On May 1, 2017 Exelixis, Inc. (Nasdaq:EXEL) reported financial results for the first quarter of 2017 and provided an update on progress toward fulfilling its key corporate objectives, as well as commercial and clinical development milestones (Press release, Exelixis, MAY 1, 2017, View Source [SID1234518756]). Schedule your 30 min Free 1stOncology Demo! In 2017, Exelixis is focused on maximizing the opportunity for its two internally-discovered compounds, cabozantinib and cobimetinib, to improve care and outcomes for people with cancer around the world. The company’s foremost priority is the ongoing U.S. launch of CABOMETYX (cabozantinib) tablets as a treatment for patients with advanced renal cell carcinoma (RCC) who have received prior anti-angiogenic therapy. During the first quarter of 2017, CABOMETYX generated $62.4 million in net product revenue, while COMETRIQ (cabozantinib) capsules for the treatment of patients with progressive, metastatic medullary thyroid cancer generated an additional $6.5 million in net product revenue, for a combined $68.9 million in net product revenue for the cabozantinib franchise. In addition, Exelixis progressed its preparations to submit a supplemental New Drug Application (sNDA) for cabozantinib as a treatment for previously untreated patients with advanced RCC based on the positive data from the CABOSUN randomized phase 2 trial. Finally, Exelixis and its partner Genentech, a member of the Roche Group, are continuing to co-promote COTELLIC (cobimetinib) in combination with vemurafenib for the treatment of patients with unresectable or metastatic melanoma with a BRAF V600E mutation in the United States. Genentech continues to advance the cobimetinib clinical development program, and recently announced that IMblaze370, the phase 3 pivotal trial evaluating the combination of cobimetinib and atezolizumab in third-line advanced or metastatic colorectal cancer, achieved full enrollment in the first quarter of 2017. Two other phase 3 pivotal trials of combination regimens including cobimetinib are planned or underway in forms of advanced melanoma.
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"The Exelixis team’s progress this quarter is a launching point from which to build throughout 2017 as we work diligently to position the company as a sustainable business focused on improving the treatment of cancer for patients on a global basis," said Michael M. Morrissey, Ph.D., President and Chief Executive Officer of Exelixis. "During the first quarter of 2017, we reached the important milestone for our shareholders of achieving profitability based on operations. In addition, we further advanced cabozantinib’s commercialization and clinical development through our ongoing strong execution on the CABOMETYX U.S. launch, made additional progress in our preparations to submit a sNDA for previously untreated patients with advanced RCC, entered into important clinical development collaborations that will evaluate cabozantinib in combination with leading immunotherapies, and granted Japanese rights to a new cabozantinib partner, Takeda."
Dr. Morrissey continued: "Our partner Genentech moved cobimetinib, the second Exelixis-discovered compound, forward during the quarter as well, with the completion of enrollment in IMblaze370 in patients with advanced colorectal cancer. At Exelixis, we are focused on continuing to lay the groundwork for the future, including repaying our remaining debt this summer, planning to fund the company’s growth from its operations, and assessing in-licensing opportunities and resuming internal drug discovery. We are committed to a plan that involves measured and judicious growth to put the company in the best position to help patients and build long-term value."
Cabozantinib Highlights
Strong Growth in Cabozantinib Franchise Net Revenues. Cabozantinib generated $68.9 million in net product revenue during the first quarter of 2017, an increase of 33 percent from the fourth quarter of 2016 and an increase of 657 percent year-over-year. The year-over-year increase was driven primarily by the U.S. introduction of CABOMETYX following FDA approval in April 2016 as a treatment for patients with advanced RCC who have received prior anti-angiogenic therapy.
Partnership with Takeda for Japanese Commercialization and Development. In January 2017, Exelixis and Takeda jointly announced an exclusive licensing agreement for the commercialization and further development of cabozantinib in Japan, including rights to CABOMETYX and COMETRIQ. Under the terms of the agreement, Exelixis received a $50.0 million non-refundable upfront payment. Exelixis is eligible to receive development, regulatory, and first-sales milestones of $95.0 million for the first three planned indications. In addition, Exelixis will be eligible to receive royalties on sales by Takeda. Takeda will be responsible for 20 percent of the costs associated with the global cabozantinib development plan’s current and future trials, provided Takeda opts in to participate in such future trials, and 100 percent of costs associated with the cabozantinib development activities that are exclusively for the benefit of Japan.
