Exelixis, Inc.

(NASDAQ:EXEL) Q3 2020 Earnings Conference Call November 5, 2020 5:00

PM ET

Company Participants

Susan Hubbard – Executive Vice President-Public Affairs and Investor Relations

Mike Morrissey – President and Chief Executive Officer

Chris Senner – Chief Financial Officer

Peter Lamb – Chief Scientific Officer

Gisela Schwab – Chief Medical Officer

P.J. Haley – Executive Vice President-Commercial

Conference Call Participants

Asthika Goonewardene – Truist

Chi Tran – Bank of America

Peter Lawson – Barclays

Andy Hsieh – William Blair

Leo Wallen – Cowen

Michael Schmidt – Guggenheim

Kennen MacKay – RBC Capital Markets

Duane Kailas – Needham & Company

Stephen Willey – Stifel

Charlie Ferranti – Goldman Sachs

Operator

Good day, ladies and gentlemen, and welcome to the Exelixis’ Third Quarter 2020
Financial Results Conference Call. My name is Holly, and I will be your operator
for today. As a reminder, this call is being recorded for replay purposes.

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

Susan Hubbard

Thank you, Holly and thank you all for joining us for the Exelixis’ third quarter
2020 financial results conference call. Joining me on today’s call are Mike
Morrissey, our President and CEO; Chris Senner, our Chief Financial Officer; Gisela
Schwab, our Chief Medical Officer; Peter Lamb, our Chief Scientific Officer; and
P.J. Haley, our Executive Vice President of Commercial, who will together review
our corporate, financial, commercial and development progress for the third quarter
2020 ended September 30, 2020.

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, commercials, financial and strategic matters. Actual
events or results could, of course, differ materially. We refer you to the
documents we file from time to time with the SEC, which, under the heading Risk
Factors, identify important factors that could cause actual results to differ
materially from those expressed by the company verbally and in writing today,
including without limitation, risks and uncertainties related to product commercial
success, market competition, regulatory review and approval processes, conducting
clinical trials, compliance with applicable regulatory requirements, our dependence
on collaboration partners and the level of costs associated with the discovery,
product development, business development and commercialization activity.

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

Mike Morrissey

All right. Thank you, Susan and thanks to everyone for joining us on the call
today. Exelixis has continued to advance all components of our business in the
third quarter, as we built the foundation to accelerate revenue growth for
cabozantinib in 2021 with potential new commercial opportunities and a variety of
mission critical developments and regulatory milestones. Please see our press
release that was issued an hour ago for our third quarter 2020 financial results
and an extensive list of key corporate accomplishments.

The highlight of the quarter was the ESMO presentation of the positive results from
the CheckMate -9ER, the Phase 3 pivotal trial evaluating the cabo/nivo combination
in first-line RCC. We’re excited to highlight the compelling activity of the
cabo/nivo doublet, notably the significant improvement in overall survival with a
doubling of both progression-free survival and objective response rate to extended
duration of response, the improved tolerability with low discontinuation rates and
improvements in health-related quality of life compared to sunitinib. The FDA has
accepted our application and granted a prior review with the PDUFA date of February
20, 2021. The Exelixis commercial organization is launch-ready and the United
States, should approval come sooner.

Our urgency and focus are driven by that consistent feedback from ESMO at -9ER
represents best-in-class IO, TKI data and reinforced by recent market research,
which indicates that a large number of previously untreated RCC patients could
benefit from the combination of these two market-leading single agents. When the
size of the first-line RCC patient population and long duration of PFS observed
with the cabo/nivo doublet are viewed together, we project a potential doubling of
cabo RCC revenues and expect to exit 2022 with a $1.5 billion annualized run rate
in the U.S. if our assumptions and modeling are accurate.

Our first-line RCC remains our top priority as the next commercial growth
opportunity for cabozantinib. We continue to make important progress with key
discovery and development activities while advancing cabo’s potential utility in
additional oncology indications. Notable progress has been made in Q3 and
throughout 2020, and enrolling the four cosmic trials, including 021, 311, 312 and
313, as well as initiating three new global Phase 3 pivotal trials of cabozantinib
in combination with atezolizumab as part of the CONTACT clinical trial program.
The success of CheckMate -9ER, coupled with data presented this year at various
ESCO meetings for cabo/IO combinations in liver, prostate, lung and bladder cancers
highlights the important role cabozantinib can play as a unique and differentiated
TKI backbone. These early signals of compelling efficacy and tolerability may
provide potential encouraging read through for current pivotal trials in new
indications.

Finally, Exelixis continues to make significant progress in our growing early stage
pipeline. We are excited to advance XL092 into ICI combination cohorts and share
the initial detail of its discovery and early clinical pharmacokinetic
characterization, which validates our overall efforts to build an improved next-gen
multi-targeted TKI that phenocopies cabo’s target inhibition profile with a more
user-friendly clinical half-life. We aim to apply our 15 plus years of clinical
experience with cabo to a broad and accelerated development plan that has the
potential to demonstrate a substantially improved risk profile compared to more
typical early stage programs. We anticipate XL092 will move into full development
in 2021.

Beyond XL092, our early stage pipeline continues to advance nicely with internal
discovery efforts in a number of important new collaborations to reinforce our
growing presence in ADCs. We expect to file up to four new INDs over the next six
months as a result of our internal efforts and the work of our discovery partners.
I’m incredibly proud of a commitment and focus displayed by the entire Exelixis
team as we continue to drive our business forward during these challenging times.

So with that, I’ll turn the call over to Chris, who will provide an update on our
Q3 financial results.

Chris Senner

Thanks, Mike. For the third quarter of 2020, the company reported total revenues of
$231.1 million. Total revenues for the quarter included cabozantinib franchise net
product revenues of $168.6 million. Net product revenues in the third quarter of
2020 were negatively impacted by lower demand and by a decline in wholesale
inventory. Total revenues also included $62.5 million in collaboration revenues
from Ipsen, Takeda and Genentech. Our total operating expenses for the third
quarter of 2020 were $273.7 million compared to $183.9 million in the second
quarter of 2020.

R&D expense was the primary driver of the increase in total operating expenses,
which increased by approximately $61.8 million and was primarily related to
increases in licensing and milestones fees associated with existing and new
business development activities, stock-based compensation expense and clinical
trial expenses from our continuing investments in cabozantinib and our emerging
pipeline.

Provision for our benefit from income taxes for the third quarter of 2020 was the
benefit of $6 million compared to a provision for income taxes of $13.9 million for
the second quarter of 2020. The company reported a GAAP net loss of $32 million or
$0.10 per share basic for the third quarter of 2020. The company also reported non-
GAAP net income of $11.2 million or $0.04 per share on a fully diluted basis. Non-
GAAP net income excludes the impact of approximately $43 million to stock-based
compensation expense net of the related income tax effect. Cash and investments for
the quarter ended September 30, 2020 was over $1.5 billion.

