Exelixis (EXEL) Q3 2024 Earnings Name Transcript

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internet product revenues and potential advertising and marketing progress alternatives. These estimates and projections contain quite a few assumptions and limitations, and we warning traders to not place undue reliance on this info. Precise occasions or outcomes might, in fact, differ materially. We refer you to the paperwork we file sometimes with the Securities and Alternate Fee, that are underneath the heading Threat Elements, determine vital elements that would trigger precise outcomes to vary materially from these expressed by the corporate verbally and in writing at this time, together with, with out limitation, dangers and uncertainties associated to product industrial success, market competitors, regulatory assessment and approval processes, conducting medical trials, compliance with relevant regulatory necessities, our dependence on collaboration companions and the extent of price related to discovery, product growth, enterprise growth and commercialization actions.

With that, I am going to flip it over to Mike.

Michael M. Morrissey — President, Chief Government Officer, and Director

All proper. Thanks, Varant, and because of everybody for becoming a member of us on the decision at this time. We’ll use our ready remarks at this time to supply a strategic perspective on the enterprise with a forward-looking view of the alternatives for cabozantinib, zanzalintinib, and the early stage pipeline to maximise success in constructing a multi-franchise oncology enterprise. The previous couple of weeks have been extraordinarily busy with the optimistic cabo ANDA ruling and the zanza collaboration announcement with Merck.

As you noticed in our press launch issued an hour in the past, Exelixis had a really profitable third quarter throughout all elements of our enterprise. I am going to begin at this time with a strategic overview to border our near-term and aspirational imaginative and prescient for the corporate, adopted by monetary and industrial updates from Chris and P.J. Amy and Dana are right here as nicely and can handle any technical R&D associated questions that come up in Q&A. Exelixis is clearly at an inflection level with the readability on the cabo ANDA and vital momentum for zanza.

cabo is having a robust 2024 and throughout actually all industrial metrics that we monitor routinely as efficiency indicators for the enterprise, and we stay very bullish on cabo’s income outlook into 2030. The zanza alternative represents an vital part of mid- and long-term income progress beginning within the again half of this decade and doubtlessly constructing right into a dominant place within the 2030s. We’re happy to be working with Merck in kidney and head and neck cancers and that price sharing, compound sharing agreements, offers vital validation and momentum for zanza whereas we preserve full world industrial rights. This collaborate with the competitors mannequin has been a pillar of our cabo growth success, and we’re happy to get the primary one shifting with zanza.

We’re clearly not performed on this regard and purpose to develop into different collaborative alternatives sooner or later. With the zanza growth plan, together with six ongoing and deliberate pivotal trials, and extra doubtlessly on the horizon, we consider zanza has the chance to surpass cabo in scope and scale with one deliberate launch per yr beginning as early as 2026. Exelixis’ aspirational objective is to be a market chief in each GU and GI oncology as our important therapeutic focus. Be aware that we’re arguably already within the pole place as a GU oncology chief.

So, constructing momentum within the GI house is a direct precedence for each cabo and zanza. Further zanza indications outdoors of GU and GI can be pursued opportunistically. Constructing, growing, accelerating, and pruning our early stage pipeline is critically vital as we advance towards a multi-franchise enterprise. With three novel compounds in our early stage medical pipeline, together with XL309, XB010, and XL495, and several other near-term INDs shut behind, we plan to effectively profile and prioritize potential winners for development into full growth.

As I stated earlier than, we’re within the pivotal trial and p-value enterprise the place clear medical differentiation is the obligatory prerequisite and the one viable path towards future industrial success. That is the essence of the cabo story and we’re making use of that filter to every thing we do in R&D. Now we have a number of thrilling mature information from our early medical efforts with zanza, and we anticipate to current a major quantity of medical information from STELLAR-001 and 002 all through 2025 at main medical conferences. We’ll present extra granularity on these information units as abstracts are accepted and titles printed.

As well as, we plan to host one other R&D Day in 2025 as nicely. With the ANDA litigation now largely behind us, we anticipate future enterprise growth actions to ramp up. As highlighted beforehand, we’re focusing on late-stage medical property within the GU/GI oncology house, the place we now have clear conviction that medical differentiation might drive final industrial success. As we have highlighted beforehand, most biotech oncology launches since 2016 have been underwhelming, with cabo being one of many few standouts when it comes to indication growth and income progress.

So, we’re very selective as we consider the medical and industrial alternative of late-stage property. Exelixis might doubtlessly pursue any kind of transaction as we advance with a realistic, considerate, and unambiguous concentrate on doing the best deal on the proper valuation for the best asset. Lastly, we’re executing with an bold plan for constructing success as a multi-franchise firm. To that finish, I need to be very clear that we’re dedicated to operating the enterprise and particularly R&D at latest expense ranges for the foreseeable future.

Our intention is to proceed to scrupulously and sometimes aggressively prioritize spending and investments towards late-stage molecules to maximise our medical and industrial success, whereas we advance the pipeline, generate free money, and return a wholesome portion of that free money to shareholders. As you all know, medical success by no means will get cheaper as compounds advance into late house growth. So, we’ll proceed to prioritize our spending as we did at earlier Exelixis inflection factors over the course of the final decade. Our share buybacks during the last two years totaling $1 billion and dedication of one other $500 million to the tip of 2025 underscores our balanced and pragmatic method to investing within the pipeline whereas returning money movement to shareholders.

So, with that background in place, let’s assessment the important thing highlights for the quarter and drill down into extra particulars for our close to and midterm imaginative and prescient for cabo and zanza. First, let’s begin with the quarter. Exelixis delivered excellent monetary efficiency in third quarter 2024 with top- and bottom-line progress yr over yr, pushed by the power of the cabozantinib franchise, together with elevated demand, new affected person begins, and income. CABOMETYX maintained its standing because the main TKI for RCC within the U.S.

with third quarter 2024 cabo franchise internet product revenues of $478 million, up 9% quarter over quarter in comparison with 2Q 2024 and 12% yr over yr in comparison with the third quarter 2023. International cabozantinib franchise internet product revenues generated by Exelixis and its companions grew to $653 million within the third quarter of 2024. Now we have elevated 2024 full-year internet product income and complete income steerage primarily based on these strong outcomes, and we’re constructing on our robust industrial momentum as we wind up the yr and headed into 2025. Chris and P.J.

will present particulars for the quarter of their ready remarks. Let’s transfer subsequent to our future. First, specializing in cabo to drive near-term upside with robust projected income progress by the tip of the last decade and the potential for zanza to drive vital income alternatives beginning as early as 2026 and accelerating into the 2030s and all through that decade. We’re clearly happy with the favorable ANDA ruling, which extends our cabo income operating into early 2030 topic to Exelixis’ potential extra regulatory exclusivity.

