On November 5, 2020 Exelixis, Inc. (Nasdaq: EXEL) reported financial results for the third quarter of 2020 and provided an update on progress toward fulfilling its key corporate objectives, as well as commercial and clinical development milestones (Press release, Exelixis, NOV 5, 2020, View Source [SID1234570072]).

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"In the third quarter of 2020, the Exelixis team built the foundation to accelerate revenue growth with CABOMETYX (cabozantinib) in 2021," said Michael M. Morrissey, Ph.D., President and Chief Executive Officer of Exelixis. "Based on the positive results from the CheckMate -9ER phase 3 pivotal trial evaluating cabozantinib in combination with nivolumab in previously untreated patients with advanced renal cell carcinoma, we and Bristol Myers Squibb completed our respective regulatory filings for the combination in August. In September, the first detailed results from the trial were presented during a Presidential Symposium of the ESMO (Free ESMO Whitepaper) Virtual Congress 2020. And then just last month, we announced the FDA accepted the filings, granted Priority Review designation and assigned an action date of February 20th of next year. Exelixis is launch-ready and prepared to immediately support this important new combination regimen, pending FDA approval."

Dr. Morrissey continued: "As we continue working to maximize the clinical and commercial potential for CABOMETYX, we’re moving quickly in parallel to build a diversified pipeline behind it. In October, we presented the preclinical profile and initial clinical pharmacokinetic data for XL092, our next-generation oral tyrosine kinase inhibitor that builds on the experience and target profile of cabozantinib with improved characteristics, including a shorter pharmacokinetic half-life. Encouraged by the data we’ve seen to date, we expanded the phase 1 study to evaluate XL092 in combination with atezolizumab in multiple solid tumors, with enrollment now underway. The XL092 program is an important component of our growing pipeline, as well as an opportunity to drive growth into new and potentially larger indications with unmet medical need. We further strengthened our pipeline during the quarter through business development activities, with two additional collaboration and license agreements focused on the discovery and development of novel antibody-drug conjugates. Our continued efforts to expand the breadth and depth of our discovery pipeline beyond small molecules, along with a focused investment in the development of cabozantinib and XL092, have the potential to drive top-line growth significantly for Exelixis, and provide new treatment options for the patients we serve."

2020 Financial Results
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November 5, 2020
Third Quarter 2020 Financial Results

Total revenues for the quarter ended September 30, 2020 were $231.1 million, compared to $271.7 million for the comparable period in 2019.

Total revenues for the quarter ended September 30, 2020 included net product revenues of $168.6 million, compared to $191.8 million for the comparable period in 2019. The decrease in net product revenues was due to a decrease in sales volumes driven by decreases in prescriptions, which were in line with market trends, and lower customer inventory.

Collaboration revenues, composed of license revenues and collaboration services revenues, were $62.5 million for the quarter ended September 30, 2020, compared to $79.9 million for the comparable period in 2019. The decrease in collaboration revenues was primarily related to a decrease in the recognition of milestone related revenues, which was partially offset by increases in development cost reimbursements earned, and higher royalty revenues for the sales of cabozantinib outside of the U.S. generated by Exelixis’ collaboration partners, Ipsen Pharma SAS (Ipsen) and Takeda Pharmaceutical Company Limited (Takeda).

Research and development expenses for the quarter ended September 30, 2020 were $176.8 million, compared to $97.3 million for the comparable period in 2019. The increase in research and development expenses was primarily related to increases in clinical trial costs, license and other collaboration costs and personnel expenses. The increase in clinical trial costs was primarily due to costs associated with expanding clinical trial programs for cabozantinib, which includes CONTACT-02, COSMIC-313, COSMIC-312 and COSMIC-021. The increase in license and other collaboration costs was primarily due to an increase in upfront license fee payments from recent business development activities with two additional collaboration and license agreements focused on the discovery and development of novel antibody-drug conjugates (ADCs). The increase in personnel expenses was primarily due to an increase in stock-based compensation expense attributable to the performance-based restricted stock units (PSUs) granted in 2019 that became probable of achievement during the third quarter of 2020 and an increase in headcount to support Exelixis’ expanding discovery and development efforts.