Phase 1 Trial Results in Combination with Nivolumab and Ipilimumab in Advanced Genitourinary Tumors. At the ASCO (Free ASCO Whitepaper) Genitourinary Cancers Symposium in February 2017, investigators presented data from the phase 1 trial of cabozantinib in combination with nivolumab, with and without ipilimumab, in patients with previously treated genitourinary tumors including metastatic urothelial carcinoma and RCC. Data from this NCI-CTEP-sponsored study have informed the design of Exelixis and Bristol-Myers Squibb Company’s (BMS) planned phase 3 pivotal trial of cabozantinib in combination with these therapies in first-line RCC, which is expected to start later this year.
Collaborations for Late-Stage Development in Combination with Immunotherapies. In February 2017, Exelixis announced agreements with BMS and Roche to collaborate on the development of cabozantinib in combination with immunotherapy agents. Exelixis and BMS announced their intent to collaborate on the evaluation of cabozantinib in combination with Opdivo (nivolumab) alone or in combination with Yervoy (ipilimumab) in a phase 3 trial in first-line RCC, and potentially in other tumor types including hepatocellular carcinoma (HCC) and bladder cancer. These studies are anticipated to begin in 2017. The collaborations build upon previously published preclinical and clinical data that underscore the scientific rationale for combining cabozantinib with immunotherapies, and provide the resources and collaborative framework to evaluate the potential for cabozantinib combination regimens to benefit patients with a variety of cancers. Separately, Exelixis and Roche will collaborate to initiate the evaluation of cabozantinib in combination with Tecentriq (atezolizumab), an anti-PD-L1 antibody, in patients with advanced RCC or bladder cancer. Ipsen has opted in to participate in the phase 3 pivotal trial in first-line advanced RCC with BMS and to participate in the study with Roche, and will have access to the results to support potential future regulatory submissions and for potential future development in its territories.
Continued Progress on Filing in Previously Untreated Advanced RCC. During the first quarter, Exelixis continued to make progress on its sNDA for cabozantinib as a treatment for previously untreated advanced RCC, and the company remains on track to complete the filing in the third quarter of 2017.
Orphan Drug Designation for HCC; Update on CELESTIAL Timelines. In March, the U.S. Food & Drug Administration (FDA) granted cabozantinib orphan drug designation for the treatment of HCC. A phase 3 pivotal trial (CELESTIAL) of cabozantinib is ongoing in patients with advanced HCC, and Exelixis is tracking events closely and now anticipates the second interim analysis at 75 percent of the events required will be completed in the second half of 2017.
Cobimetinib Highlights
IMblaze370 in Advanced Colorectal Cancer Completes Enrollment. Roche and Genentech recently announced that IMblaze370, the phase 3 pivotal trial evaluating the combination of cobimetinib and atezolizumab in third-line advanced or metastatic colorectal cancer, achieved full enrollment in the first quarter of 2017.
Two Pivotal Trials in Melanoma to Be Underway in 2017. In addition to the progress with IMblaze370, Roche has made it public that IMspire150 TRILOGY, which evaluates the combination of cobimetinib, atezolizumab, and vemurafenib in first-line BRAF V600 mutation-positive metastatic or unresectable locally advanced melanoma, enrolled its first patient in January 2017. IMspire170, a planned pivotal trial of cobimetinib and atezolizumab vs. pembrolizumab in first-line BRAF wild-type metastatic or unresectable locally advanced melanoma, is expected to enroll its first patient in the second quarter of this year.
Update on Dispute between Exelixis and Genentech. In January 2017, Exelixis announced that Genentech, a member of the Roche Group, had withdrawn its counterclaim against Exelixis in the ongoing JAMS arbitration concerning alleged breaches of the parties’ collaboration agreement. Genentech had asserted a counterclaim for breach of contract, which sought monetary damages and interest related to cost allocations under the collaboration agreement. When notifying the arbitral panel, and Exelixis, of this unilateral action, Genentech further stated that it is changing the manner in which it allocates promotional expenses of the COTELLIC plus Zelboraf (vemurafenib) combination therapy. Genentech’s revised allocation applies retrospectively and prospectively and substantially reduces Exelixis’ exposure to costs associated with promotion of the COTELLIC plus Zelboraf combination in the United States. Notwithstanding Genentech’s change of approach, other significant issues remain in dispute between the parties. As a result, we will continue to press our position before the arbitral panel to obtain a just resolution of these claims. The ultimate outcome and timing of the arbitration is difficult to predict.