The District Court docket’s judgment can be topic to enchantment by both occasion. I need to remind everybody that to the perfect of our data, the FDA has not granted tentative approval of MSN’s proposed ANDA merchandise greater than 5 years after their unique submission. Constructing off the power of cabo’s management place in RCC and potential new indications in internet in CRPC, our midterm projections spotlight the potential for cabo to succeed in peak gross sales within the U.S. of almost $3 billion yearly by 2030, with conservative estimates for progress of the bottom enterprise, capturing a major market share of the oral internet remedy indication and a restricted alternative in prostate most cancers, which is closely discounted till we get readability on regulatory traction with our projected fourth-quarter submitting.

Let’s flip subsequent to zanza. zanza has been largely underneath the radar from the Road’s perspective with solely slightly over half of our overlaying analysts, together with it of their income fashions. We anticipate it should acquire extra consideration and prominence shifting ahead now with the optimistic cabo and a ruling and the just lately introduced collaboration with Merck. Particularly, zanza is constructed to develop on cabo’s basis and its early growth plan offers a framework to surpass cabo’s medical and industrial success.

Our first six zanza pivotal trials and 4 lead indications, together with colon most cancers, kidney most cancers, head and neck most cancers, and neuroendocrine tumors represents a big inhabitants of over 100,000 most cancers sufferers yearly, with overwhelming unmet medical want primarily based on present requirements of care with the cadre of generic and established medicine. Critically, latest progress throughout these trials reinforces our plan to safe our first potential approval for zanza as early as 2026 after which in subsequent years, one extra approval per yr and in medical and regulatory success. The zanza income alternative with this primary wave of label enabling trials is substantial, with projected better than $5 billion of top-line gross sales within the U.S. to 2033, almost equally break up between GU and GI indications.

Clearly, a second wave of latest trials in GU, GI, and different applicable indications might advance this chance to the subsequent stage within the mid-30s and past. zanza commercialization ex-U.S., both by Exelixis or a possible new companion might drive vital industrial and monetary upside as nicely. I am going to wrap up right here with a couple of extra feedback on the pipeline, advancing behind cabo and zanza. We’re thrilled however by no means happy with the depth and scope of the early pipeline property we constructed and are shifting into and thru early medical analysis.

Our small molecule and biologic approaches symbolize the chance to match the perfect modality with essentially the most compelling tumor pathobiology as both monotherapies or mixture companions, with checkpoint inhibitors or proprietary Exelixis molecules. We’re advancing lead molecules within the artificial lethality house with XL309 and XL495 and a wide range of biologics in EDC, bispecific, and monoclonal antibody codecs. The last word objective for all these applications is to quickly generate medical information to prioritize development into full growth, all with the objective of exceeding expectations as a multiproduct multi-franchise oncology biopharma. So, with that, please see our press launch issued an hour in the past for our third quarter 2024 monetary outcomes and an intensive listing of key company milestones achieved within the quarter.

I am going to now flip the decision over to Chris.

Christopher J. Senner — Government Vice President, Chief Monetary Officer

Thanks, Mike. For the third quarter of 2024, the corporate reported complete revenues of roughly $539.5 million, which included cabozantinib franchise internet product revenues of $478.1 million. CABOMETYX internet product revenues have been $475.7 million and included roughly $6.6 million in medical trial gross sales, which is analogous to Q2 2024. Gross-to-net for the cabozantinib franchise within the third quarter 2024 was 26%, which is decrease than the gross-to-net we skilled within the second quarter 2024.

This lower in gross to internet deductions within the third quarter 2024 is primarily associated to decrease Medicare Half D and DoD and TRICARE bills. We are actually projecting that our gross-to-net deductions for fiscal yr 2024 can be between 28% and 29%. Our CABOMETYX commerce stock was flat at 2.1 weeks available when in comparison with the second quarter 2024. As a continued reminder, medical trial gross sales have traditionally been uneven between quarters, and we anticipate this to proceed into the long run.

Whole revenues included — complete revenues included $60.2 million of license revenues for the third quarter of 2024. The biggest contributor to our license revenues was $42 million from the royalties we earned from Ipsen and Takeda on their gross sales of cabozantinib of their territories. Moreover, we acknowledged roughly $11 million in license revenues for a regulatory milestone ensuing from Ipsen’s submitting of their utility for a possible internet indication with the European Medicines Company. Our complete working bills, together with restructuring and impairment expenses for the third quarter of 2024 have been roughly $352 million in comparison with $361 million within the second quarter of 2024.

The sequential lower in these working bills was primarily pushed by decrease normal and administrative bills, offset by greater medical trial and licensing prices within the third quarter of 2024. After evaluating our near-term wants for each lab and workplace services on our Alameda campus, we put sure of our unoccupied lease services available on the market for sublease. In consequence, we recorded a noncash impairment cost of roughly $52 million associated to those lease services. Provision for earnings taxes for the third quarter 2024 was roughly $37 million in comparison with a provision for earnings taxes of roughly $67 million for the second quarter 2020.

The corporate reported GAAP internet earnings of roughly $118 million or $0.40 per share on a totally diluted foundation for the third quarter 2024. The corporate additionally reported non-GAAP internet earnings of roughly $136 million or $0.47 per share on a totally diluted foundation. Non-GAAP internet earnings excludes the impression of roughly $18 million of stock-based compensation expense internet of the associated earnings tax impact. Money and marketable securities as of September 30, 2024, have been roughly $1.7 billion.

Within the third quarter of 2024, we repurchased roughly $12 million of Exelixis shares at a median value of $25.61, as a part of the $500 million share repurchase program licensed by the board in August 2024. And eventually, turning to our monetary steerage for the complete yr 2024. We’re rising and narrowing our complete income and internet product income steerage given CABOMETYX robust internet product income efficiency in Q2 and Q3 of this yr. We’re rising our complete income steerage to $2.15 billion to $2.2 billion.

