Good day, ladies and gentlemen, and welcome to the Q3 2009 Exelixis earnings conference call. My name is Chris, and I will be your operator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Mr. Charles Butler. Please proceed.

Thank you everyone for joining us on the Exelixis third quarter 2009 earnings call. Joining me on today’s call are as usual, George Scangos, Frank Karbe, and Mike Morrissey who will review our corporate financial and R&D progress over the quarter and upcoming events in the months ahead. Before we get started, I would like to note that during our presentation today, we will be making certain statements that are forward-looking including without limitation, statements related to development plans and goals for XL184, XL147, and 765, expectations regarding our year-end financial guidance, the clinical and commercial potential of compounds in our pipeline, our discovery platform, and the execution of our business strategy. These statements are only predictions and are based upon our current assumptions and expectations. Our actual results and the timing of events could differ materially from those anticipated in such forward-looking statements because of risks and uncertainties discussed in presentation materials, the comments made during this presentation and the risk factor section of our 10-Q for the quarter ended October 2nd, 2009, and our other reports filed with the Securities and Exchange Commission. We expressly disclaim any duty to make any updates or revisions to any forward-looking statements. Now, I would like to turn the call over to George Scangos.

Thanks, Charles, and thanks to all of you who are joining us today. We had a productive and successful third quarter. Financially, we ended with over $300 million in cash, which is more than we had at the beginning of the year. Our revenues are up, our expenses are down. At the same time, we made substantial progress advancing our clinical and preclinical pipeline of compounds, which we continue to believe is one of the strongest in the industry. We have undertaken broad, aggressive clinical development plans for XL184 in collaboration with Bristol-Myers Squibb, and for 147 and XL765 in collaboration with Sanofi-aventis. All of this demonstrates how our partnering strategy is paying off. We brought in substantial cash; we offloaded a lot of expenses. We have great partners who believe in our programs and reporting substantial resources behind them. Strategy reduces our capital needs and results in a broad aggressive clinical development of our pipeline. Importantly, we have structured our collaborations, so that we receive meaningful, commercial participation in all of the compounds in our pipeline. XL184, which (inaudible) with Bristol-Myers Squibb continues to show substantial clinical and commercial progress. And in a few minutes, Mike Morrissey will update you on some of the more recent data. I just want to say here that we are implementing a broad development plan for XL184 in multiple indications. As you know, we are conducting a phase 3 study in Medullary Thyroid Cancer, which is actively enrolled. We also have a comprehensive effort to evaluate XL184 in glioblastoma multiforme or GBM as both the first and second line agent. We recently reported an update of our GBM data at the Society for Neuro-Oncology meeting. The phase 1b/2 trial of 184 in combination with erlotinib in patients with non-small cell lung cancer is…

Thank you. As George mentioned, our third quarter financial results are very strong. This is mainly due to our partnering strategy beginning to be clearly reflected in our P&L. We signed three new partnerships since December last year. These partnerships provided a substantial amount of upfront cash and provide overtime an even greater amount of R&D funding. Cash inflows in the third quarter of ’09 alone totaled almost $160 million, which consisted primarily of upfront payments and cost reimbursements. Under our collaborations with Bristol-Myers Squibb and Sanofi-aventis, we conduct a large amount of work that which we carry the expenses on our books, but the majority of which are paid for by our partners. For the most part, these expense reimbursements as well as the amortization of upfront payments are booked on our P&L as revenue. Consequently, our quarterly revenue have substantially increased. Our operating expenses in Q3 are slightly reduced compared to Q3 of ’08, mainly due to strict cost management and our net loss is significantly lower than in the third quarter last year, which primarily reflects the increase in revenue as a result of our partnering strategy. We ended this quarter with over $300 million in cash. And earlier this week, we repaid the first tranche of the GSK loan of about $35 million in cash. Let me now turn to our third quarter financial results in detail. As a reminder, we are reporting our financial results on a GAAP basis only, and as always, the complete press release with our results can be accessed through our Website at Exelixis.com. Let me begin with revenues. Revenues for the quarter ended September ’09 amounted to $55 million compared to $29.9 million for the comparable period in ‘08. The 84% increase from ‘08 to ‘09 primarily reflects the increase…