Selling, general and administrative expenses for the quarter ended September 30, 2020 were $88.2 million, compared to $51.3 million for the comparable period in 2019. The increase in selling, general and administrative expenses was primarily related to increases in personnel expenses and marketing costs. The increase in personnel expenses was primarily due to an increase in stock-based compensation expense attributable to the PSUs granted in 2019 that became probable of achievement during the third quarter of 2020 and an increase in administrative headcount to support Exelixis’ commercial and research and development organizations.

Provision for (benefit from) income taxes for the quarter ended September 30, 2020 was $(6.0) million, compared to $25.2 million for the comparable period in 2019, primarily due to the change in pre-tax income (loss).

GAAP net income (loss) for the quarter ended September 30, 2020 was $(32.0) million, or $(0.10) per share, basic and diluted, compared to GAAP net income of $97.5 million, or $0.32 per share, basic and $0.31 per share, diluted, for the comparable period in 2019. The change in GAAP net income was primarily related to an increase in operating expenses and a decrease in total revenues.

Non-GAAP net income for the quarter ended September 30, 2020 was $11.2 million, or $0.04 per share, basic and diluted, compared to non-GAAP net income of $107.6 million, or $0.35 per share, basic and $0.34 per share, diluted, for the comparable period in 2019. Non-GAAP net income excludes stock-based compensation, adjusted for the related income tax effect.
Exelixis Third Quarter 2020 Financial Results
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November 5, 2020
Cash and investments were $1.5 billion at September 30, 2020, compared to $1.4 billion at December 31, 2019.

Non-GAAP Financial Measures

To supplement Exelixis’ financial results presented in accordance with U.S. Generally Accepted Accounting Principles (GAAP), Exelixis presents non-GAAP net income (and the related per share measures), which excludes from GAAP net income (loss) (and the related per share measures) stock-based compensation expense, adjusted for the related income tax effect for all periods presented.

Exelixis believes that the presentation of these non-GAAP financial measures provides useful supplementary information to, and facilitates additional analysis by, investors. In particular, Exelixis believes that these non-GAAP financial measures, when considered together with its financial information prepared in accordance with GAAP, can enhance investors’ and analysts’ ability to meaningfully compare Exelixis’ results from period to period, and to identify operating trends in Exelixis’ business. Exelixis has excluded stock-based compensation expense, adjusted for the related income tax effect, because it is a non-cash item that may vary significantly from period to period as a result of changes not directly or immediately related to the operational performance for the periods presented. Exelixis also regularly uses these non-GAAP financial measures internally to understand, manage and evaluate its business and to make operating decisions.

These non-GAAP financial measures are in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Exelixis encourages investors to carefully consider its results under GAAP, as well as its supplemental non-GAAP financial information and the reconciliation between these presentations, to more fully understand Exelixis’ business. Reconciliations between GAAP and non-GAAP results are presented in the tables of this release.

2020 Financial Guidance
Cabozantinib Highlights

Cabozantinib Franchise Net Product Revenues and Royalties. Net product revenues generated by the cabozantinib franchise in the U.S. were $168.6 million during the third quarter of 2020, with net product revenues of $159.6 million from CABOMETYX and $9.0 million from COMETRIQ (cabozantinib). Based upon cabozantinib-related revenues generated by Exelixis’ collaboration partner Ipsen in the third quarter of 2020, Exelixis earned $19.9 million in royalty revenues.
Exelixis Third Quarter 2020 Financial Results
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Initiation of CONTACT-03 Phase 3 Pivotal Trial of Cabozantinib in Combination with Atezolizumab in Previously Treated Metastatic Renal Cell Carcinoma (RCC). In July 2020, Exelixis announced the initiation of CONTACT-03, a global phase 3 pivotal trial of cabozantinib in combination with atezolizumab in patients with inoperable, locally advanced or metastatic RCC who progressed during or following treatment with an immune checkpoint inhibitor as the immediate preceding therapy. CONTACT-03 is part of a clinical trial collaboration between Exelixis and F. Hoffmann-La Roche Ltd. that includes two additional ongoing phase 3 pivotal trials – CONTACT-01 in patients with metastatic non-small cell lung cancer who have been previously treated with an immune checkpoint inhibitor and platinum-containing chemotherapy and CONTACT-02 in patients with metastatic castration-resistant prostate cancer (mCRPC) who have been previously treated with one novel hormonal therapy.