Moreover, we’re rising our internet product income steerage to $1.775 billion to $1.825 billion, which will increase the midpoint of our internet product income steerage vary by $100 million when in comparison with our beforehand supplied internet product income steerage. Given the place we’re within the yr, we’re tightening our R&D and SG&A expense steerage ranges. Please see Slide 20 of our Q3 earnings presentation for additional element. And with that, I am going to flip the decision over to P.J.

PJ Haley — Government Vice President of Business

Thanks, Chris. The third quarter of 2024 was a really robust quarter because the group continued to execute at a excessive stage, which has resulted in CABOMETYX persevering with to be the primary prescribed TKI and RCC. Moreover, CABOMETYX stays the primary TKI plus IO mixture in first-line renal cell carcinoma. CABOMETYX TRx quantity grew 9% yr over yr in Q3 2024 in comparison with Q3 2023.

In the identical interval, the TKI market basket quantity declined by 1%. Importantly, the enterprise continues to develop when it comes to demand in new affected person begins, each of which have been at an all-time excessive for CABOMETYX within the third quarter. CABOMETYX continued to carry out nicely from a market and aggressive perspective. CABOMETYX once more led the TKI market basket with TRx share rising to 42%.

As we now have mentioned beforehand, the first-line RCC market is extraordinarily aggressive and Q3 was the eighth full quarter through which CABOMETYX plus nivolumab stay the primary prescribed TKI plus IO mixture in first-line RCC. Particularly, we’re persevering with to see robust progress in the neighborhood oncology setting. Trying ahead, the industrial group is worked up in regards to the optimistic outcomes from the CABINET examine in neuroendocrine tumors, as Exelixis goals to develop into a pacesetter within the internet house. We consider the RCC market offers a blueprint for a way the web market might develop and develop within the coming years.

The worldwide RCC market grew from roughly $3.7 billion in 2016 to roughly $10 billion in 2023, pushed by new therapeutic launches, improved outcomes for sufferers, resulting in longer remedy durations and longer survival with sufferers receiving extra traces of remedy. Equally, early projections for the worldwide internet market present it might nearly double going from roughly $2.5 billion in 2023 to roughly $4.6 billion in 2030. Primarily based on the CABINET examine, CABOMETYX is well-positioned to seize a good portion of this market pending regulatory approval. Past cabo, the STELLAR-311 examine positions zanza nicely within the neuroendocrine tumor house.

Nevertheless, it isn’t included in these early projections. The CABINET information have been enthusiastically obtained at this September’s ESMO assembly and concurrently printed within the New England Journal of Medication. As we speak to KOLs and physicians and market analysis, the efficacy information from CABINET is seen favorably by prescribers when it comes to progression-free survival, general response fee, and illness management fee. They view the CABINET information as clinically significant and there’s pleasure for the potential for cabo to develop into obtainable to internet sufferers.

The overwhelming majority of physicians in our neuroendocrine tumor market analysis have expertise with cabo in RCC, HCC, or DTC, which is according to CABOMETYX utilization information. These oncologists cite their expertise with CABOMETYX in these tumors as a optimistic issue, notably in relation to consolation with dose modification and toxicity administration. The suggestions and analysis clearly exhibit {that a} regulatory approval for CABOMETYX primarily based on the CABINET examine would have the potential to assist a broad vary of internet sufferers and handle a major unmet medical want. The CABINET examine had a various inhabitants that included sufferers no matter website of illness origin, tumor grade, prior Lutathera, SSTR standing, or useful standing of the tumors.

In our market analysis and medical suggestions, physicians cite the examine design as a optimistic and that it covers a variety of internet sufferers that they see of their observe, in addition to the truth that it’s a modern information set and is inclusive of sufferers who’ve obtained prior Lutathera. The potential broad utility of cabo in NET is a differentiator on this setting relative to different accredited brokers. cabo might have the chance to be the simple alternative to make use of in neuroendocrine tumors provided that it was studied in all related medical segments. In our evaluation of the neuroendocrine prescriber universe, we see the overwhelming majority of internet enterprise potential in roughly 3,500 prescribers.

We’re thrilled that about 80% of those prescribers have already got expertise writing CABOMETYX. Of those 3,500 NET treaters, 2,800 are already present on-label targets for the gross sales drive, indicating that entry to them can be environment friendly. Additionally, of the 700 internet prescribers who aren’t presently referred to as on. The overwhelming majority, 550, are co-located with present CABOMETYX targets.

Ending FDA approval, we’re assured that we can quickly attain and educate this internet prescriber universe effectively given the overlap with present gross sales targets and the truth that we expanded our GI gross sales group. Turning to the NET market. Now we have performed market analysis, which reveals that oral therapies account for roughly 25% of the first-line market and 50% of the utilization within the second and third-line-plus settings. At the moment obtainable oral choices do not need the identical breadth of knowledge throughout all illness traits, together with website of origin, grade, and useful standing.

Additionally, in market analysis, physicians don’t view the toxicity profile of those brokers in a good method. Majority of NET sufferers will obtain a number of traces of remedy, and there’s lack of optimum sequencing information on this setting, notably in sufferers beforehand handled with Lutathera. All of this taken collectively underscores the necessity for a up to date information set that’s broadly relevant to deal with the unmet medical want for this heterogeneous affected person inhabitants. Trying on the small molecule marketplace for NETs in 2025 utilizing modern pricing, the small molecule alternative can be roughly $1 billion within the U.S.

Moreover, upon approval, CABOMETYX can be the one branded small molecule remedy competing within the neuroendocrine tumor market. This can be a crucial level as cabo would have a transparent benefit in promotional share of voice and be the one oral remedy with complete affected person assist companies. With the CABINET information and a targeted launch technique that leverages the optimistic prescriber expertise with cabo, Exelixis is well-positioned to quickly penetrate this market. Moreover, as Exelixis goals to develop into a pacesetter within the neuroendocrine tumor market, we’re excited in regards to the deliberate STELLAR-311 trial of zanza and NETs.

The industrial group is worked up and motivated by the launch planning and preparation for the chance in NETs. The cabo franchise is closing out 2024 with vital momentum in our presently accredited indications and a possible regulatory approval of CABOMETYX in NET, would supply the chance to proceed the expansion and momentum within the coming years. Trying by the cabo lens, it’s clear that nice information with an amazing group behind it, can considerably assist sufferers and develop markets. Now we have seen this in RCC because the oral remedy market has expanded by almost 40% because the starting of 2021.