Now, turning to our fiscal year 2020 financial guidance. We have updated in the
financial guidance we provided earlier this year to reflect the changes to our
business in the second half of 2020. We are maintaining our total revenues
guidance, which we expect to be in the range of $900 million and $950 million due
to higher milestone and R&D reimbursement revenues.

Net product revenues are expected to be in the range of $700 million and $725
million. Cost of goods sold is expected to be approximately 5% of net product
revenues. Research and development expenses are increasing due primarily to higher
forecasted licensing expenses and are expected to be in the range of $550 million
and $575 million, which includes non-cash expenses related to stock-based
compensation of approximately $40 million.

Selling, general and administrative expenses are increasing due primarily to

incremental personnel related costs and are expect to be in the range of $290
million and $300 million, which includes non-cash expenses, related to stock-based
compensation approximately $70 million.

Guidance for the effective tax rate in 2020 is decreasing; it is now expected to be
in the range of 14% and 16%. And finally, we’re projecting cash and investments to
be in the range of $1.5 billion and $1.6 billion. This guidance does not include
the impact of potential new business development activities.

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

Peter Lamb

Thanks, Chris. I’m happy to provide an update on our preclinical development and
pipeline expansion efforts. Work at our discovery laboratories and Alameda is
continuing following stringent protocols to protect the health of our employees. It
is exciting to see the ongoing flow of data and we’re continuing to make progress
on an early stage discovery program and I’d like to take this opportunity to thank
all of our discovery team members for making this happen.

Work at our discovery partners, particularly Invenra, Aurigene and Iconic, has
continued to advance as has preclinical development work at our network of CROs. As
a result, we now have the opportunity to file up to four INDs in the next six
months. This quarter, we could file INDs for the CDK7 inhibitor, AUR102 from our
Aurigene collaboration, which going forward, we will refer to with the XL102; and
the tissue factor-targeting ADC ICON-2 from our Iconic collaboration, which we will
refer to as XB002, going forward. Early next year, we could also file INDs for
XL265, a TAM kinase focused TKI from our internal laboratories and in second
compound from our Aurigene collaboration with a novel mechanism of action.

We recently presented data on XL092, our next-generation MET, VEGFR, AXL, MER
inhibitor that is currently in Phase 1 trials at the recent EORTC-NCI-AACR
meetings. In addition, Aurigene presented data on XL102, the CDK7 inhibitor at the
same meeting, and Iconic presented data on XP002 the tissue factor-targeting ADC at
the recent World ADC Conference. We plan to present data on XL265 and the second
Aurigene compound at major scientific meetings next year.

I will recap some of the key data from the XL092 presentation. XL092 is intended to
build on the in-depth understanding that we’ve gained with respect to the clinical
activity of cabozantinib, both as a single agent and in combination. Cabozantinib
is a potent inhibitor of the RTKs, MET, VEGFR2, AXL and MER, which are widely
expressed on tumor cells and on cells in the tumor microenvironment. Both MER and
AXL are overexpressed in a variety of solid tumors and their activation drives
tumor growth, survival invasion, and metastasis. In particular, upregulation of MET
and increasingly AXL has been linked to resistance to multiple therapeutic
interventions, including chemotherapy, targeted therapy and the angiogenic therapy,
radiation and immune checkpoint blockade.
Both MET and VEGFR2 were also expressed in the tumor endothelium and their
activation promotes tumor angiogenesis. All four RTKs are expressed in various
immune cell types in the tumor microenvironment and the activation from multi-
immune suppression. For example, activation of AXL and MER on tumor-associated
macrophages promotes immune suppressive M2 macrophage phenotype. Activation of
VEGFR2 promotes Treg and MDSC proliferation while MET activation inhibits antigen
presentation by dendritic cells.

Upregulation and activation of MET in a suppressive subset of neutrophils also

occurs in response to immune checkpoint blockade in a preclinical model and install
to drive resistance. Cabozantinib assuming promising activity in combination with
PD-1 or PD-L1 antibodies in Phase 1b and Phase 3 clinical trials. In the clinics,
cabozantinib has the terminal half-life of about 99 hours, which results in initial
drug accumulation and an extended washout period when drug is withdrawn.
Arraignment optimizing XL092 was to identify a compound with a similar target
inhibition profile to cabozantinib, but with a shorter clinical half-life.

The in vitro profile of XL092 shows that it’s potent inhibitor of MET, VEGFR2, AXL
and MER in biochemical and cellular assays with the relative activities gets you to
RTKs being comfortable to cabozantinib. Oral dosing of XL092 to tumor-bearing mice
results in profound inhibition of MET and AXL activity in tumors and a VEGFR2
activity in lung tissue consistent with its in vitro profile. XL092, it’s highly
active, but well-tolerated doses in multiple xenograft models with activity that’s
cabozantinib. XL092 those who have been tested in the CT26 mirroring syngeneic
colon carcinoma model this as a single agent and in combination with a PD-1
antibody. This model is relatively refractory to PD-1 antibodies and a PD-1
antibody alone did not improve the survival of mice compared to vehicle.

In contrast, single agent XL092 significantly improved survival, notably the

combination of XL092 and PD-1 antibody resulted in a further improvement in
survival, suggesting synergistic activity for the combination. All treatments were
well tolerated. XL092 can’t be in a Phase 1 trial in patients with advanced solid
tumors. Over four cohorts and two formulations that’s dependent on increases in
Cmax and AUC revenues. The terminal half-life for XL092 is between 20 hours and 28
hours, significantly shorter than the 99 hour terminal half-life for cabozantinib.
Overall, the data show the XL092 meets to go with maintaining the cabozantinib
target inhibition profile while having a significantly shorter clinical
pharmacokinetic half-life.

We’ve had a very busy quarter from the business development perspective and are
advancing a number of discussions. We continue to assess opportunities in both the
small molecule and biologic space, which we find scientifically compelling and when
we see a clear path forward for us to effectively develop and commercialize with an
emphasis on clinical – on a clinical stage programs.

We recently announced new collaborations with Redwood Catalent’s and NBE-

Therapeutics to develop novel ADCs using their respective site-specific conjugation
and payload technologies. Through these collaborations, we intend to develop a
pipeline of ADCs to address a broad spectrum of tumor types by targeting selected
tumor antigens, specifically matched with the most appropriate payloads for a given
indication. These would follow on from what would be our first ADC to reach the
clinic, XB002. That’s the subject of our collaboration with Iconic until which IND
filing could occur in the near future. We look forward to providing additional
updates on these BD discussions as they come to fruition.

I’ll now turn the call over to Gisela.

Gisela Schwab

Thank you, Peter. I’m pleased to provide an update on our cabozantinib regulatory
and development program progress on XL092, and new compounds moving towards IND.

I’ll start with CheckMate -9ER. We’ve made a lot of progress since the positive
top-line results were announced for cabozantinib and nivolumab combination in
first-line RCC, in late April by BMS and Exelixis. As you recall, the study
demonstrated a significant benefit over the comparator, sunitinib for all three
efficacy endpoints, including a significant improvement in overall survival with a
40% reduction in the risk of death and a doubling of PFS and objective response
rate compared to sunitinib.

