On November 1, 2023 Exelixis, Inc. (Nasdaq: EXEL) reported financial results for the third quarter of 2023 and provided an update on progress toward achieving key corporate objectives, as well as commercial, clinical and pipeline development milestones (Press release, Exelixis, NOV 1, 2023, View Source [SID1234636635]).
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"The third quarter of 2023 was another strong one for the CABOMETYX commercial franchise, which continues to fuel the buildout of our differentiated pipeline of small molecules and biotherapeutics," said Michael M. Morrissey, Ph.D., President and Chief Executive Officer, Exelixis. "CABOMETYX maintained its status as the leading tyrosine kinase inhibitor for the treatment of renal cell carcinoma, driven by its use in combination with nivolumab in the first-line setting. On the cabozantinib development front, we reported positive results from the phase 3 CONTACT-02 and CABINET studies in prostate and neuroendocrine tumors, respectively."
Dr. Morrissey continued: "We welcomed Dr. Amy Peterson as our new Chief Medical Officer in August with a focus on accelerating our clinical pipeline programs, including zanzalintinib, our next-generation tyrosine kinase inhibitor, and XB002, our most advanced antibody-drug conjugate. We’re making progress enrolling key trials for both programs, and we’re excited for the presentation of the clear cell renal cell carcinoma cohort of zanzalintinib’s STELLAR-001 study at the 2023 International Kidney Cancer Symposium later this month. On the business development front, we signed a new agreement with Insilico Medicine to in-license XL309, formerly ISM3091, a potentially best-in-class small molecule inhibitor of USP1, and we are continuing to evaluate external opportunities for potential best-in-class or first-in-class late-stage and commercial assets. We’ll discuss all these updates and more at our R&D Day on Tuesday, December 12th in New York City. I’d like to thank the entire Exelixis team for all their hard work and contributions during the third quarter as we advanced our mission to help cancer patients recover stronger and live longer."
Third Quarter 2023 Financial Results
Total revenues for the quarter ended September 30, 2023 were $471.9 million, as compared to $411.7 million for the comparable period in 2022.
Total revenues for the quarter ended September 30, 2023 included net product revenues of $426.5 million, as compared to $366.5 million for the comparable period in 2022. The increase in net product revenues was primarily due to an increase in sales volume and an increase in average net selling price.
Collaboration revenues, composed of license revenues and collaboration services revenues, were $45.4 million for the quarter ended September 30, 2023, as compared to $45.3 million for the comparable period in 2022. Collaboration revenues primarily consisted of royalty revenues for the sales of cabozantinib outside of the U.S. generated by Exelixis’ collaboration partners, Ipsen Pharma SAS and Takeda Pharmaceutical Company Limited.
Research and development expenses for the quarter ended September 30, 2023 were $332.6 million, as compared to $198.8 million for the comparable period in 2022. The increase in research and development expenses was primarily related to increases in license and other collaboration costs, personnel expenses and manufacturing costs to support Exelixis’ development candidates, partially offset by lower stock-based compensation expense.
Selling, general and administrative expenses for the quarter ended September 30, 2023 were $138.1 million, as compared to $115.0 million for the comparable period in 2022. The increase in selling, general and administrative expenses was primarily related to increases in personnel expenses, stock-based compensation expense and legal and advisory fees.
Provision for income taxes for the quarter ended September 30, 2023 was $4.8 million, as compared to $18.8 million for the comparable period in 2022, primarily due to a decrease in pre-tax income.
GAAP net income for the quarter ended September 30, 2023 was $1.0 million, or $0.00 per share, basic and diluted, as compared to GAAP net income of $73.2 million, or $0.23 per share, basic and diluted, for the comparable period in 2022.
Non-GAAP net income for the quarter ended September 30, 2023 was $32.1 million, or $0.10 per share, basic and diluted, as compared to non-GAAP net income of $102.0 million, or $0.32 per share, basic and $0.31 per share, diluted, for the comparable period in 2022.
Non-GAAP Financial Measures
To supplement Exelixis’ financial results presented in accordance with U.S. Generally Accepted Accounting Principles (GAAP), Exelixis presents non-GAAP net income (and the related per share measures), which excludes from GAAP net income (and the related per share measures) stock-based compensation expense, adjusted for the related income tax effect for all periods presented.