We’re extraordinarily excited in regards to the portfolio introduced Part 3 zanza trials. We’re motivated to develop the cabo franchise to a kinase inhibitor franchise with zanza having the potential to assist sufferers in tumors the place cabo has demonstrated exercise comparable to NETs and RCC in addition to new tumors comparable to colorectal and head and neck cancers. So, we are able to proceed to assist extra sufferers with most cancers as we strengthen our GU and GI franchises. And with that, I’ll flip the decision again over to Mike.

Michael M. Morrissey — President, Chief Government Officer, and Director

All proper. Thanks, P.J. I would like to shut our name at this time by thanking all of our very gifted and devoted workers, who’re unwavering and fulfilling our mission to assist most cancers sufferers recuperate stronger and reside longer, efficiently litigating the ANDA with the outcomes of extraordinarily exhausting work and perseveres over actually years led by our wonderful authorized group in partnership with outdoors counsel slightly extra hailed. I am grateful to the quite a few inner workers who have been interviewed deposed and in any other case engaged in supporting this litigation, together with scientists and discovery and manufacturing leaders, and members of the industrial and medical affairs groups in addition to finance and public affairs.

It was a real group effort throughout your entire firm, and I respect the dedication of everybody who’s concerned in seeing you thru to fruition. I would additionally like to acknowledge the group concerned in efficiently negotiating the Merck medical growth collaboration, which was one other cross-functional effort led by our enterprise growth colleagues. With this collaboration, we’re on our technique to serving to many extra most cancers sufferers with zanza. I would additionally wish to thank our industrial group, which has pushed cabo’s outperformance and contributed to our robust monetary outcomes over the primary 9 months of this yr.

And eventually, I would like to acknowledge our total R&D group, who’ve propelled our pipeline efforts ahead at a fast tempo. The collective Exelixis group has completed an amazing deal so far in 2024 and with far more to come back on the horizon as we try to ship outcomes for most cancers sufferers and our shareholders. We stay up for updating you on our progress. Thanks to your continued assist and curiosity in Exelixis, and we’re glad to now open the decision for questions.

Questions & Solutions:

Operator

Thanks. [Operator instructions] Please stand by whereas we compile the Q&A roster. Our first query comes from the road of Asthika Goonewardene with Truist. Your line is open.

Asthika Goonewardene — Analyst

Hello, guys. Thanks for taking my questions and congrats on the beating the race right here. It’s totally encouraging to see that. Since I am restricted to only one query, I am going to simply concentrate on the Merck collaboration that was just lately introduced.

Are you able to perhaps give us some colour on the diligence course of that means into that deal? How intensive was it? I do know it is exhausting to touch upon that, however that can be helpful. And the rationale I am asking is as a result of Merck already has lenvatinib, a drug that the place tolerability and half-life has been debilitating to its growth. I am simply attempting to get a way of how the — what they did once they did evaluation with zanza. Thanks.

Michael M. Morrissey — President, Chief Government Officer, and Director

Yeah, Asthika. It is Mike. Thanks for the query. Yeah.

It is a exhausting query to reply. We do not need to communicate for Merck. We definitely need to respect the method that came about over many, many, many months. We’re thrilled to be working with arguably our important competitor within the RCC house with cabo shifting ahead along with them with zanza.

So, we’re enthusiastic about shifting ahead. Clearly, there’s no person higher within the business to truly executing trials than Merck. So, the truth that they’re operating two giant pivotal trials is simply superior from our viewpoint, and we’re definitely excited to work with them going ahead with these first set of trials with zanza.

Operator

Thanks. Please stand by for our subsequent query. Our subsequent comes from the road of Jason Gerberry with Financial institution of America Securities. Your line is open.

Unknown speaker — Financial institution of America Securities — Analyst

Hello. That is Chi on for Jason. Thanks for taking our questions. Congrats On securing a good ruling on cabo IP.

One on enterprise growth. I perceive you look to do the best view of the best valuation for the best asset inside the GU/GI house. I am curious you probably have a desire for modality, whether or not it is small molecule, monoclonal bispecific, or ADC, and whether or not you’ve gotten a sense on the scale of the deal, you’ll contemplate for BD. Thanks a lot.

Michael M. Morrissey — President, Chief Government Officer, and Director

Yeah. Thanks for the query on BD. Look, we’re agnostic to, I feel, nearly all these elements, we’re targeted on energetic molecules, as I discussed in our ready remarks, that we now have conviction on when it comes to being able or the chance to generate differentiating medical information that we are able to then convert into industrial success. I imply, once more, that is the training from cabo.

That is the cabo lens that we base every thing on. So, we clearly need to have the ability to work within the GU/GI house as a result of we’re actually set as much as execute very nicely there, each clinically and commercially. However when it comes to modalities, we’re open. We’re on the lookout for energetic molecules that we predict we are able to construct right into a franchise primary, after which recover from the objective line quite a few occasions from a regulatory viewpoint with the apparent upside in serving to extra sufferers after which having that translate into industrial success.

Operator

Thanks. Please stand by for our subsequent query. Our subsequent query comes from the road of Silvan Tuerkcan with Residents JMP. Your line is open.

Silvan Tuerkcan — Analyst

Yeah. Thanks, group. Thanks for taking my query and congrats on the beat. I want to find out about perhaps that there is a hole between — clearly, between your near-term progress with cabo and zanza.

And you then need to do with BD after which your earlier pipeline, however perhaps speaking in regards to the earlier pipeline, your artificial lethality property. When can we anticipate some information there? And the way have you ever — what’s your view on the house with all of the aggressive information that has come out just lately right here? Thanks a lot.

Michael M. Morrissey — President, Chief Government Officer, and Director

Dana, I need to take that one first from a aggressive viewpoint. After which I feel each Amy and I can present some colour commentary as nicely.

Dana Aftab — Chief Scientific Officer

Certain. So, thanks for the query. Simply concerning — so let’s simply be clear, we have got two compounds within the clinic now which are within the artificial lethality house XL309, which targets you as design. And as we introduced within the press launch, XL495 has now been filed, and the Part 1 trial is operating.