Additionally, the combination of cabozantinib at 40 milligrams daily and nivolumab

was generally well-tolerated, and associated with a low discontinuation rate, while
maintaining improved quality of life compared to sunitinib.

Detailed results of the study were presented by dr. Toni Choueiri at the recent
virtual ESMO Conference in the Presidential symposium and favorably, discussed by
Dr. Camilla Parker. On the basis of the results from the trial, we’ve made great
regulatory progress together with EMS and our partners Ipsen and Takeda.

We have completed the supplemental NDA filing concurrently with BMS’s supplemental
BLA filing in the United States in August and FDA has recently accepted the
submissions for priority review and signed a PDUFA date of the 20 of February of
2021.

Concurrently with the United States submission, BMS and Ipsen have also completed
at the submission in Europe to the EMA and the filing which validated on September
12, 2020. Further international filings have also been accomplished, including
Switzerland, Australia, Canada, and Brazil, with many more to follow in short
order. And also just a few days ago, our partner Takeda together with Ono
Pharmaceuticals, have announced the submission of concurrent sNDAs for the
combination of cabozantinib and nivolumab for advanced RCC in Japan.

besides the progress on CheckMate -9ER, the ongoing phase 3 program for
cabozantinib continues to make rapid progress. We have continued our efficient
execution of the COSMIC-021, COSMIC-311 and COSMIC-312 and COSMIC-313 studies,
where these have either completed or are nearing full enrollment on a global level.
And we are on track for top-line results for these trials as previously shared.
Importantly, we have also been able to start up the three phase 3 trials under the
CONTACT phase 3 program in collaboration with Roche. and all three studies are now
screening and enrolling patients globally.

Looking back on this quarter, I’m thrilled with the progress of the cabozantinib
program and the level of execution by both on teams and clinical rep [ph] regular
teams, who together have been able to make significant progress despite the
challenging times and conditions around the world, due to the global pick in
progress despite the challenging times and conditions around the world due to the
global pandemic.

I’ll now turn to the progress on our XL092 program and our new IND projects. As
Peter described in detail, XL092 is our next generation MET, AXL, MER and VEGFR
tyrosine kinase inhibitor that has been designed with a similar target profile is
cabozantinib, but with a shorter pharmacokinetic half-life. This is expected to
allow for rapid and flexible management of tolerability while maintaining the
efficacy profile associated with potent inhibition of key targets in the
cabozantinib profile.
Our ongoing phase 1 study has already confirmed that the goal of designing a
molecule with a shorter pharmacokinetic half-life that’s been accomplished and
we’ve recently begun the evaluation of the combination with atezolizumab in a
parallel phase 1b part of the study while completing single-agent dosing.

We are also in the late stages of planning a broad and comprehensive development
program for XL092 across various tumor indications, lines of therapy and settings
of interest and intend to pursue the comprehensive evaluation of XL092 in
combination with various established checkpoint inhibitors and potential new
combinations, including promising new checkpoint inhibitor duplets as well as other
combination partners of interest.

We have a deep and solid foundation in TKIs and extensive experience with
cabozantinib, and see many opportunities to build on and expand the therapeutic
settings as we planned for potential tumor indications and lines of therapy for
XL092 combinations, including first to market strategies for high unmet need
indications with potential for accelerated development.

Second, moving beyond cabo’s strategies and building our clinical experience in
tumors, the cabozantinib is approved or being developed with the goal to develop
new standards of care with novel and expanded combinations. Third, expanding the
TKI footprint, they’re investigating new indications in the IO white space, where
XL092 can potentially improve outcomes through cooperative activity with immuno-
oncology compounds. and finally, exploring new opportunities and approaches in
treatment settings that might be accessible to XL092 with potentially improved
tolerability due to shorter half-life.

with the goal to potentially start late stage trials as soon as 2021, we are
focusing on advancing phase 1b dose ranging in combination with checkpoint
inhibitors rapidly to move into expansion cohorts that may support data-driven
late-stage development options across a variety of tumor types.

Based on our 15 years of experience and clinical success with cabozantinib, we are
highly confident that the RTK inhibition profile of XL092 should also have broad
utility and the shorter half-life for the chemically distinct molecule; it’s likely
to offer potential advantages and differentiation as well. This experience in
understanding drives our excitement and enthusiasm around XL092 and we ultimately
view the development risk profile as potentially being greatly improved versus more
typical early-stage programs.

And I’ll close with a brief word regarding our IND candidates. We are working
towards IND filing before end of year for XL102 and the CDK7 inhibitor that has
been discovered by our partner Aurigene, as well as for XB002 or ICON-2, a first
biologic product candidate, an ADC that has been discovered by Iconic. additional
IND candidates also are making good progress and will reach IND filing in the next
few months.

And with that, I’ll hand the call over to P.J.

P.J. Haley

Thank you, Gisela. I’m pleased to discuss the CABOMETYX business as we head into
2021, which will be a transformative year for the brand as we anticipate our first
potential combination approval in first-line kidney cancer and subsequently,
further combination data presentations for cabo. the strong -9ER data positioned
CABOMETYX to return the franchise to significant revenue growth. The momentum built
with the launch could further be driven by additional data readouts and other
important indications as the robust cabo development program continues to generate
data.

I will discuss the opportunity that -9ER provides Exelixis. looking forward, as we
continue to build upon the foundation in RCC, where we remain the number one
prescribed single agent TKI. we are pleased that CABOMETYX market share remained
stable in Q3 in our key segments, in both RCC and HCC. according to brand impact of
IQVIA, CABOMETYX TRx share was stable at 31% in Q3 relative to 30% in Q2. while at
the same time, TRx volume of the RCC oral TKI market basket of CABOMETYX, INLYTA,
SUTENT and VOTRIENT declined by – in Q3 by 6% relative to Q2, CABOMETYX TRx volume
declined by 3% in Q3 relative to Q2.

As I mentioned, our focus is squarely on future growth of the cabozantinib

franchise and we were excited by the recent outcome and presentation of the
CheckMate -9ER study. We believe that these results pending regulatory approval may
provide us with the opportunity to grow CABOMETYX market share and increase
duration of therapy in the first line.

the -9ER data in a presidential session was among the most high profile
presentations at the 2020 ESMO conference and the data were extremely well-received
by the KOLs and in market research we’ve conducted. The ICI combination opportunity
is large with 15,000 RCC patients in the U.S. eligible in the first-line setting
with ICI combination therapy consisting of approximately 80% of that market.
according to this brand impact data, ICI-TKI combinations constitute 50% of the
first-line market and are widely used across clinical risk groups demonstrating the
broad potential for CABOMETYX with nivo in the first-line setting.

