To Our Stockholders
Drug discovery and development is a difficult business. Failure is far more common than success: roughly 9 out of 10 potential drugs that enter clinical testing don’t make it to regulatory approval. The ones that do take years and hundreds of millions, sometimes even billions, of dollars to get there.1 And even with an approval, there are no guarantees of commercial success: many drugs struggle to deliver on the promise of their data in the real world.
With great science, teamwork, perseverance, and a little luck, success is achievable. In 2016, Exelixis was fortunate to see many years of hard work culminate in several important milestones. Our third product CABOMETYX™ (cabozantinib) tablets received regulatory approval in a major indication. COTELLIC® (cobimetinib), which we discovered and now co-promote with Genentech, saw its clinical development program significantly expand. And importantly, Exelixis markedly improved its financial position to prepare for the future.
But now is not the time to sit back and celebrate. Although we’re grateful for the success we’ve earned, our primary motivation is to do everything we can to maximize our future opportunities. The entire Exelixis team is driving forward with humility, perspective, and urgency; we are rededicating our time, resources, and passion to do even more to help patients with cancer. 2016 was a good year for Exelixis, possibly the best in our long 22-year history. But there’s more to come; in fact, in a very real way, we’re just getting started.
CABOMETYX: The Newest Exelixis Medicine
In April 2016, the FDA approved CABOMETYX as a treatment for patients with advanced renal cell carcinoma (RCC) who have received prior anti-angiogenic therapy. This capped eighteen intense months during which the Exelixis team focused principally on the opportunity in advanced RCC – generating clinical data through the METEOR trial, and building the commercial and medical affairs infrastructure necessary to hit the ground running on the day of approval. As a result, the first CABOMETYX prescription was in the hands of a patient who needed it just three days later.
As the first therapy to demonstrate robust and clinically meaningful improvements in the trifecta of efficacy endpoints — progression-free survival, overall survival, and objective response rate — in a global phase 3 trial in previously-treated RCC patients, CABOMETYX has been rapidly adopted in the U.S. by the clinical community that treats advanced RCC. By the end of 2016, it was the most widely used oral therapy for advanced RCC in the second-or-later line treatment setting.2 Full-year 2016 CABOMETYX revenues of $93.5 million reflect its impact on the RCC treatment landscape in just its first eight months.
While Exelixis focuses on the U.S. launch of CABOMETYX, we’ve built a network of partners who are bringing the medicine to patients internationally. In February 2016, we entered into an exclusive licensing agreement with Ipsen Pharma SAS (Ipsen) to develop and commercialize cabozantinib, and that agreement now encompasses all territories outside of the United States and Japan. Following European Commission approval in September 2016, Ipsen quickly began initiating the launch of CABOMETYX across the EU’s 28 member states. Separately, our newest partner Takeda Pharmaceutical Company Limited (Takeda) is advancing plans to develop and commercialize cabozantinib in Japan following their signing of an exclusive licensing agreement with us in January 2017. Our agreements with Ipsen and Takeda expand cabozantinib’s global reach while providing us with non-dilutive milestone payments and royalty income we can reinvest in our business to impact oncology on a much larger scale.
Our cabozantinib partnerships are not limited to commercialization; Ipsen and Takeda participate in cabozantinib’s clinical development and will leverage emerging datasets as we build a franchise in RCC and additional indications. Following positive results from the CABOSUN phase 2 randomized trial, we are preparing a supplemental New Drug Application for cabozantinib as a treatment for patients with previously untreated RCC, which we plan to submit in the third quarter of this year. In addition, CELESTIAL, the global phase 3 pivotal trial of cabozantinib versus placebo in second-line advanced hepatocellular cancer (HCC) continues to enroll, with data expected in 2017.
Most recently, we have committed to fully exploring cabozantinib’s potential to be used in combination with immunotherapies based on its apparent compatibility with those agents and its ability to create a favorable immune environment. In early 2017, we announced clinical development collaborations with Bristol-Myers Squibb Company (BMS) and Roche to evaluate cabozantinib alongside their leading immunotherapies in a range of clinical trials. With BMS, we are co-funding a phase 3 pivotal trial of cabozantinib plus nivolumab (trade name Opdivo®) with and without ipilimumab (trade name Yervoy®) in first-line RCC to start later this year, as well as potential studies in HCC, bladder cancer, and other tumor types. Our agreement with Roche calls for a phase 1b trial of cabozantinib with atezolizumab (trade name Tecentriq®), an anti-PD-L1 antibody, in patients with advanced solid tumors, with four expansion cohorts of patients with RCC and bladder cancer.