As I highlighted at our R&D Day presentation in December, each of these molecules are considerably differentiated from the opposite molecules which are within the clinic. Relating to XL309, we now consider we’re the entrance runner within the clinic with Roche pulling again on their molecule to remodel and work by some PK points. They actually hit a ceiling when it comes to publicity. So, we’re fairly pleased with our place now within the clinic with that compound.

After which with 495, the PK-1 inhibitor, the principle competitors there’s from restore with lunresertib. And as we introduced at R&D Day in December, our compound, we consider, has a PK benefit in addition to selectivity benefit. With our PK modeling, we consider we are able to hit nicely into the efficacious vary of publicity with once-daily dosing. And we even have — we additionally hit about 33% or 35% fewer kinases in a broad selectivity panel in comparison with that competitor compound.

So, we predict there is likely to be a security benefit as nicely.

Michael M. Morrissey — President, Chief Government Officer, and Director

Amy?

Amy Peterson — Chief Medical Officer

Yeah. So, I do know we spent a number of time speaking about cabo and zanza as a result of these are form of the nearer-term issues. However belief me, Dana is holding the event group very busy with a few of these property within the pipeline as they advance. And they’re – right here we actually are specializing in best-in-class.

And with the modality that we now have round USP1 and single-stranded break restore, there’s actually a chance to not solely lengthen the attain of PARP inhibition and BRCA mutations however doubtlessly additionally take it past BRCA mutated sufferers into HRD and doubtlessly different indications. And we now have XB010 ADC with MMA payload that targets 5T4 advancing. And now as Dana simply identified, FPI to 495. So, we’re busy with the pipeline.

There’s so much coming. There’s extra to come back. And we’re actually specializing in that simply as a lot as intensely as we’re specializing in zanza and maturing it.

Operator

Thanks. Please stand by for our subsequent query. Our subsequent query comes from the road of Michael Schmidt with Guggenheim Securities. Your line is open.

Michael Schmidt — Analyst

Hey. Thanks for taking my query. Nice to see reacceleration of cabo gross sales progress to double-digits right here within the second half of this yr. Might you simply touch upon what’s been the first driver for that? After which on zanza, congrats on the Merck collaboration.

I am simply curious when you might touch upon the 2 deliberate Part 3 research of zanza and [Inaudible] in RCC and the way you concentrate on positioning that versus cabo and the ARCUS HIF-2a inhibitor long term. Thanks a lot.

Michael M. Morrissey — President, Chief Government Officer, and Director

OK. P.J., take the primary one, and I am going to touch upon the second. OK.

PJ Haley — Government Vice President of Business

Yeah. Thanks for the query, Michael. We’re definitely very happy. As I discussed, with the quarter and the numerous momentum we now have with cabo now and the franchise, as I’ve talked about beforehand, we have been form of persevering with to see new highs in each demand and new affected person begins and actually primarily pushed by first-line RCC.

We have maintained our market management place there. And as we see rising new affected person begins there, we proceed to see affected person stacking and form of demand shifting ahead. So, very happy with that. And actually, it comes all the way down to we have got nice information throughout the board there after which an amazing group actually targeted on executing at a excessive stage and simply proceed to see that shifting ahead.

Michael M. Morrissey — President, Chief Government Officer, and Director

By way of zanza with Merck, once more, we have agreed with Merck to maintain the main points to ourselves for now. As I am certain time goes on and trials are shifting ahead. Merck once more, who’s operating these trials will talk the design and people sorts of points. So, keep tuned on that.

I haven’t got a lot to say when it comes to different aggressive applications. We’re very, very glad to be partnered with Merck, which has the one FDA-approved HIF inhibitor available on the market proper now. And with the momentum we have got with zanza, and positively with their firepower, we’re very excited to be shifting ahead right here with them going ahead.

Operator

Thanks. Please stand by for our subsequent query. Our subsequent query comes from the road of Greg Renza with RBC Capital Markets. Your line is open.

Gregory Renza — Analyst

Nice. Good night. Good afternoon, Mike and group. Congrats on the quarter and in addition on the string of latest nice replace.

Mike, perhaps sticking with zanzalintinib and we respect the structure of a number of the peak alternative long term, that is nice to see. Simply wished to ask when you might perhaps elaborate slightly bit additional on a number of the assumptions there, you definitely talked about of the affected person stacks, which is useful that the differentiating information that you’d anticipate to get to these numbers and even the unadjusted nature. However as we take into consideration form of these breakdowns with respect to GU and GI and head and neck, can be nice. And definitely, associated, Mike, what’s the optimum pipeline constructed — portfolio assemble for you having gone again, having lived by the cabo days establishing and defending the aggressive positioning is zanza at form of that single asset to get that full white house and variety of alternative, the best mind-set for Exelixis shifting ahead.

Thanks a lot, and congrats once more, guys.

Michael M. Morrissey — President, Chief Government Officer, and Director

Yeah. Thanks, Greg. I respect the feedback and the query. Look, as we talked about beforehand, cabo offers the muse for which we’re constructing future alternatives with zanza going ahead that we have realized so much with cabo.

We have spent 15-plus years growing that molecule. We have had a string of successes. We have performed, I feel, a number of actually nice science on the lab bench within the clinic, been in a position to study so much as a company to have the ability to maneuver. So, suppose we’re making use of all these learnings from all these completely different lanes into how we view the zanza alternative.

By way of particulars on assumptions, we now have a really subtle industrial group that does modeling professionally, I imply, that is what they do. So, we’ll share that — these assumptions and that information in time. I feel it is vital for the sell-side now to be fairly frank to roll up their sleeves, begin with their pencils and take a look at these alternatives, begin doing your personal modeling, and we are able to discuss that collectively when a few of that information, a few of your modeling is extra mature sooner or later. However we’re thrilled about having zanza the place’s it is at to have a molecule at this stage in six ongoing their deliberate pivotal trials.

We predict there’s extra alternative on the way in which collaboration with Merck top-line information in 303 in 2025, doubtlessly first launch in ’26. The momentum is palpable proper now, coming off the power of cabo. So, we’re excited to be – to once more, to be previous the ANDA, so everyone can concentrate on the enterprise shifting ahead, optimistic path ahead with out having the – a number of the overhang that we have had with the ANDA and different stuff up to now. So, glad to interact with you going ahead and looking out ahead to creating this occur.