Additionally, ICI combinations constitute approximately 20% of the second-line RCC

market. CABOMETYX was approved in RCC over four years ago. During this time, it has
developed very strong brand equity and is viewed as the best-in-class TKI in RCC.
The Exelixis’ team has significant experience in RCC with two prior successful
launches and we look forward to the opportunity to educate physicians on the -9ER
data post-approval, so that more patients have the opportunity to benefit from
CABOMETYX therapy in the first-line setting.

The strength of the -9ER data speaks for itself, a doubling of median progression-
free survival and ORR and superior overall survival versus sunitinib, which
provides us with strong differentiation versus the other IO combination therapies
currently available. Importantly, clinical benefits were observed in the vast
majority of patients in the trial resulting in a low rate of primary progression,
regardless of IMDC risk status or patient subtype supporting broad used in the
marketplace. In addition, the optimized cabo combination starting dose of 40
milligrams daily yielded a compelling safety and tolerability profile along with a
low treatment discontinuation rate and favorable quality of life, all of which has
been notable with physicians in our research.

taken together, the combination of a best-in-class TKI like cabo with a well-
established immune checkpoint inhibitor, like the nivolumab in RCC, along with the
strong efficacy and safety data from CheckMate -9ER present the opportunity to
share a compelling and highly motivating story to our customers and enable broad
positioning across clinical risk groups in first-line RCC.

feedback on the CheckMate -9ER data with both academic and community oncologists
has been extremely positive and we believe we can leverage the success and
prescriber familiarity of both cabo and nivo to gain traction quickly in the
combination setting when approved. our team is laser focused on launch preparation
as we stand ready to engage our customers in both live and virtual settings as
appropriate as soon as FDA approval is granted.
At the same time as we launch CABOMETYX in combination in the first line, there
will continue to be patients progressing from ICI based therapy into the second
line that will be eligible for CABOMETYX monotherapy. We continue to capture a very
high percentage of that patient population and believe cabo may grow in the second-
line setting as well.

There’s a great deal to be excited about as we think about the totality of the
CABOMETYX RCC business looking forward. The -9ER data positions, cabo/nivo to take
significant market share in the first-line setting and provides insights into the
potential duration of therapy for CABOMETYX in combination. the median progression-
free survival per investigator was over 19 months and the median duration of
response was over 20 months in the study, pointing to the potential for the
duration of therapy to be significantly longer than cabo monotherapy.

taken together, the increase in first-line market share and duration along with the
potential growth in second-line, positions the CABOMETYX RCC business to vector
towards a run rate of $1.5 billion in U.S. revenue by the end of 2022. this
projection is of course, contingent upon our modeling and assumptions, which
included a total of five ICI combinations in the marketplace. Furthermore, this
does not include any potential incremental revenue from COSMIC-313, the triplet of
cabo/nivo/ipi, or any other new cabo data readouts.

beyond -9ER, we were very excited by the cabozantinib development program, as it

moves forward broadly across multiple indications with different combination
partners. We look forward to building on this momentum in RCC, HCC, DTC, and other
potential future indications, such as prostate and lung is our development program
evaluating cabozantinib in combination with immune checkpoint inhibitors advances.
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.

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

Mike Morrissey

All right. thanks, P.J. As we outlined at JPMorgan in January, 2020 is a

transitional year for Exelixis as we navigate important readouts from ongoing
pivotal trials, like -9ER, and advance our pipeline with cabo lifecycle management
activities and new indications and combinations, while at the same time, building a
diversified portfolio of assets. to date, 2020 has been a year of significant
achievement and progress across all components of our business in the face of the
COVID-19 pandemic. Unfortunately, we continue to acknowledge the potential risk to
our business, should the pandemic continue to grow in severity as we’ve all sadly
seen over the last several months.

I’ll close by reiterating the three key themes from today’s call. First, we expect
2021 to be a transformational year for Exelixis and the cabo franchise as we
project a -9ER approval to accelerate revenue growth for cabozantinib. based on the
size of the first-line RCC market and long duration of PFS in -9ER, we expect to
exit 2022 with a $1.5 billion annualized run rate for RCC in the U.S. if our
modeling is accurate.

Second, we’re encouraged by XL092 as a next-gen multitalented VEGFR, MET, AXL, MER
inhibitor with the more user-friendly clinical half-life and the significant
opportunity it represents to broadly expand into new and existing solid tumor
indications with a variety of IO backbones and combination strategies.

Third, we are aggressively advancing and investigating the diverse portfolio of

next generation Exelixis cancer medicines, including both small molecule and
biological modalities to increase our potential success in helping even more cancer
patients with difficult to treat tumors.

I’ll close by thanking everyone at Exelixis for their efforts in the third quarter
under conditions that appear to get more and more challenging each quarter. The
majority of our team has been working from home for more than seven months now, and
continues to meet the demands of our business with great teamwork, expertise, and
energy.

I’m incredibly proud to say that the entire Exelixis team continues to work as one
and making every day count as we discover, develop and commercialize, the next
generation of our medicines for cancer patients in need of better and more
effective therapies. We look forward to updating you on our progress in the future.
Thank you for your continued support and interest in Exelixis and we’re happy to
now open the call for questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question is going to come from the
line of Asthika Goonewardene with Truist.

Asthika Goonewardene

Hi, guys. Thanks for taking my questions, and then showed a nice quarter again. A
few if I may, Peter, can you maybe tell us a little bit about what mechanisms of
actions besides PD-1 and CTLA-4 makes sense to you? I’m just wondering if they
think about new negatives, vaccines and those kinds of mechanisms as well.

Gisela, totally understand that you have a lot of opportunity to accelerate

development of 092, and we’re quite excited to see what you guys do there. But
maybe, I was wondering, for those of us on the outside, when would we get maybe, a
first glimpse of that single agent PD-1 combo data from the dose expansion?

And then Mike, I have to ask, you mentioned $1.5 billion in cash. That’s a nice
chunk that you have to. How you think about business development activity for 2021?
And maybe, to color up further, it’s still going to be more licensing deal focused
or would the acquisitions could be underplay would be helpful. Thanks a lot, guys.

Mike Morrissey

All right. Asthika, there’s a lot there. Why don’t we start with Gisela and Peter
on 092? Gisela, you want to start there?

Gisela Schwab

Sure, absolutely. Thank you for the question. And the question was around when do
we get a first look on the phase 1 data. Peter referred to a little bit of the
pharmacokinetic data that was included in the recent presentation and showed
already that the molecule is behaving as hoped for when it was designed. And that
it has shown a shorter half-life of about 24 hours or so. And regarding further
data, we’ll present data, certainly when we have mature data, and just know that we
are hoping to start at late stage studies and 2021. And of course, we see the data
before we even get to presenting or publishing it. And so we can make decisions
certainly, a little bit earlier and as you – as we do, you’ll see us move forward
in that direction.
Peter Lamb

Yes. I mean, just to take your question on the kinds of IO modalities might be good
to combine XL092 with, I mean, I think I’ll be with – there’s a broad opportunity
there beyond the oldest, PD-1, PDL-1, CTLA4 as you have commented, in which we
already have clinical POC essentially from cabozantinib. Obviously, we’ll continue
to look at the development of additional IO agents be they novel checkpoint
inhibitors, be they cytokines, and all of which could, could end up being
appropriate combination partners, even a double, or potentially even triplets with
XL092 depending upon the indication on the savings.