Completion of Patient Enrollment for EXAMINER Phase 4 Trial of Cabozantinib in Metastatic Medullary Thyroid Cancer. In July 2020, Exelixis announced the completion of patient enrollment in EXAMINER, the phase 4 trial evaluating the safety and efficacy of the 60 mg tablet formulation of cabozantinib compared with the 140 mg capsule formulation, which is marketed as COMETRIQ, for the treatment of patients with progressive, metastatic medullary thyroid cancer. EXAMINER is a post-marketing requirement from the U.S. Food and Drug Administration (FDA) and the European Commission. The trial was designed to enroll up to 250 patients, and top-line results from the trial are anticipated later this year.

Submission of Supplemental New Drug Application (sNDA) to and Acceptance by the FDA for Cabozantinib in Combination with Nivolumab for Advanced Renal Cell Carcinoma. In August 2020, Exelixis announced the submission of an sNDA to the FDA for cabozantinib in combination with Bristol-Myers Squibb Company’s (BMS) nivolumab for patients with advanced RCC. The sNDA submission was based on the positive results of the CheckMate -9ER phase 3 pivotal trial, which met its primary endpoint of significantly improving progression-free survival (PFS) and secondary endpoints of overall survival (OS) and objective response rate. In October 2020, Exelixis and BMS announced that the FDA had accepted Exelixis’ sNDA and BMS’ supplemental Biologics License Application (sBLA), granted Priority Review to both applications and assigned a Prescription Drug User Fee Act goal date, or target action date, of February 20, 2021.

Completion of Patient Enrollment for the COSMIC-312 Phase 3 Pivotal Trial in Previously Untreated Hepatocellular Carcinoma (HCC). In August 2020, Exelixis announced the completion of patient enrollment in COSMIC-312, a global phase 3 pivotal trial evaluating cabozantinib in combination with atezolizumab versus sorafenib as a treatment for patients with previously untreated advanced HCC, providing the patient population for the event-driven analyses of the study’s endpoints. Separately, patient enrollment remains open in China in order to enroll a sufficient number of patients to enable local registration, if supported by the clinical data. The co-primary endpoints of the trial are PFS and OS for the combination of cabozantinib and atezolizumab versus sorafenib. Based on current event rates, Exelixis anticipates announcing top-line results in the first half of 2021.

Presentation of Positive Results from CheckMate -9ER Phase 3 Pivotal Trial during Presidential Symposium I at the European Society for Medical Oncology Virtual Congress 2020 (ESMO 2020). In September 2020, Exelixis and BMS announced the first presentation of results from the CheckMate -9ER phase 3 pivotal trial as part of Presidential Symposium I at ESMO (Free ESMO Whitepaper) 2020, in which cabozantinib in combination with nivolumab demonstrated significant improvements across all efficacy endpoints, including OS, in previously untreated advanced RCC, with a favorable tolerability profile versus sunitinib.

Validation of Regulatory Filings for Cabozantinib plus Nivolumab in the European Union (EU). In September 2020, Exelixis, BMS and Ipsen announced that the European Medicines Agency (EMA) had validated BMS’ and Ipsen’s type II variation applications for cabozantinib plus nivolumab, which confirmed the submissions were complete and began the EMA’s centralized review process. Like BMS’ and Exelixis’ own regulatory filings in the
Exelixis Third Quarter 2020 Financial Results
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November 5, 2020
United States, BMS’ and Ipsen’s EU filings were based on positive data from the CheckMate -9ER phase 3 pivotal trial.

Presentation of Positive Results from Two RCC Cohorts of the COSMIC-021 Trial of Cabozantinib in Combination with Atezolizumab at ESMO (Free ESMO Whitepaper) 2020. In September 2020, Exelixis presented positive phase 1b clinical trial results for the combination of cabozantinib and atezolizumab in patients with locally advanced or metastatic solid tumors at ESMO (Free ESMO Whitepaper) 2020. Data from the clear cell RCC and non-clear cell RCC expansion cohorts of the COSMIC-021 trial were presented as part of the GU Proffered Paper Session and as part of a poster presentation, respectively, and showed that cabozantinib in combination with atezolizumab demonstrated promising preliminary efficacy and a favorable safety profile.