Operator

Thanks. Please stand by for our subsequent query. Our subsequent query comes from the road of Yaron Werber with TD Cowen. Your line is open.

Yaron Werber — Analyst

Nice. Thanks for taking my query. Congrats on the quarter and on the litigation. So, Mike, simply the one factor that basically caught my thoughts is your remark about doubtlessly taking a look at late-stage offers.

I feel you have form of commented that, however I feel that is form of one thing you are highlighting a bit extra now, no less than in our view. Am I fascinated about this accurately and are you open for acquisitions, or is that this like actually in-licensing solely? Thanks.

Michael M. Morrissey — President, Chief Government Officer, and Director

Yeah, Yaron. So, thanks for the query and the commentary. Look, we have been speaking about late-stage alternatives for some time now. As you heard from Dana and Amy, we now have a really full early stage pipeline.

We like these molecules. We predict they’re best-in-class. Now we have a number of work to do to interrogate after which prioritize what strikes into full growth. So, to be fairly frank, we do not want extra growth candidates, extra INDs, extra Part 1 molecules as a result of we have got our plate full, proper, when it comes to what we’re doing internally, proper? We’re serious about constructing Exelixis right into a multiproduct multi-franchise oncology enterprise, that is the objective.

And to try this, and clearly, we now have cabo going full steam. Zanza have gotten nice traction. But when we are able to discover once more, the best asset that has the best stage of — provides us the best stage of conviction on with the ability to generate differentiating medical information that may then drive industrial efficiency we’re very serious about discovering a technique to carry that molecule or these molecules into the group. As I stated in my ready remarks, we now have any variety of completely different potential enterprise growth alternatives going ahead.

We are able to do just about something we predict is smart, but it surely’s acquired to be the best deal, the best valuation with the best asset.

Operator

Thanks. Please stand by for our subsequent query. Our subsequent query comes from the road of Jay Olson with Oppenheimer. Your line is open.

Jay Olson — Analyst

Wow, congrats on all of the progress throughout so many fronts, actually respect the optimism round zanza, a formidable $5 billion peak U.S. gross sales potential. Are you able to touch upon what provides you the conviction at this cut-off date to share your ideas on the industrial potential? Is it associated to the Merck collaboration or one thing else? And since you’ve gotten world rights to zanza, why did you focus your outlook on U.S. revenues and the way are you fascinated about the ex-U.S.

alternative? Thanks.

Michael M. Morrissey — President, Chief Government Officer, and Director

Yeah, Jay. Thanks for the query. It is actually the best time, as I stated in my form of my early feedback this afternoon, proper, we’re at this inflection level organizationally, the place we’re previous — we’re previous the ANDA, we now have that overhang lastly eliminated. We wish everyone, all of our numerous stakeholders to have a look at us at this time, as we’re going ahead with a profitable product in cabo, an asset in zanza that has a number of, I’d say, excessive PTRS photographs on objective when it comes to new indications that we predict might actually construct on cabo’s success and develop it from the size and scope that we’re seeing presently with cabo.

So, it is actually the best time to get everyone targeted on the long run. Once more, as I discussed with Greg, there’s — we have been — we have had a difficult time getting folks to concentrate to us from the standpoint of the place we’re at and the place we’re going. So, to get you guys, everyone off the sidelines and taking a look at us in perhaps a brand new gentle with the momentum we have got proper now, I feel, is tremendous vital. We’re targeted on constructing a multiproduct multi-franchise enterprise as a result of that is the place the worth is for sufferers and for shareholders.

And with the momentum we now have with cabo and with zanza and the pipeline, a number of optionality, BD-wise we’re tremendous enthusiastic about our path going ahead.

Operator

Thanks. Please stand by for our subsequent query. Our subsequent query comes from the road of Andy Hsieh with William Blair. Your line is open.

Andy Hsieh — Analyst

Thanks for taking our questions. Actually inspired to see the sturdiness of cabo’s management there. Two questions, if I could. One for P.J.

So, there is a pet imaging agent for CA-9 for RCC that would get approval doubtlessly subsequent yr. I am simply questioning the way you view that doubtlessly pulling some sufferers who in any other case would have gone undiagnosed, and would that be a possible upside to your $10 billion TAM that you simply laid out for RCC? Second query has to do with the — additionally the $1 billion TAM that you simply talked about for the small molecule NET. Simply form of again of the extent of calculation I feel you are in all probability projecting anyplace from a five- to six-month length. I am curious, when you take a look at the panorama, particularly with like Afinitor label a number of the durations for earlier traces are principally 9, 10 months.

So, is it unreasonable to imagine that if zanza entrenches earlier within the remedy panorama for NET, that length can be considerably greater, provided that it is a extra indolent most cancers? Thanks.

PJ Haley — Government Vice President of Business

Yeah, Andy. Thanks for the questions. Briefly, with reference to RCC, I feel a number of sufferers are within the funnel, and we’re definitely — as I discussed, happy with our efficiency there and our main TRx market share, which continues to develop, now as much as 42% in that market basket. And I feel that market — a lot of the sufferers are being handled.

And I feel the bar for achievement, notably within the first line, and actually, even with cabo within the second line is sort of excessive. So, I view that market as comparatively steady within the close to time period vis-a-vis different mechanisms of motion. And fascinated about NET, as you talked about, yeah, as I discussed, a couple of quarter of the sufferers in first-line NET are getting oral therapies roughly 50% within the second, third-line settings getting orals. And we principally use, I will not go into the main points of all of our assumptions, however we have performed a number of market analysis there.

I perceive it very nicely. And utilizing durations that we see from that. I definitely suppose you are right. Clearly, the sooner — you do go the longer the length of remedy, notably in neuroendocrine tumors, which is a little more indolent than another strong tumors.

And I feel there’s the potential for zanza in the long run, pending trial outcomes, regulatory approval, and so forth., of getting earlier utilization and subsequently, an extended length. I feel that is definitely proper. However what I would say within the close to time period, we’re actually enthusiastic about cabo and the potential approval that we’re taking a look at with a PDUFA date of April 3. And as we take into consideration that market and that $1 billion market in 2025 that I discussed, we predict we’re extremely nicely positioned to not solely penetrate it and obtain a number of that market however do it quickly.