Mike Morrissey

Okay, great. Thank you, Peter. Thanks, Gisela. Asthika, on the BD side, as we said
previously, we’re very focused on using business development activities, to expand
our pipeline of either clinical and/or preclinical compounds that we’re pursuing.
We certainly did number of deals to announce this quarter with NBE and Catalent’s
on the ADC side, we have a whole roster, a line-up of potential deals kind of
coming down the pipe, when those get done. if those get done, we’ll talk about
those in more detail.

Obviously, we have, I think, a pretty good feeling for the kind of activity we’re
looking for. The obvious importance of if possible, combining with the – with 092
as we go forward as well. So, there’s lots of opportunity and it’s a full team
effort here in terms of how we’re focused to make sure that we make the right
investments for the right assets at the right time for the right value, right. So –
but we’re very excited about the recent additions to our – to the network of
collaborators that we have and looking forward to getting those collaborations
going and really tracking at full speed.

Asthika Goonewardene

Great. Thanks a lot, guys.

Mike Morrissey

You bet.

Operator

Thank you. Our next question is going to come from the line of Jason Gerberry with
bank of America.

Chi Tran

Hi. Good afternoon. Good evening, everyone. This is Chi on for Jason. Thanks for
taking our questions. I guess maybe, first one for me is that, you talk about ICI
combo’ed in renal, talk about that there’s about 20% of the patients, who use the
ICI combo? The curious, do you have a split between IO/IO versus IO/TKI 20% and
were these patients, did they receive TKI monotherapy or were the IO retreatment,
where say they may have received an IO/TKI in frontline and next is to an IO/IO in
second line?

P.J. Haley

Yes. Hi, chi. Thanks for the question. This is P.J. I’ll take that. So, as I
mentioned, we think of the -9ER opportunities is very large and broad. and per your
question, looking at the current sort of market share of IO combinations, in RCC,
the 20% is in second line. So, what we see and this is all according to brand
impact, there’s IQVIA data in first-line IO combinations account for about 80% of
the market, right. And that’s a larger place and that’s the – a large population,
and that’s the setting, in which the -9ER study is done. So, we would anticipate
really I’m taking that first-line setting. of the 80%, about 50% total of the
market is IO/TKI. The 20%, I was referring to is second-line uptake of IO
combinations, and that’s kind of a mix of IO/TKI and IO/IO. And this is again,
according to brand impact. And you really see those coming after just a variety of
first-line agents.

There’s no real strong pattern there. but I think what excites us about certainly,
the -9ER data and the market research we’ve done with quite a large number of
physicians at this point, is that the feedback on the data is very positive. As I
mentioned with regards to the safety and tolerability, the efficacy data, quality
of life data, and we think we’ll have a significant opportunity particularly in
that first-line setting there and think we can really drive a lot of market share.
And as I mentioned also the duration of therapy aspect will be really significant
for the business. When we look at 19 months of PFS by investigator, 20 months’
duration of response in the -9ER study. So, we believe that that duration of
therapy will be long – certainly much longer than what we see in CABOMETYX
monotherapy.

Chi Tran

Awesome. I guess, going back to the front line, it seems to be like IO/TKI keep
pushing up a bit by bit every other quarter or so, do you see there’s opportunity
for IO/TKI to expand further would be potential approval of -9ER and we’re right
now added at 40%, 50%. where do you see that potentially can reach, waiting to see
the potential filling for IO/TKI assignment in the frontline setting?

P.J. Haley

Yes. Yes. Great question, Chi. And as I mentioned, we kind of see that potential
broad. So, the 50% IO/TKI, we certainly view as our profile being best-in-class and
that’s the feedback we’re getting and being very competitive there. So, we think we
can take share in that segment. We certainly believe we can take share in the other
segments, lot broadly in the IO/IO segment as well as the 20% that our TKI
monotherapy, because certainly, this is compelling data. And as we have the
opportunity to educate physicians on it, we think we could expand the market and
really steal share from all of those segments to benefit patients.

Chi Tran

Awesome. I guess maybe, a last one from me is that, if you guys can provide any
color on your progress on your second-line and your prostate cohorts in COSMIC-021,
and when can we potentially expect next data update for these two particular
indications. Thank you.

Mike Morrissey

Gisela, do you want to take that one?

Gisela Schwab

Absolutely. Thank you. Thanks for the question and happy to address that for CRPC
and for non-small cell lung and the checkpoint inhibitor pre-treated population, we
have presented data early in the year, I’d ask, would you and also at ASCO for the
non-small cell lung cancer indication in both encouraging activity for the
cabozantinib and atezolizumab combination, showing response rates for CRPC are 32%
with a long duration and a disease control rate of 80%.

And likewise for the lung cohort, we saw a 27% response rate and disease control
rate there as well. These cohorts, cohort 6 and cohort 7 have now fully involved in
COSMIC-021 and that is following up patients to fully understand mature data in
both of these populations. And then, additionally of course, we are planning
towards a potential accelerated approval path, in particular toward the CRPC
indication, where we had initial interactions with FDA, and that will be dependent
upon cohort 6 data and when it’s mature, but also additional cohorts in CRPC in the
021 study.

So, certainly, following up these cohorts and we look forward to providing updates
as they become available for both indications and just to a complete on the non-
small cell lung cancer cohort and the checkpoint inhibitor, pretreated patient
population. We are also completing enrollment with 80 patients and the other single
agent cohort in this study as well. So, this has advanced very nicely and we look
forward to more mature data.

Chi Tran

And maybe, just one quick follow-up from me. When you said, you had initial
interaction with the FDA on the prostate cohort 6 data. When did that interaction
happen?

Gisela Schwab

We have discussed that on various conference calls, so that they happened a while
back when we discussed the initial encouraging observations in the cohort 6 based
upon the first 30 patients or so, where we’ve seen very encouraging results in
terms of objective response rates. So that’s a while back and then we received that
initial encouraging feedback.

Chi Tran

Got it. Thank you.

Gisela Schwab

Thanks, Chi.

Operator

And our next question is going to come from the line of Peter Lawson with Barclays.

Peter Lawson

Hey, thanks for taking my questions. just on revenues, just if you could break out
anything around that low demand, whether it came from academia or the community
setting, and what inventory was this quarter?

P.J. Haley

Yes, this is P.J. We’ll just do
there, I kind of referred to in
RCC were down approximately 6%.
dynamic there in the market and
to academic or community there.
with regards to the quarter in demand, what we saw
the script is the entire market basket of TKIs and
And really, I think that’s a – it’s sort of a broad
we didn’t really see any differences with regards
Certainly, some impacts still from COVID with
regards to what we’re seeing in the healthcare system, patient visits being down,
various follow-ups, et cetera. So, I think that’s something we saw broadly with
regards to the market, and certainly also saw it in the – in those products
reporting earnings as well.