Exelixis believes that the presentation of these non-GAAP financial measures provides useful supplementary information to, and facilitates additional analysis by, investors. In particular, Exelixis believes that these non-GAAP financial measures, when considered together with its financial information prepared in accordance with GAAP, can enhance investors’ and analysts’ ability to meaningfully compare Exelixis’ results from period to period, and to identify operating trends in Exelixis’ business. Exelixis has excluded stock-based compensation expense, adjusted for the related income tax effect, because it is a non-cash item that may vary significantly from period to period as a result of changes not directly or immediately related to the operational performance for the periods presented. Exelixis also regularly uses these non-GAAP financial measures internally to understand, manage and evaluate its business and to make operating decisions.
These non-GAAP financial measures are in addition to, not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Exelixis encourages investors to carefully consider its results under GAAP, as well as its supplemental non-GAAP financial information and the reconciliation between these presentations, to more fully understand Exelixis’ business. Reconciliations between GAAP and non-GAAP results are presented in the tables of this release.
2023 Financial Guidance
Exelixis is providing the following updated financial guidance for fiscal year 2023:
Total revenues
$1.825 billion – $1.850 billion
Net product revenues
$1.625 billion – $1.650 billion
Cost of goods sold
4.0% – 5.0% of net product revenues
Research and development expenses (1)
$1.050 billion – $1.075 billion
Selling, general and administrative expenses (2)
$525 million – $550 million
Effective tax rate
20% – 22%
____________________
(1)
Includes $35 million of non-cash stock-based compensation expense.
(2)
Includes $70 million of non-cash stock-based compensation expense.
Cabozantinib Highlights
Cabozantinib Franchise Net Product Revenues and Royalties. Net product revenues generated by the cabozantinib franchise in the U.S. were $426.5 million during the third quarter of 2023, with net product revenues of $422.2 million from CABOMETYX (cabozantinib) and $4.3 million from COMETRIQ (cabozantinib). Based upon cabozantinib-related net product revenues generated by Exelixis’ collaboration partners during the quarter ended September 30, 2023, Exelixis earned $37.8 million in royalty revenues.
Positive Results from Phase 3 CONTACT-02 Pivotal Trial Evaluating Cabozantinib in Combination with Atezolizumab in Metastatic Castration-Resistant Prostate Cancer (mCRPC). In August, Exelixis and partner Ipsen announced that the global phase 3 CONTACT-02 pivotal trial met one of two primary endpoints, demonstrating a statistically significant improvement in progression-free survival (PFS) at the primary analysis. CONTACT-02 is evaluating cabozantinib in combination with atezolizumab compared with a second novel hormonal therapy (NHT) in patients with mCRPC and measurable soft-tissue disease who have been previously treated with one NHT. At a prespecified interim analysis for the primary endpoint of overall survival (OS), a trend toward improvement of OS was observed; however, the data were immature and did not meet the threshold for statistical significance. Therefore, the trial will continue to the next analysis of OS as planned. The safety profile of the combination of cabozantinib and atezolizumab was consistent with the known safety profiles for each single medicine, and no new safety signals were identified with the combination. Based on feedback from the U.S. Food and Drug Administration (FDA), Exelixis will discuss a potential regulatory submission when the results of the next OS analysis are available. Detailed findings will be presented at a future medical meeting.
Detailed Results from Phase 3 CABINET Pivotal Trial Evaluating Cabozantinib in Advanced Pancreatic and Extra-Pancreatic Neuroendocrine Tumors Presented at the 2023 European Society for Medical Oncology (ESMO) (Free ESMO Whitepaper) Congress. In October, detailed results were presented from the phase 3 CABINET pivotal trial at the 2023 ESMO (Free ESMO Whitepaper) Congress. Results of interim analyses in both cohorts demonstrate statistically significant and clinically meaningful improvement in PFS in those patients treated with cabozantinib. Adverse events were consistent with the known safety profile of cabozantinib. CABINET is sponsored by the National Cancer Institute and is led by The Alliance for Clinical Trials in Oncology. Previously, in August, Exelixis announced The Alliance for Clinical Trials in Oncology’s independent Data and Safety Monitoring Board unanimously recommended to unblind and stop the trial early due to a dramatic improvement in efficacy observed at an interim analysis. These findings will be discussed with the FDA.