Actually, the extra we give it some thought is we’re the one branded oral remedy within the house, it actually provides us a giant benefit when it comes to the promotional share of voice and actually simply the flexibility to assist sufferers complete affected person assist companies, we predict it will likely be actually vital. So, we’re actually enthusiastic about that chance within the close to time period.

Operator

Thanks. Please stand by for our subsequent query. Our subsequent query comes from the road of David Lebowitz with Citi. Your line is open.

Unknown speaker — Financial institution of America Securities — Analyst

Hello, guys. Jon for David. Thanks for taking our query. For cabo and neuroendocrine tumors, I do know you simply — you are referring to a number of the industrial issues for this market, however what kind of work nonetheless must be performed earlier than a possible launch? And assuming approval, how ought to we be fascinated about preliminary launch cadence? Are there any current indications which may function form of a proxy for a way we must be fascinated about early uptake? Thanks.

PJ Haley — Government Vice President of Business

Yeah. Thanks for the query, Jonathan. Our group, as I discussed, are extremely excited and motivated throughout the board preparing for this launch. We can be able to go on day one as we all the time are for launching a brand new indication.

And admittedly, the extra we do it, I feel the higher we get at it. So, what I’d anticipate right here, as I discussed, not having actually the quantity of competitors that you’ve in RCC, which is, for instance, very aggressive we’d anticipate a really robust uptake proper from the start. And we consider our information could be very robust. I went into some element on the prescriber universe.

The gross sales drive has been expanded and we’re frankly actually able to go. And we consider we are able to actually transfer into the market quickly and effectively. And actually, we’re very excited in regards to the alternative to assist doubtlessly a number of sufferers with neuroendocrine tumors.

Operator

Thanks. Please stand by for our subsequent query. The following query comes from the road of Akash Tewari with Jefferies. Your line is open.

Unknown speaker — Financial institution of America Securities — Analyst

Hello. That is Anastasia on for Akash. Congrats on the quarter and on the latest IP determination. Only a couple on my finish.

The primary is in regards to the potential to develop Merck partnership past RCC and head and neck. Do you suppose that is attainable as we get extra information from the PD-L1 VEGF bispecifics? After which the second query is, do you suppose that your head and neck information would examine nicely versus mirrors within the PD-L1 refractory inhabitants, or do you see this sort higher or worse on our entrance?

Michael M. Morrissey — President, Chief Government Officer, and Director

Anastasia, thanks for the questions. Amy, why do not you begin with the top and neck query, after which I am going to handle the Merck?

Amy Peterson — Chief Medical Officer

Yeah. So, in relation to zanza, we’re clearly serious about growing it broadly as its best-in-class, and we now have a number of collaborations to that and with different IOs, together with Arezo, together with nivolumab and now just lately with pembrolizumab in head and neck. So, whether or not or not there’s growth past head and neck, I’d say, we’re all the time wanting. And naturally, we’re serious about getting zanza into as many indications as attainable.

What we mix with stays to be seen. And I suppose, in relation to the info with the bispecifics within the PD-1 refractory house, I am not fairly certain we’re competing with them. Now we have a couple of yr lead time with Bicara in opposition to Bicara within the frontline house and Merus. And we’re leveraging that lead time very aggressively to make sure websites that we are able to enroll and browse that examine out.

The way it performs out within the P1 refractory, so perhaps I did not perceive the query, however I am unsure I will reply that for Bicara.

Michael M. Morrissey — President, Chief Government Officer, and Director

OK. Thanks.

Operator

Thanks. Please stand by for our subsequent query. The following query comes from the road of Stephen Willey with Stifel. Your line is open.

Stephen Willey — Analyst

Yeah. Good afternoon. Thanks for taking the questions and congrats on the quarter. So, I do know you beforehand characterised STELLAR-305 as a Part 2/3.

I feel you are now form of explicitly referring it to, to it as a Part 3. So, simply questioning when you’ve accomplished that formal evaluation of Part 2 information to formally transition into Part 3. And I suppose in that case, are you able to communicate to these metrics that you simply’re evaluating to make that call and simply whether or not you is likely to be disclosing that information sooner or later? Thanks.

Michael M. Morrissey — President, Chief Government Officer, and Director

Amy, please go forward.

Amy Peterson — Chief Medical Officer

Yeah, rapidly. Thanks for the query. It’s a Part 2/3. We’re nonetheless in ruling, and we’ll disclose information when it’s mature.

Operator

Thanks. Please stand by for our subsequent query. Our subsequent query comes from the road of Ash Verma with UBS. Your line is open.

Ash Verma — Analyst

Hello. Thanks for taking our questions. So, I simply wished to grasp the capital allocation priorities from right here. You have got a reasonably sizable buyback program excellent.

Do you suppose this was the best focus while you have been coping with the IP uncertainty, however now that the IP determination is behind you, why not focus most of your capital deployment on the pipeline build-out? Thanks.

Michael M. Morrissey — President, Chief Government Officer, and Director

Yeah. Thanks for the query. It is Mike. Yeah.

I feel with our money flows, we are able to do the entire above. So, as I discussed in my ready remarks, we’re dedicated to being very disciplined as we go ahead when it comes to expense ranges, form of holding expense ranges form of the place they’re presently for the foreseeable future with the money flows that we now have and undertaking, we predict we are able to proceed investing within the pipeline doing BD after which returning money to shareholders.

Operator

Thanks. Please stand by for our subsequent query. Our subsequent query comes from the road of Peter Lawson with Barclays. Your line is open.

Peter Lawson — Analyst

Nice. Thanks for taking the query. Simply I’ve a query round Slide 9 that the steerage round zanza. So, ought to we learn that as form of zanza $5 billion in 2033, after which what cabo form of basically declined to zero?

Michael M. Morrissey — President, Chief Government Officer, and Director

Peter, it is Mike. I feel the cabo LOE is within the 2030 timeframe. So, as outlined on Slide 9, that may be a 2024 quantity, and we see zanza rising dramatically over the subsequent a number of years as these pivotal trials learn out, and if profitable, might drive a number of upside progress for zanza.

Operator

Thanks. Please stand by for our subsequent query. Our subsequent query comes from the road of Etzer Darout, BMO Capital Markets. Your line is open.

Lukas Shumway — Analyst

Hey. It is Luke Shumway on for Etzer. Thanks for taking my query. For the zanza colorectal most cancers replace subsequent yr, the first endpoint is OS in sufferers with out liver occasions.