Chris Senner

Yes, Peter, this is Chris. So, from a reporting perspective, we reported revenue
down quarter-over-quarter about – sequential quarter about $10 million. About half
of that was related to demand, which kind of correlates with what P.J. was talking
about. And this is for cabozantinib franchise and then of the remaining $5 million
probably about three or so is related to inventory and the rest is related to a
slightly higher gross to net.

Peter Lawson

Great. Thank you. And then just as we think about Q4, what helps drive acceleration
run those revenues and then any color around kind of what could be happening in
October?

Mike Morrissey

Yes. Peter, it’s Mike. And probably not appropriate to talk about the quarter this
early. Obviously, the biggest driver for revenue growth is that 90-hour approval
and launch, as we talked about in the script. So, we’re ready to roll once we get
the letter and/or certainly excited about the data and the potential, and the team
is certainly very skilled and prepared to get out there and educate physicians, and
prescribers on the data stuff. But that’s the big driver and that’s the big message
for the call today.

Peter Lawson

Great. And then I just find anything around HCC, any since around growth, if that
was declining as well.

Mike Morrissey

Yes.

P.J. Haley

Hi, Peter. It’s P.J. again. One thing we’ll say is that basically the HCC
businesses were stable in Q3, more broadly as we look forward, in HCC, we’re
obviously looking forward to the 312 study reading out in combination in the first-
line setting with atezo in HCC. And what we’ve seen is bev/atezo approval in Q2 has
really driven significant, quick uptake for that regimen and personally, in HCC.
And that bodes well potentially for another combination such as cabo/atezo, should
the data be positive, and also it’s moving IO therapy into the first line in HCC.

So, as we kind of look longer-term, we would anticipate a similar dynamic to what

we’ve seen in RCC, whereas IO moves forward and then that sort of that 50% or so of
the market that they occupied in second line kind of opens up for more TKI
utilization. And we think the CABOMETYX data in our current label from the
celestial study in HCC in second line is well positioned to then take more of that
share in second line as patients progress beyond IO therapy in HCC.

Peter Lawson
Great. Thanks so much for the detail.

Gisela Schwab

You bet, Peter. Thank you.

Operator

And our next question will come from the line of Andy Hsieh with William Blair.

Andy Hsieh

Okay. Thanks for taking my question and I hope everybody is doing well at Exelixis.
So, I have a question regarding basically data presented at the triple meeting. So,
I think the [indiscernible] there is that there are more similarities and
differences with the exception about like tenfold higher potency against actual.
So, the first question I guess, for Peter or Gisela, is kind of the clinical
relevance, why specifically you chose to optimize that specific target and also
kind of thinking about bigger picture in things Gisela for kind of laying out the
development path for 092, but just given the similarities, how much can you kind of
peek into what you have in-house for COSMIC-021 and accelerated the development of
092. And that question really derived from the fact that you’re thinking about
advancing that asset into late stage development next year.

Gisela Schwab

Yes.

Peter Lamb

We feel so, Andy. Thanks for the questions and endeavor. So, I think if you’ve got
the message from the presentation of the triple meeting was the aim with 092 was to
retain the target profile of cabo, so potent against MET, AXL and MER and potent
against VEGFR2. There was one slight wrinkle there where, with cabo and the VEGFR2
potencies is more potent against that the max and that feature, we pretty much
retained in XL092. I think that plays out quite nicely in the in vivo setting as
well. I think, we didn’t specifically optimize on AXL potency. We wanted to be sure
it was potent enough. And as you correctly say, it turned out being a bit more
potent. I mean, it’s definitely an emerging target of interest in many solid tumors
and a lot of indications we may go into, but that was not a primary driver of the
optimization. It was really retaining that target profile whilst giving them
something that have a significantly shorter pharmacokinetic offline.

Susan Hubbard

Okay. And Gisela, do you want to take the second part of the question?

Gisela Schwab

Thank you. Thanks for the question. So, the question was around the development
path and what can we learn or have we learned from COSMIC-021 and what can be
applied for 092, and how can we drive things forward? I think this is a key
question, of course, XL092, as Peter as described, is a differentiated product and
the profile suggests that it has a shorter half-life and while retaining the target
inhibition profile that we’ve learned to love with cabozantinib and we’ve seen very
encouraging activity within.

So, with that, certainly, we have lots of experience with cabozantinib as a single
agent and combination. And so everything that we’ve learned and anything really in
021 – COSMIC-021, but also in other clinical experience with cabozantinib is coming
to bear in some way that we can build on when we think about the development costs
for XL092 while we’re not looking to replace cabozantinib, we are rather viewing
this as the development cost with the opportunity to build upon that experience in
broadly expand the opportunity in two indications outside the current and near-term
specific indications that comprised the existing cabozantinib footprint, also
including combination partners line of therapy in tumor indication.

And so I think, we certainly see a lot of opportunities for XL092’s project

development plan with various combination partners and in different lines of
therapy, but also across an array of different indications. And that may include
some of the cabozantinib indications, but again, we’re not looking to replace
cabozantinib and are looking to do head-to-head study.

Andy Hsieh

Great. Thank you. And maybe, one more for P.J. going back to the kind of the
dynamic COVID-19 impact with the TKI market, I’m just wondering if you’re seeing
any inflection points and maybe, your thoughts on when that is going to stabilize,
would it be with like a vaccine be necessary to kind of see that, or are you
anticipating some sort of stabilization going in the near-term?

P.J. Haley

Yes. Thanks for the question, Andy. I wouldn’t want to speculate too much
specifically on the RCC, TKI market vis-à-vis COVID. I think anecdotally customer
feedback, you do hear that things are starting to get back to normal depending on
the geography, the location, tele-health et cetera, but I think, when you do look
at data, that’s been put out there, published from folks like the community, for
the Community Oncology Association, you see that these things have impacts of
screening of – just follow-up things that may influence the patients’ journey.

So those, I think just take a little bit of time, and this is broadly for oncology
to kind of work through the system. Obviously, you can’t really, there’s no crystal
ball for anyone with regards to the pandemic. And I think the system just working
through that, but I wouldn’t want to speculate too much looking forward, but I
think, what’s important for us, as kind of Mike mentioned, we mentioned in the call
is that we’re very excited about -9ER with regards to getting that approval and
then being ready to go with the launch and really driving growth in the business
forward for CABOMETYX with that approval.

Andy Hsieh

Right. Yes, absolutely, yes. Looking forward to that approval. Thanks for all the
insights and answering all my questions.

Gisela Schwab

You bet, Andy.

Operator

And our next question will come from the line of Yaron Werber with Cowen.

Leo Wallen

Hi, everyone. This is Leo on for Yaron Werber.

Gisela Schwab

Hi.

