to satisfy the need for eligibility with measurable disease being present at inclusion. And so that was the key focus of the study. And with that, we are focusing on either soft tissue lesions or there could be lesions that are in soft tissue in association with bone. And of course, visceral metastases. So that is the key focus on the study. Also looking, of course, at bone metastasis and here, in particular, but bone scan, we would be looking at progression in bone rather than response in bone. And those responders that we have described have not progressed in bone lesions, for instance.

[Michael Morrissey, CEO, President & Director]

So George, again, as we talked about previously, the whole focus here was to take learnings from the comments and then apply them several years later to ask a simpler set of questions that we could get very clear clinical insight into without going into more controversial, if you will, readouts. And certainly, the bone scan response readouts back in the day, 2012, 2013, while very interesting, had -- we hadn't proven any correlation in terms of clinical benefit, right? So that we took a step back here and instead of trying to ask the big question across the entire population to really focus the effort around something that we could use RECIST 1.1 in terms of both enrollment and response assessment that would give us a clean, noncontroversial answer. And I think the data -- and I think some of the momentum we got from ASCO GU and all the excitement there is because largely because it was a very simple standard readout in terms of response assessment.

[George Farmer, BMO Capital Markets]

Okay. And then regarding the strategy for accelerated approval, I believe FDA has also focused on progression-free survival as an important surrogate. You talk a lot about duration of response, which is different. What sort of hurdle do you think you need to show for progression-free survival in the study, if any? Or is the DOR going to be sufficient, do you think?

[Gisela Schwab]

So in terms of progression-free survival really in order to evaluate this properly, we need a randomized approach, and then it's usually done in randomized Phase II or Phase III stress testing. When we're talking about the potential for an accelerated approval pathway, we're looking at a response rate and durability of those responses in a single-arm study such as we're doing now with the cohort 6.

[Operator]

Our next question comes from the line of Paul Choi with Goldman Sachs.

[Paul Choi, Goldman Sachs Group]

I also have a question on prostate. And maybe if you could help us thinking about where in the benchmarks that you think that the combination could result in terms of PFS? Any sort of baseline expectations or historical comparators you would reference to, particularly given cabozantinib's prior history as a monotherapy? If you could maybe just sort of from the landscape there that would be helpful for us? And then I had a follow-up question on biz devs.

[Gisela Schwab]

So right now, as I said, just a minute ago, we are looking at the response rate and durability of response. I think if we are successful in a potential accelerated approval path, of course, we are planning on conducting a Phase III evaluation, and we'll talk about the details and assumptions around that when the time comes. And we're ready to do so, and we're ready to initiate this study. But I think when you're talking about a progression-free survival, again, that would be an evaluation that is much stronger in a randomized setting such as a Phase III study.

[Paul Choi, Goldman Sachs Group]

Okay. And then as a follow up, we'll be sitting on a pretty nice cash pile at year-end based on your guidance. Could you maybe speak to how you think about uses of cash in terms of business development, I guess, depending on what your clinical successes over the next couple of quarters in terms of your major readouts that are coming up here?

[Michael Morrissey, CEO, President & Director]

Yes. So Paul, it's Mike. Obviously, we have a lot going on with cabo right now and a lot of confidence both in the progress and the opportunity that is there. Beyond that, we'd like to build, again, statement of the obvious, right, a diversified portfolio of drugs that can help more patients across a multitude of both modalities as well as pathways and targets. So we've got a lot going on in discovery right now.

As you saw kind of some of the year -- the press release that began the year, we've got a target to have up to 3 new INDs this year from both internal and collaborative sources. We're doing a lot of work right now across the board, looking at a variety of additional collaborations and/or assets and/or companies that we would like to understand if we can -- in the scenario where we move forward with those transactions, do they build value? And where is the risk involved? Where is the upside? How do we build conviction around the science, around the clinical and around the commercial opportunity? And I think that latter one is probably the most important from the standpoint of when you see a variety of different transactions over the last few years as well as just the challenge of launching drugs in this space with arguably good data and an approval can be somewhat onerous.

So look, we have a lot of success across the board, and we're looking to build a company that is based upon a diversified offering, both from internal as well as external sources. So that will continue. But the focus is doing the right deal for the right assets at the right time for the right price. And I think we're -- intrinsically, we have that discipline in place to make sure that we're doing the right work and spending the right amount of money to get the assets that we really believe can move the needle for us and for patients in the future.

[Operator]

Our next question comes from the line of Jeff Hung with Morgan Stanley.

[Jeff Hung, Morgan Stanley]

You've talked about how the HCC market was where RCC was years ago and that you'd have to help build out that market. And then in the next few weeks, cabo will have been approved for a year in second line HCC. So can you comment on how far you think you've come on building out that market for cabo in second line HCC? And what additional work needs to be done?

[Patrick Haley, EVP, Commercial]

Yes, this is P.J., thanks for the question, Jeff. We're certainly pleased with the progress we've made in our -- as you mentioned, approximately a year on the market. We are -- we're the #1 TKI and sort of our setting in the second line plus space, which is encouraging. And I think what we've always said about the market being built is it would take not only us, but a variety of different potential combinations moving upfront. And as I mentioned, I think the atezo/bev is going to be really the first catalyst there that could bring more patients into that sort of treatment funnel, so to speak, in the medical oncology setting in the first line. So I think we're on the cusp of potential more change there, similar to RCC, and then certainly excited about our study in 312 as we look forward in the HCC landscape. So more to come there.

[Jeff Hung, Morgan Stanley]

Great. And then can you talk about XL092 and remind us how it's different from cabo? And any specific properties you'd highlight that you think may be advantageous over cabo?

[Michael Morrissey, CEO, President & Director]

Yes, I'll be happy to take that question. Again, we haven't said a lot about the pharmacology of that molecule and the design considerations that went into that previously. We certainly plan to talk about that this year. And at least one medical meeting in the future sometime this year. So stay tuned on that. Once we get that slot, we'll talk about when that is, where that is, and then we'll be certainly happy to share both the thinking behind that and the work that went into helping us understand the value that this next-gen cabo could bring.

[Operator]

I'm showing no further questions at this time. And so I'd like to turn the call over to your host for today, Susan Hubbard. Ms. Hubbard?

[Susan Hubbard, EVP, Public Affairs & IR]

Thank you, Towanda, 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]

Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect. Everyone, have a wonderful day.