How readily identifiable are sufferers with out liver occasions in the actual world? And would that require a companion diagnostic?

Amy Peterson — Chief Medical Officer

Hello. That is Amy. Thanks for the query. So, that is an imaging evaluation.

All sufferers, once they’re identified with superior illness are inclined to get scanned from head to toe. And that completely features a liver scan, particularly for sufferers with colorectal due to its predilection to metastasizes to the liver. So, all sufferers with colorectal may have a scan of their liver. And it is fairly simple to determine whether or not or not there’s a illness current within the liver or not.

So, it is an imaging. It is a medical evaluation. It is really not a companion diagnostic, and it is readily utilized by physicians daily.

Operator

Thanks. Please stand by for our subsequent query. Our subsequent query comes from the road of Sudan Loganathan with Stephens. Your line is open.

Sudan Loganathan — Analyst

Hello. Thanks for taking the time to share your quarterly outcomes. Good night. Congratulations on all the good — the good quarter and the latest progress on many fronts.

With the breadth of medical program alternatives for cabo and zanza, the GU, and GI house, what indications or therapeutic applied sciences are left on the market of curiosity while you’re on the lookout for property through the BD endeavors? Are you particularly on the lookout for property primarily for novel mixtures with cabo and zanza or monotherapy choices on the market to cowl the GU/GI indications?

Michael M. Morrissey — President, Chief Government Officer, and Director

Yeah, Sudan. Thanks for the query. It is Mike. Yeah.

I’d say easiest reply is the entire above. Our conviction is round medical differentiation that may drive industrial success if these are — these property mixed with zanza, different XL molecules within the pipeline, nice. In the event that they’re stand-alone brokers or mixed with checkpoints, that is wonderful, too. So, once more, we’re agnostic in relation to modality MOA kind of transaction.

We’re targeted on actually excessive stage of conviction on medical differentiation that then drives industrial success.

Operator

Thanks. Please stand by for our subsequent query. Our subsequent query comes from the road of Chris Shibutani with Goldman Sachs. Your line is open.

Chris Shibutani — Analyst

Thanks. Mike, as you concentrate on the way you’re staffing your groups and clearly monitoring the way you’re spending, noting that SG&A, the R&D has come down. What are the areas that you simply really feel are going to be vital to develop additional?

Michael M. Morrissey — President, Chief Government Officer, and Director

Thanks, Chris. Yeah. I feel we’re in a reasonably great place proper now. Clearly, if we now have within the out years continued medical success and we have to increase what we have got commercially.

That is a comparatively simple and incremental progress as we have seen to this point in our planning for the web house. However when it comes to the corporate, we now have 100-plus workers. We’re – I feel we’re main imply when it comes to what we’re aspiring to do organizationally when it comes to constructing this multi-franchise oncology enterprise. However we have got a number of momentum within the group from an R&D viewpoint, from a industrial viewpoint with the best measurement G&A to make all of it work.

So, we’re enthusiastic about the place we’re, and we predict we have got the best group and positively the best horsepower each talent-wise in addition to energy-wise to make that occur as we go ahead.

Operator

Thanks. Please stand by for our subsequent query. Our remaining query comes from the road of Joe Catanzaro with Piper Sandler. Your line is open.

Joe Catanzaro — Analyst

Hey, nice. Thanks for taking my query. Congrats on the quarter. I had one on the PK MIT program because it’s now in Part 1.

So, you talked about on restorative and that program appears to have honed in a biomarker-selected inhabitants in endometrial and ovarian most cancers. So, perhaps are you able to communicate to your technique round tumor kind choice and biomarkers that you could be be utilizing. And you then additionally talked about potential cytotoxic mixtures for that program. Questioning if perhaps you can elaborate a bit extra on that.

Thanks.

Dana Aftab — Chief Scientific Officer

Yeah. Thanks for the query, Joe. That is Dana. I am going to take that one.

So, sure, so XL495 as you are fairly conscious as a PK-1 inhibitor, which has proven artificial lethality in tumors which have elevated cyclin E ranges that may be pushed by quite a few completely different precise genetic biomarkers, together with CCNE amplification and some others. So, we have definitely recognized these biomarkers in our preclinical fashions, however we have additionally recognized another attention-grabbing biomarkers that we now have not but disclosed, which we’re additionally fairly enthusiastic about. So, we’re taking a look at all of those biomarkers within the Part 1 examine. Now we have additionally performed fairly a couple of mixture research preclinically taking a look at, as you talked about, cytotoxics, but additionally a really expanded vary of medicine which have direct or oblique impacts on producing form of a replication stress kind phenotype within the cells and we now have a number of alternatives there.

So, we’ve not been – we’ve not actually disclosed particulars of our Part 1 program but. We are going to try this sooner or later sooner or later. However till then, we’re taking a look at fairly a couple of completely different hypotheses within the clinic for each biomarkers and mixtures.

Operator

Thanks. Girls and gents, I am exhibiting no additional questions within the queue. I’d now like to show the decision again over to your host, Varant, for closing remarks.

Varant Shirvanian — Director of Investor Relations

Thanks, Towanda, and thanks all for becoming a member of us at this time. We welcome your follow-up calls with any extra questions you might have that we have been unable to deal with throughout at this time’s name.

Operator

[Operator instructions]

Length: 0 minutes

Name members:

Varant Shirvanian — Director of Investor Relations

Michael M. Morrissey — President, Chief Government Officer, and Director

Christopher J. Senner — Government Vice President, Chief Monetary Officer

PJ Haley — Government Vice President of Business

Mike Morrissey — President, Chief Government Officer, and Director

Asthika Goonewardene — Analyst

Unknown speaker — Financial institution of America Securities — Analyst

Silvan Tuerkcan — Analyst

Dana Aftab — Chief Scientific Officer

Amy Peterson — Chief Medical Officer

Michael Schmidt — Analyst

P.J. Haley — Government Vice President of Business

Gregory Renza — Analyst

Yaron Werber — Analyst

Jay Olson — Analyst

Andy Hsieh — Analyst

Stephen Willey — Analyst

Ash Verma — Analyst

Peter Lawson — Analyst

Lukas Shumway — Analyst

Sudan Loganathan — Analyst

Chris Shibutani — Analyst

Joe Catanzaro — Analyst

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