Exelixis, Inc. Partnering Before Approval

Exelixis (EXEL 1.15%) reported earnings last week, but it was an announcement about licensing the rights to cabozantinib that had investors excited.

Exelixis results: The raw numbers

What happened with Exelixis this quarter?

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  IMAGE SOURCE: EXELIXIS.

  While the 35% increase in revenue looks impressive, the absolute sales of Cometriq remain low, especially in comparison to the potential for cabozantinib in kidney cancer.
• The big news came after the quarter ended -- in conjunction with the earnings announcement -- that Exelixis had signed a deal with Paris-based Ipsen to sell cabozantinib outside of the United States, Canada, and Japan that included $200 million up front and $60 million upon approval of cabozantinib for kidney cancer in Europe. There are other undisclosed milestones -- up to $545 million total -- and tiered royalties up to 26% on sales of cabozantinib by Ipsen.
• Exelixis submitted the applications to both the U.S. and EU regulators for approval of cabozantinib to treat kidney cancer. The FDA is expected to make a decision by June 22 -- hopefully earlier -- and the European Medical Agency could make a decision later this year.
• We already knew that the Meteor trial had met its primary endpoint of slowing progression-free survival -- delaying when the tumor starts growing or the patient dies -- compared to Novartis' (NVS 2.44%) Afinitor, but last month, Exelixis said that Meteor also showed that cabozantinib extended overall survival compared to Afinitor.
• The company ended the year with $253 million in cash, which, when combined with the $200 million from Ipsen, puts the company in good shape to launch cabozantinib stateside.

What management had to say 
It's sometimes hard for biotechs to decide how much to invest in the launch of a product before it's actually approved, but with the strong phase 3 data, Exelixis doesn't seem to be holding back. "Our preparations for a potential launch continue to advance as planned and we have now completed the staffing necessary to be launch-ready in the U.S. pending approval," said Michael Morrissey, Exelixis' president and CEO.

Exelixis hasn't disclosed the magnitude of the overall survival (OS) benefit in the Meteor trial. "We plan to present the OS data at a major medical meeting later this year," Morrissey said. The data has been submitted to U.S. and EU regulators that could be added to the prescription label, but Morrissey said "ultimately we cannot speculate what will be in the label, that is up to the agencies."

Looking forward
Obviously, the launch of cabozantinib will be the biggest event for Exelixis this year, but the magnitude is still quite unknown without the overall survival data. Bristol-Myers Squibb's (BMY 0.65%) immuno-oncology drug Opdivo was approved in November for the same second-line kidney cancer setting that Exelixis is applying for, so it's a little unclear if the biotech will be able to beat Bristol-Myers Squibb in the marketplace.

Opdivo helped patients live for 25 months compared to 19.6 months for patients treated with Novartis' Afinitor. Cabozantinib has to beat that 5.4-month difference by a decent margin because it's more toxic than Bristol-Myers Squibb's Opdivo.

Looking beyond kidney cancer, next year the Celestial phase 3 trial testing cabozantinib in liver cancer is scheduled to read out. There are a lot of similarities between the kidney and liver cancer, so management is hopeful cabozantinib will produce an increase in overall survival for liver cancer as well.

Editor's note: This article has been updated to correct the milestone payment for cabozantinib's European approval in kidney cancer to $60 million.