Leo Wallen

Thanks for taking my questions. I have a couple of questions; first is regarding

the cabo. You guys mentioned about the market trend to for TKI. I’m just wondering
if you see any specific trends or different in terms of different market segments,
such as maybe, the second-line RCC versus the first-line RCC. and within first-line
RCC, are you just seeing any like different trends in the different risk categories
in terms of favorable risk versus cool risk? I’m just wondering how the potential
approval of -9ER in first quarter next year or the potential data from COSMIC-313
would kind of reverse that trend and I have a follow-up question for 092. Thanks.

P.J. Haley

Yes. Hi, Leo, it’s P.J. I’ll take that first question. So, as I mentioned broadly,
we’ve kind of presented the TKI trends, and what they were. but what I would say
is, when you look at the market for RCC, you see significant utilization of
combinations in the frontline setting. Approximately, 80% of the frontline setting
is combination therapy, in terms of IO and something else and 50% of that is
IO/TKI.

So, I think significant opportunities for -9ER looking forward, pending an

approval. And as I kind of mentioned, we see -9ER competing across clinical risk
groups, which is what we see the current IO/TKI to get therapy doing now, it’s
getting share in favorable, intermediate and poor risk and we see -9ER potentially
competing across all of those well – as well as across all competitors.

With regards to the second line, we see CABOMETYX retaining our market share kind
of across segments, certainly in the second line currently are key segment there,
and have the potential for growth, and we really get the vast majority of patients,
who are progressing from an IO-based therapy in the second line. So again, could
see potential growth there as we look forward. So, I think we’re looking at just
the potential to grow broadly pending the approval of -9ER, which we’re extremely
excited about.

Leo Wallen

Okay, thanks. So, in terms of the first-line RCC dynamics, are you seeing more of
like a decreasing trend of the use of IO/IO versus IO/TKI, or it’s still maintained
as same?

P.J. Haley

Yes. I mean we’ve got, if you look at one of the slides, we’ve got that broken out
in a bar chart for you. So, we see about 50% of the first-line as IO/TKI currently.
And I would say, that’s either maintaining or slightly been increasing is what
we’ve seen over the last couple quarters. So, I think that shows that IO/TKI is
really kind of resonating broadly in the marketplace. So, I think there’s the
opportunity to really build on that momentum with CABOMETYX in a potential -9ER
approval.

Leo Wallen

I see. Thanks. So, regarding the 092, I’m just wondering, if you identify any
potential indication that will allow you to go through the accelerated directory
path?

Gisela Schwab

Yes. This is Gisela. Thanks for the question. I think this will be entirely data
dependent. And at this point, it’s a little bit early to speculate at this point.
So, in the Phase 1 study, we have incorporated expansion cohorts in specific
indications, and as we learn more about the compounds, we’ll certainly examine the
data and then make a data-driven decisions.

Leo Wallen

Got it. Okay. Thank you so much. It’s very helpful.

Gisela Schwab

Thanks, Leo.

Operator

And our next question will come from the line of Michael Schmidt with Guggenheim.

Michael Schmidt

Hey, guys. Good afternoon, and thanks for taking my questions. Maybe, just a couple
of follow-up to prior questions. It’s been a little while now since asthma where
the type in -9ER data was presented. Just wondering what feedback has been now from
KOLs since it’s been a while and one rate what your level of engagement, what
physicians has to let you the feedback in that regard, and also wondering, how we
should think about potential inclusion in [indiscernible] guidelines prior to the
approval of the combination in February.

P.J. Haley

Hey, Michael. this is P.J. So, I’ll just – with regards to the second part, I mean,
in NCC, and, I won’t speculate on what they or when they might do it, they just
have to kind of wait and see how that goes. With regards to feedback, we’ve talked
to a lot of KOLs, conducted many ad boards, and we’ve also done market research
with a significant amount of community and academic positions.

So, we’re talking well over 100 physicians at this point. So, I think we’ve gotten
a really nice sampling and flavor of feedback and it’s all been extremely positive
and we believe this will be a best-in-class combination in terms of IO/TKI; really
looking at the totality of the data, it’s impressive. When you look at the efficacy
in terms of, it’s the only combination that doubles progression-free survival, and
objective response rate, while increasing, improving overall survival and doing
that while it maintains quality of life relative to sunitinib, which is really
novel in this setting.

And I think you kind of wrap all that up in the fact that this is a new optimized
dose of 40 milligrams daily in terms of with combination and nivo here, and
physicians are viewing this very favorable and looking at it in a sense that
they’re getting efficacy that they really want to use for their patients with
tolerability sort of safety profile and quality of life that they really like, and
can kind of build on their experience really both these agents separately. So, it’s
been very favorable, I think we’re excited, we’re ready to go and launch it sort of
across the board, both virtually and in person, and I think that the entire team is
just looking forward to having the opportunity to get out there and educate on the
data.

Michael Schmidt

Okay. And then on COSMIC-312, the frontline liver cancer study, I guess, how do you
think about potential differentiation from the approved Tecentriq-Avastin
combination, and is it purely an efficacy question? Are there other factors that
play that might sway physicians to prescribe one versus the other combination
potentially are pending success, obviously?

Mike Morrissey

Yes, Mike, P.J. addressed that as well. I think obviously, we’ll have to get a
positive study and the answer to that will be data-dependent. I think, a couple of
things as I think about that setting those, we’re seeing in multiple data sources,
the atezo/bev combination do well in terms of rapid uptake in the first-line,
seeing first-line share of already 30% to 50%. So that said, I think we’ll – it’ll
be a great opportunity to differentiate depending on the data with instead of an
IO/bev option and IO/TKI option, so novel mechanism of action. and this is a tumor
type very much like renal, where TKIs have been backbone of therapy for over a
decade.

So, I think that’s – that we’ll be – we’ll be – we’ll do well from an experience
standpoint there. And then I think there’s certain nuances with regards to
bevacizumab in terms of the inclusion criteria, potential places, where physicians
will want to think about what are appropriate patients given that safety profile,
where perhaps we’ll have a slight advantage there, but obviously, we have to really
wait and see the data. But certainly, represents a large potential of growth
opportunity in the first-line setting and in the interim potentially, some
opportunity for those patients progressing on an IO-based therapy into the second-
line HCC.

Michael Schmidt

Okay. And then one, maybe for Peter or Gisela. Just on XL092, so given the similar
binding characteristics of that molecule to CABOMETYX and I guess the shorter half-
life, how would one expect that to translate into a differentiated clinical
profile? Is it mainly a safety advantage or might that and able to potentially a
higher dosing or pushing efficacy maybe further, and as a result of that are there
certain potential indications where XL092 might be more advantageously positioned
relative to CABOMETYX for example.