Corporate Highlights
Reduced Indebtedness Through Repayment of Silicon Valley Bank Loan. In late March 2017, Exelixis repaid all amounts outstanding under its term loan with Silicon Valley Bank initiated in 2010 and which was due for repayment on May 31, 2017. The payment included $80.0 million in principal plus $0.1 million in accrued and unpaid interest. The company also plans to repay the Deerfield Notes, a series of Convertible Secured Notes issued to entities associated with Deerfield Management Company, L.P. due July 1, 2018. Exelixis has designated the Deerfield Notes a Current Liability given its ability and intent to retire them on or about July 1, 2017, one year ahead of their maturity date. As of March 31, 2017, the carrying balance on the Deerfield Notes was $113.9 million with the total of $124.9 million due at maturity. Retiring the Deerfield Notes one year ahead of their maturity date will provide the company a savings of approximately $12 million in interest expense, net of the termination fee.
Cabozantinib and Cobimetinib Data Presentations at the 2017 ASCO (Free ASCO Whitepaper) Annual Meeting. Exelixis-discovered compounds will be the subject of 13 presentations, including further analysis of the METEOR study in advanced RCC as well as updated results from the phase 1b combination trial of cabozantinib plus immunotherapy in genitourinary tumors. Additional cabozantinib data presentations will include results from trials in endometrial cancer and uterine carcinosarcoma. Cobimetinib data will include updates from the early stage combination trials of cobimetinib plus atezolizumab, and plus atezolizumab and vemurafenib, which have informed the design of several of Roche’s ongoing or planned phase 3 pivotal trials.
2017 Financial Guidance
The company is reiterating its previously provided guidance that total costs and operating expenses for the full year will be between $290 million and $310 million. This guidance includes approximately $25 million of non-cash costs and expenses related primarily to stock-based compensation expense.
First Quarter 2017 Financial Results
Total revenues for the quarter ended March 31, 2017 were $80.9 million, compared to $15.4 million for the comparable period in 2016. Total revenues include $68.9 million of net product revenues compared to $9.1 million for the comparable period in 2016. The increase in net product revenues primarily reflects the impact of the commercial launch of CABOMETYX in late April 2016. Total revenues also include $12.0 million of collaboration revenues compared to $6.3 million for the comparable period in 2016. Collaboration revenues for the quarter ended March 31, 2017 include $4.5 million, $2.7 million and $2.3 million earned under our collaboration agreements with Ipsen, Takeda and Genentech, respectively, and $2.5 million in contract revenues from a milestone payment received from BMS related to its ROR gamma program. In comparison, during the three months ended March 31, 2016, collaboration revenues include $1.2 million and $0.1 million in collaboration revenue under our collaboration agreements with Ipsen and Genentech, respectively, and $5.0 million in contract revenues from a milestone payment received from Merck related to its worldwide license of our PI3K-delta program.
Research and development expenses for the quarter ended March 31, 2017 were $23.2 million, compared to $28.9 million for the comparable period in 2016. The decrease in research and development expenses were primarily a result of decreases in clinical trial costs for METEOR, the company’s phase 3 trial in advanced RCC and share-based compensation; those decreases were partially offset by an increase in personnel related expenses resulting from an increase in headcount predominantly associated with the build-out of the Exelixis medical affairs organization.
Selling, general and administrative expenses for the quarter ended March 31, 2017 were $34.3 million, compared to $34.9 million for the comparable period in 2016. The decrease in selling, general and administrative expenses was primarily a result of decreases in marketing costs due to a decrease in losses under the collaboration agreement with Genentech and stock-based compensation; those decreases were almost entirely offset by increases in personnel expenses resulting from an increase in headcount connected with the build-out of the Exelixis U.S. commercial organization and an increase in legal costs.
Other expense, net for the quarter ended March 31, 2017 was a net expense of $3.4 million compared to $10.1 million for the comparable period in 2016. The decrease in other expense, net, was primarily due to a decrease in interest expenses as a result of the 2016 conversions and redemption of the 4.25 percent Convertible Subordinated Notes due 2019.
Net income for the quarter ended March 31, 2017 was $16.7 million, or $0.06 per share, basic, and $0.05 per share, diluted, compared to a net loss of $(59.2) million, or $(0.26) per share, basic and diluted, for the comparable period in 2016. The decrease in net loss for the quarter ended March 31, 2017 was primarily due to the increase in net product and collaboration revenues and the decrease in operating and interest expenses.
Cash and cash equivalents, short- and long-term investments and long-term restricted cash and investments totaled $475.8 million at March 31, 2017, as compared to $479.6 million at December 31, 2016.
Basis of Presentation
Exelixis adopted a 52- or 53-week fiscal year that generally ends on the Friday closest to December 31st. For convenience, references in this press release as of and for the fiscal periods ended March 31, 2017, December 30, 2016 and April 1, 2016 are indicated as being as of and for the periods ended March 31, 2017, December 31, 2016 and March 31, 2016, respectively.