Announcement of Submission of Supplemental Application for Cabozantinib in Combination with Nivolumab in Japan for the Treatment of Unresectable, Advanced or Metastatic RCC. In October 2020, Exelixis announced that its collaboration partner Takeda, and Ono Pharmaceuticals Co., Ltd. (Ono), submitted a supplemental application to the Japanese Ministry of Health, Labour and Welfare for Manufacturing and Marketing Approval of cabozantinib in combination with nivolumab for the treatment of patients with unresectable, advanced or metastatic RCC. The application is also based on the results from the CheckMate -9ER study. Takeda has licensed the exclusive rights to cabozantinib from Exelixis for development and commercialization in Japan, while Ono jointly develops and commercializes nivolumab, in collaboration with BMS, in Japan, South Korea and Taiwan. Takeda previously received approval in March 2020 to market single-agent cabozantinib for the treatment of patients with curatively unresectable or metastatic RCC in Japan.

Pipeline Highlights

Presentations of Data for XL092 and AUR102 at the 32nd EORTC-NCI-AACR (Free EORTC-NCI-AACR Whitepaper) (ENA) Symposium on Molecular Targets and Cancer Therapeutics. In October 2020, Exelixis presented the preclinical profile and initial clinical pharmacokinetics (PK) for XL092 at the ENA Symposium. The poster discussion presentation included preclinical results demonstrating robust target and tumor growth inhibition, as well as increased efficacy for XL092 when combined with an immune checkpoint inhibitor. PK data from the ongoing phase 1 trial suggested a significantly shorter PK half-life for XL092 as compared to cabozantinib. Also at the ENA Symposium, Aurigene presented promising preclinical data for AUR102, its novel inhibitor of cyclin-dependent kinase 7, including potent anti-tumor activity in a large panel of cancer cell lines. Exelixis has an exclusive option for AUR102 under its July 2019 exclusive collaboration, option and license agreement with Aurigene. Exelixis’ option window extends up until the time of Investigational New Drug application (IND) acceptance; AUR102 could be the subject of an IND later this year.

Enrollment of First Patient in Phase 1 Trial Cohort Evaluating XL092 in Combination with Atezolizumab in Patients with Advanced Solid Tumors. In October 2020, Exelixis announced enrollment of the first patient into the dose-escalation cohort of the combination arm of the phase 1 trial evaluating the safety, tolerability, PK and preliminary anti-tumor activity of XL092 alone and in combination with atezolizumab in patients with advanced solid tumors. Initiated in February 2019, the dose-escalation evaluation of the XL092 monotherapy arm of the phase 1 trial is ongoing. Once the recommended doses of both single-agent XL092 and XL092 in combination with atezolizumab are established, the trial will begin to enroll expansion cohorts for patients with clear cell and non-clear cell RCC, hormone-receptor positive breast cancer and mCRPC.

Corporate Updates

FDA Approves TECENTRIQ (Atezolizumab) Plus COTELLIC (Cobimetinib) and ZELBORAF (Vemurafenib) for Previously Untreated BRAF V600 Mutation-Positive Advanced Melanoma. In July 2020, the FDA approved the sBLA submitted by Genentech, Inc. (a member of the Roche Group) (Genentech), for TECENTRIQ plus COTELLIC
Exelixis Third Quarter 2020 Financial Results
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conference call to ensure adequate time for any software download that may be required to listen to the webcast. Alternatively, please call 855-793-2457 (domestic) or 631-485-4921 (international) and provide the conference call passcode 6945239 to join by phone.

A telephone replay will be available until 8:00 p.m. EST on November 7, 2020. Access numbers for the telephone replay are: 855-859-2056 (domestic) and 404-537-3406 (international); the passcode is 6945239. A webcast replay will also be archived on www.exelixis.com for one year.
Exelixis Third Quarter 2020 Financial Results
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November 5, 2020
conference call to ensure adequate time for any software download that may be required to listen to the webcast. Alternatively, please call 855-793-2457 (domestic) or 631-485-4921 (international) and provide the conference call passcode 6945239 to join by phone.

A telephone replay will be available until 8:00 p.m. EST on November 7, 2020. Access numbers for the telephone replay are: 855-859-2056 (domestic) and 404-537-3406 (international); the passcode is 6945239. A webcast replay will also be archived on www.exelixis.com for one year.