Gisela Schwab

Yes, this is Gisela. Thank you for the question. I think the key question is, how
does the shorter half-life translate into differentiated profiles? And the key here
is that it’s worth event management and management of tolerability could be
improved and adverse events could subside more quickly as Peter explained earlier,
cabozantinib depends a long half-life in the [indiscernible] on time is it’s
longer. So that would be expected to be shorter and adverse events could sit side
more quickly. And so it would be potentially resulting in if you build more user-
friendly TKI in that fashion and that could translate into an improved safety
profile in terms of other advantages that could be notable the shorter half-life of
course, it’s also important to when thinking about peri-surgery indications or
administration, where wound healing as well as pleased and things like that will
always have to be kept in mind when dosing a longer half-life TKI to targets VEGFR.
And so that could be a setting, where a shorter half-life, it’s also of benefit.
But this would be a very specific indication here. General, we XL092 as one that’s
a compound that can potentially have a broad and diversified development, including
such indications as just mentioned.

Michael Schmidt

Okay. Thank you so much.

Gisela Schwab

Thank you, Michael.

Operator

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

Kennen MacKay

Thanks for taking the question. I was hoping that the team could comment a little
bit about specifically how cabo/nivo in the CheckMate -9ER profile would be
differentiated in the eyes of physicians versus some of the other checkpoint TKI
combos that are already approved, essentially, what’s going to be the edge that
drives physicians to choose about cabo/nivo over any of the other combinations.
Thank you.

P.J. Haley

Yes, hi Ken, and this is P.J. I’ll take that. As I was kind of referring to
earlier, I think the data are really compelling and we’ve heard this from broadly
in market research and for KOLs. I think, first of all, it’s the only – not only
the only IO/TKI, but the only combination that’s doubling PFS and objective
response rate while improving survival. So, I think when you look at the totality
of the efficacy data, that’s very compelling. Furthermore, the safety and
tolerability profile, I think look really good to physicians low discontinuation
rate, the EU rate really good with the 40 milligram dose.

And then if you look at the quality of life data, right, it’s maintaining quality
of life despite adding a second drug and providing all that clinical benefit that
we’ve talked to, which is unique relative to other IO/TKI. So, I think that’s
really compelling for physicians and we’ve heard really good feedback on it. So, I
think that gives us a lot of opportunity to position it broadly successfully across
risk groups, favorable, intermediate and poor, and with regards to any potential
competitors.

Mike Morrissey

Yes, hi, Ken, it’s Mike. That’s a really good question, and we’ve done a lot of
market research in terms of ad boards and blinded market research, and it’s been a
very consistent instead of feedback, I’d also refer you back to the analyst
discussion that we had post the ESMO presentation back in September with four are
very kind of top tier KOLs that presentation is still on our website still online.
And that would definitely recommend people take a listen to that. There was a lot
of great discussion there, a lot of great perspective there on why they think this
is not only great, a very competitive combination, but really veteran towards best-
in-class as well.

Kennen MacKay

Thanks, Mike. Thanks, P.J.

Gisela Schwab

Thank you, Ken.

Operator

And our next question is going to come from the line of Chad Messer with Needham &
Company.

Duane Kailas

Hello, everyone. Thanks for squeezing me in. And this is Duane for Chad. Just one
question from us. Are here indications that are going to be revisited with XL092 or
cabo face certain challenges in development?

Gisela Schwab

This is Gisela. Just to go back to the development plan for XL092 there are
certainly areas where cabozantinib has been developed its commercialized and where
we can be looking now at different lines of therapy, different combinations within
a tumor type. And that it certainly in the broader development plan. But we also
see opportunity and various different combinations that haven’t been explored with
cabozantinib. We see opportunity in different lines of therapy earlier lines of
therapy across indications including adjuvant and new adjuvant indications, given
the target the profile of the compound. And so we really are viewing this as an
opportunity to build on the cabozantinib development plan, and from the
cabozantinib development plan more broadly with a wide array of opportunities.

Duane Kailas

All right. Thank you for taking the question and congratulations on all the
progress.

Gisela Schwab

Thank you, Gill.

Operator

And our next question will come from the line of Stephen Willey with Stifel.

Stephen Willey

Yes, thanks for squeezing me in. So just a quick question. I know on the kind of
year end 2022 run rate and guidance that you’re providing, I think Mike, you had
mentioned, or P.J. had mentioned that you expect there to be, I think, five ICI/TKI
combos to be approved at that point. I know you spoke a little bit to the inputs
regarding just treatment duration that you guys were maybe assuming in that number,
but can you maybe just say, I guess yes or no, whether or not you guys are assuming
that you guys have a majority market share relative to those other those combo
competitors and maybe to what extent?

Mike Morrissey

Yes. Steve, it’s Mike. We don’t want to give that level of data from a competitive
point of view. I would say if it’s a, it’s a very conservative market share
estimate that’s arguably comparable. But certainly we’re not, we’re not going
offline on a market share ledge, if you will, in terms of assuming we get a very
large majority market share either. So, we’re taking, I think a very conservative
view here, obviously, a doubling of duration of treatment, approximately based upon
the PFS data is a strong driver of those of that run rate. But we’re conservative
in terms of the expectation for market share, leaving some upside for growth as
well, even beyond 313 and other cabo activities in that indication.

Stephen Willey

Okay. And, then just real quickly on COSMIC-311. I know that there’s a – I guess in
interim read coming this quarter is, should we expect to see any kind of data, I
guess, within a press release? Or was that something where you guys are just going
to be – are just going to stay yes, we hit the threshold we’re filing. No, we
didn’t. We’re going forward.

Mike Morrissey

Yes. It’s our study. So, we have more flexibility with what we say and when we say
it. So, I mean, we normally put some level of kind of uber top-line data in press
release to give people some sense of the results. And I’m assuming we’ll do that
here, but that remains to be seen. So, stay tuned.

Stephen Willey

All right. That’s helpful. Thank you.

Gisela Schwab

Thanks, Steve.

Operator

And our next question will come from the line of Paul Choi with Goldman Sachs.

Charlie Ferranti

Hi everyone. This is Charlie Ferranti on for Paul. Thanks so much for taking our
questions. I just had a quick question on the XL092 Phase 1 study. I noticed that
previously there was a cohort designated for non-small cell lung cancer, and that
cohort appears to have been edited to drop that indication at this point. And so
I’m just wondering, has your thinking evolved somehow on this indication in terms
of how you want to maybe approach it using XL092, because I see that on Slide, I
think 30 of the presentation NSCLC is still listed as a potential target. So, just
wondering how you’re thinking about lung at this point? Thank you very much.

Gisela Schwab

Absolutely. Lung cancer is certainly still a interest and as a potential indication

and various different fittings and as we go forward and as we develop a variety of
combination approaches containing XL092 is a backbone, we are certainly including
lung cancer in our thought process and in our plans. Hey, Charlie anything…

Charlie Ferranti

Thank you so much. That’s it for tonight. Thank you.

Operator

Thank you. I’ll now turn the conference over to Susan Hubbard for closing comments.
Susan Hubbard

Great. Thank you, Holly. 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 not able to address on today’s call.

Operator

Thank you. And thank you all for joining us today. We walked on your follow-up
calls and we appreciate your participation. You may now disconnect.