COSMIC-313 Second Interim Analysis of OS Secondary Endpoint. During the third quarter, a second prespecified interim analysis for the OS secondary endpoint of the phase 3 COSMIC-313 pivotal trial was completed. The data did not meet the threshold for statistical significance. Therefore, the trial will continue to the next planned analysis of OS, anticipated in 2024. The COSMIC-313 study is evaluating the triplet combination of cabozantinib, nivolumab and ipilimumab versus the combination of nivolumab and ipilimumab in previously untreated advanced intermediate- or poor-risk renal cell carcinoma. In July 2022, Exelixis announced that the trial met its primary endpoint, demonstrating significant improvement in blinded independent radiology committee-assessed PFS at the primary analysis.
Corporate Highlights
Settlement of CABOMETYX Patent Litigation with Teva Pharmaceuticals. In July, Exelixis announced that it entered into a Settlement and License Agreement (Agreement) with Teva Pharmaceuticals Development, Inc. and Teva Pharmaceuticals USA, Inc. (collectively "Teva"). This settlement resolves patent litigation brought by Exelixis in response to Teva’s Abbreviated New Drug Application seeking approval to market a generic version of CABOMETYX prior to the expiration of the applicable patents. Pursuant to the terms of the Agreement, Exelixis will grant Teva a license to market its generic version of CABOMETYX in the U.S. beginning on January 1, 2031, if approved by the FDA and subject to conditions and exceptions common to agreements of this type. The U.S. District Court for the District of Delaware dismissed the case without prejudice in September 2023 per the parties’ joint request, effectively terminating all ongoing Hatch-Waxman litigation between Exelixis and Teva regarding CABOMETYX patents.
Appointment of Amy Peterson, M.D., as Executive Vice President, Product Development & Medical Affairs and Chief Medical Officer. In August, Exelixis announced the appointment of Amy Peterson, M.D., as Executive Vice President, Product Development & Medical Affairs and Chief Medical Officer. Dr. Peterson is a veteran oncology drug development leader whose experience includes senior clinical development and operational roles at Genentech, Medivation, BeiGene and CytomX. She received her M.D. from Thomas Jefferson University, completed a residency in internal medicine at Northwestern Memorial Hospital and undertook a hematology/oncology fellowship at the University of Chicago. Dr. Peterson joined Exelixis as the company accelerates development of its product pipeline and builds on the success of its global cabozantinib oncology franchise.
Exelixis and Insilico Medicine (Insilico) Enter into Exclusive Global License Agreement for XL309 (formerly ISM3091), a Potentially Best-in-Class USP1 Inhibitor. In September, Exelixis and Insilico announced that the companies entered into an exclusive license agreement granting Exelixis global rights to develop and commercialize XL309, a potentially best-in-class small molecule inhibitor of USP1, which has emerged as a synthetic lethal target in the context of BRCA-mutated tumors. Under the terms of the agreement, Insilico granted Exelixis an exclusive, worldwide license to develop and commercialize XL309 and other USP1-targeting compounds in exchange for an upfront payment of $80 million and potential future development and commercial milestone payments, as well as tiered royalties on net sales.
Share Repurchase Program. As of September 30, 2023, Exelixis has repurchased 16.943 million shares of the company’s common stock for a total of $344.8 million. In March, Exelixis announced that the company’s Board of Directors authorized the repurchase of up to $550 million of the company’s common stock before the end of 2023. Share repurchases under the program may be made from time to time through a variety of methods, which may include open market purchases, in block trades, accelerated share repurchase transactions, exchange transactions, or any combination of such methods. The timing and amount of any share repurchases under the share repurchase program will be based on a variety of factors, including ongoing assessments of the capital needs of the business, alternative investment opportunities, the market price of Exelixis’ common stock and general market conditions.
Basis of Presentation
Exelixis has adopted a 52- or 53-week fiscal year that generally ends on the Friday closest to December 31st. For convenience, references in this press release as of and for the fiscal period ended September 29, 2023 is indicated as being as of and for the period ended September 30, 2023.
Conference Call and Webcast
Exelixis management will discuss the company’s financial results for the third quarter of 2023 and provide a general business update during a conference call beginning at 5:00 p.m. ET / 2:00 p.m. PT today, Wednesday, November 1, 2023.