Cobimetinib’s Growing Commercial and Clinical Footprint
Cobimetinib, the MEK inhibitor we discovered and then licensed to Genentech, a member of the Roche Group, came into its own last year with important commercial and clinical development progress. Following initial regulatory approvals in 2015, the combination of cobimetinib (trade name COTELLIC®) and vemurafenib (trade name Zelboraf®) is gaining share in the first- and second-line metastatic melanoma market, a highly competitive environment.3 Additional trials combining cobimetinib with approved and investigational immunotherapy and small molecule agents are underway in a variety of other tumor types to better define the compound’s future potential.
Several of these next opportunities stem from the ongoing phase 1b trial of cobimetinib plus atezolizumab. At the 2016 ASCO Annual Meeting, investigators presented preliminary data from the colorectal carcinoma (CRC) cohort of the trial. They reported the combination was well tolerated and associated with promising anti-tumor activity, most notably in patients with the microsatellite-stable form of CRC, which is associated with very low response rates when treated with immunotherapy on its own. Based on these results, IMblaze370, a phase 3 pivotal trial of cobimetinib plus atezolizumab in 360 patients with third-line advanced or metastatic CRC, was initiated in the second quarter of 2016.
The cobimetinib/atezolizumab phase 1b trial also includes a metastatic melanoma cohort. Based on encouraging results presented at last year’s Society for Melanoma Research (SMR) Congress, a phase 3 pivotal trial of the combination versus pembrolizumab, a PD-1 inhibitor, in 500 patients with previously untreated BRAF wild-type melanoma was announced. This trial, called IMspire170, is scheduled to enroll its first patient in the second quarter of this year. Also at SMR, investigators presented positive data from a separate phase 1 trial of the triple-combination of cobimetinib, atezolizumab and vemurafenib; this led to IMspire150 TRILOGY, an ongoing phase 3 pivotal trial testing whether the triple-combination can outperform the cobimetinib/vemurafenib regimen on its own.
With the potential to be in three phase 3 pivotal trials in 2017, cobimetinib is an increasingly important part of the Exelixis story: if cobimetinib sees continued success in its late-stage clinical development and receives additional regulatory approvals, Exelixis could have not one, but two oncology franchises. Our agreement with Genentech also limits our financial risk. It provides that our partner funds cobimetinib's clinical development in its entirety and, should that development plan result in further sales of COTELLIC, we receive an initial 50/50 share of U.S. profits and losses (decreasing as sales increase) and royalties on ex-U.S. sales. We also participate in COTELLIC’s promotion, fielding a quarter of the U.S. sales force.
Building Towards Exelixis’ Future
While advancing cabozantinib and cobimetinib, we have continued to build the infrastructure that will support Exelixis’ growth and evolution beyond our current pipeline. In 2016, we grew revenues for the cabozantinib franchise to $135 million and received $300 million in non-dilutive milestone and royalty payments for our products. We also retired $287.5 million of debt, de-levering our balance sheet and giving us added flexibility to manage our business.
With this financial progress and fiscal discipline, we finished 2016 with approximately $480 million in cash.4 From here, we believe we can fund the company’s growth from our operations. We’re actively planning for that next phase, which will include evaluating additional oncology compounds for in-licensing and restarting our internal discovery efforts in a measured way, combining our long-term knowledge and experience with an appropriate footprint.
The cycle of drug discovery, development and commercialization has been the essence of Exelixis for the majority of the company’s 22 years. Our performance in 2016 would not have been possible without the spirit of collaboration that flows through our dynamic and unique mix of veteran and new employees who joined in the last year to help us launch CABOMETYX in the U.S. This collaborative ethos fuels the interactions we have within the company, as well as with our valued biopharmaceutical partners on cabozantinib and cobimetinib. It also extends to the investigators, nurses, and site coordinators who make our clinical trials possible. Most importantly, our commitment to collaboration is evident in the way Exelixis engages with the clinician community, and how they relate to the patients who rely on our therapies. It’s a team effort. It has to be.
On behalf of all of us at Exelixis, thank you for your continued support as we maximize the opportunity we’ve been given to change the treatment of cancer for patients around the world.
Michael M. Morrissey, Ph.D.
President and Chief Executive Officer
- DiMasi, J.A., H.G. Grabowski, and R.W. Hansen, Briefing: Cost of Developing a New Drug (November 18, 2014) [Presentation]. 2014, Tufts University. Accessed February 3, 2017; available at http://csdd.tufts.edu/files/uploads/Tufts_CSDD_briefing_on_RD_cost_study_-_Nov_18,_2014..pdf
- Internal data on file.
- As reported by Roche in its 2016 Results presentation, Slide 10, February 1, 2017.
- Includes cash and cash equivalents, short- and long-term investments and long-term restricted cash and investments.