Exelixis Earnings: No Time to Reminisce

Despite positive phase 3 data last month, the biotech's earnings release was focused on what's ahead.

Brian Orelli
Brian Orelli
Aug 11, 2015 at 9:48PM
Health Care

Exelixis (NASDAQ:EXEL) released second-quarter earnings after the bell on Tuesday, and despite the great news it's had over the past month, the release was focused on what to expect next.

You'll recall that in July, Exelixis released positive phase 3 data for its trial testing Cometriq in kidney cancer. The drug beat Novartis' Afinitor in a head-to-head trial of patients who have progressed after being treated with a VEGF-targeted drug, such as Pfizer's Sutent or Amgen's Nexavar.

Expanding into kidney cancer is important, because the drug is currently only approved to treat medullary thyroid cancer, which is a very small indication. In the second quarter, Exelixis booked just $8 million in sales in sales of Cometriq. The second-line kidney cancer market is a $1 billion split among a few players, but mostly the aforementioned Afinitor, which Cometriq beat, and Pfizer's Inlyta, which produced a similar progression-free survival as Afinitor in its pivotal trial.

Exelixis is shooting for completing the regulatory filings for U.S. and EU approvals in early 2016. Beating the standard of care could help get Exelixis a priority review in the U.S., potentially putting an approval eight months after turning in its application, rather than the standard 12 months. The oncology division of the FDA has also been approving applications well ahead of their PDUFA goal dates, so we could see an approval even faster.

In the EU, Exelixis is still looking for a partner but said it'll submit the application if an ex-U.S. partnership isn't complete by then. Obviously it would be easier to have the partner on board at the start of the review process, since there are a lot of back-and-forth discussions between regulators and drug companies in the EU; there's certainly incentive to ink a deal sooner rather than later.

Beyond second-line kidney cancer, there are opportunities for Exelixis to further expand the market for Cometriq. A phase 2 trial in first-line kidney cancer comparing Cometriq to Sutent completed enrollment in March and should read out next year. And an ongoing phase 3 trial in second-line liver cancer is scheduled to read out in 2017.

The National Cancer Institute's Cancer Therapy Evaluation Program is running a phase 1 trial combining Cometriq with Bristol-Myers Squibb's immunotherapies, Opdivo and Yervoy, in patients with genitourinary tumors, including bladder cancer and kidney cancer. One group of patients will get Cometriq with Opdivo, while the other group will get all three drugs. The main goal of the trial is to find doses of the drugs that can be used together. We'll probably get some efficacy data out of the trial, too, but it may be hard to interpret, since we know Cometriq and Opdivo both work on kidney cancer and there won't be a control group to compare to.

A pair of phase 2 trials in lung cancer presented at the American Society of Clinical Oncology showed that Cometriq was active against lung cancer. Since immunotherapies have also shown activity in lung cancer, Exelixis and its academic partners are exploring the possibility of combination therapies in lung cancer as well.

Cometriq is clearly Exelixis' bread and butter, but the biotech also has a stake in cobimetinib, which it licensed to Roche. The drug is under review in the U.S. and EU for advanced melanoma. After getting pushed back, a decision on the application in the U.S. is expected on or before Nov. 11. The advanced melanoma market has become more crowded over the past few years, but it'll allow Exelixis to get its sales feet wet in a larger market; the deal with Roche allows Exelixis to provide up to 25% of the U.S. sales force. Outside the U.S. the company will get a low double-digit royalty on sales.

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Solid(er) financial situation
As most biotechs do after a huge increase in their stock price, Exelixis raised cash through a secondary offering last month. Between the $167 million it had on hand at the end of the second quarter and the $146 million it raised, Exelixis is on solid ground, which should help keep potential partners from taking advantage of the biotech during negotiations for ex-U.S. rights to Cometriq.

The company also extended its $100 million notes owed to Deerfiled to July 1, 2018. The notes require Exelixis to pay 15% interest, but that's better than eating up a third of its cash right now paying off the debt.

As it ramps up for commercial sales of Cometriq and cobimetinib, operating expenses in the second half of 2015 are expected to be in the range of $80 million to $90 million, up from $71 million in the first half of the year. Fortunately that's not all cash burn, as it includes non-cash stock-based compensation, which will increase by $10 million in the second half of the year.