With that back on in place, I want to take a few minutes to highlight our recent data and clinical plans for XL184, XL147, and XL765. XL184 continues to look like a very interesting compound, with a clear signal of clinical activity in multiple tumor types. XL184 shows compelling data as a single agent in both Medullary Thyroid Cancer and GBM, and we are seeing early encouraging signs of clinical activity in the Phase 1b/2 trial of XL184 in combination with erlotinib in patients with non-small cell lung cancer. The XL184 randomized – its continuation trial is underway and rolling nicely across multiple indications. The progress we are making in our ongoing XL184 trials, we anticipate submitting a broad and deep data set across a variety of tumor types for presentation at ASCO in 2010. The development program for XL184 continues to grow in scope and magnitude and we are working closely with our colleagues at BMS to advance this important asset in a number of tumor indications. First, we continue to advance the global phase 3 trial of XL184 in Medullary Thyroid Cancer and expect to file an NDA for this indication in the second half of 2011. Key data from our ongoing phase 1 study in MTC patients were presented at the Annual Meeting of the American Thyroid Association and the European Thyroid Association this fall can underscore the potential of XL184 in MTC. The phase 1 cohort of MTC patients, 31 of 34 or 91% of patients had tumor shrinkage as their best radiographic response, 15 of 34 or 44% of patients experienced tumor shrinkage of 30% or more on at least post baseline scan, and 10 of 34 or 29% of patients with miserable disease had a confirmed partial response. Second, the phase 1b/2 trial of…

Okay. Thanks, Mike, and thanks again to those of you who joined us this afternoon. I think we are in a great position now for growth and success and we are going to keep pressing ahead and continue to execute on our strategic plans. I believe that the Exelixis’ story is one of the most compelling in the biotechnology industry. We have several leading compounds in advanced clinical development. XL184 supported by a major clinical development effort across numerous tumor types, the clinical PI3K programs are supported by broad phase 2 efforts in multiple large indications. We have quality partnerships that we believe will lead to the successful development of our compounds. Importantly Exelixis currently is performing the majority of the clinical work on every compound. This combination, the financial commitment and expertise of pharma companies coupled with the speed and efficiency of Exelixis is an exciting combination that allows us to maximize therapeutic and commercial potential of our compounds in the most efficient way. I do want to remind everyone that although we focus discussion on these three compounds, that there are currently 12 compounds that have been generated by Exelixis that are in clinical development as well as several more in preclinical development and lead optimization. The pipeline is progressing well and we will present data on several compounds at the upcoming EORTC meeting. So, the potential for upside for us is substantial. We continue to leverage our unique discovery of platform that is consistent; we generated high quality compounds across multiple therapeutic areas. We expect that this platform will continue to generate early stage assets for proprietary development or partnering, fueling our continued growth in opportunity over the long term. We are in active discussions with a number of companies and fully expect to sign additional collaborations as we move forward. As always, I want to thank all of our employees whose hard work and dedication have made all this progress possible. So, thanks to everyone here at Exelixis. And with that, I will conclude the call, and we will be happy to open up for questions at this time.

(Operator instructions) Our first question comes from the line of Jessica Lee. Please proceed. Jessica Lee – Goldman Sachs: Thank you for taking my questions. First question with regard to your recent results on XL184 in GBM. So, if I read the data correctly, it looks like for the 125-milligram arm, the discontinuation rates due to AE a 17%, is that correct, and do you think that discontinuation rate is high enough for you to consider a lower dosage?

I think the package of data that we updated at the SNO last week highlights the clear sign of clinical activity we see with XL184 at the 125-milligram in second, third line GBM patients. The safety and tolerability parameters are continuing to be evaluated. The n total number of patients that were discussed at SNO is relatively small. As I mentioned in the script, we are looking very closely at tolerability, at the frequency and duration of interruptions and most importantly the duration of response with 184 at the dose. So, this is all in progress, and we are really focused primarily on expanding that data set. We have also recently amended the protocol to do much more aggressive adverse event management, and much more rapid dose reduction as needed from a standpoint of emerging adverse events to be able to potentially widen that window, and that amendment is now going forward. We are also prepared. As I mentioned in the script as needed to explore either lower doses or alternating dose regimen. So, it’s really a matter of refining and fine-tuning the dose and the manner by which we dose patients in this indication, and I think we are on track to do that pretty well right now. Jessica Lee – Goldman Sachs: Great, thank you.

You bet.

Eric Schmidt – Cowen & Company: Thanks for taking my question. Just another question on 184 in GBM, I guess for Mike, do you now think there is enough data to suggest that the drug is more active in Avastin naïve patients, and if so, how does that frame your thinking about future pivotal trials?

Hi, Eric. That was in the data we had at ASCO and the update on the 175-milligram daily dosing group at SNO. That was certainly one conclusion as you can draw based upon the response rate etcetera in that setting. We are continuing to explore both the antiangiogenic naïve and antiangiogenic pretreated populations as part of this phase 2. And as more data comes in, we will be able to make, I would say from distinctions about what direction we go in relative to that letter population. So, it’s work in progress, more data, more patients, I think we need to be able to explore, but that’s certainly is what we are doing right now. Eric Schmidt – Cowen & Company: A question for George on partnerships. You referenced having multiple additional assets that you might partner and being in multiple additional partnership discussions, and in the past, you kind of flied for us where your highest level of interest is, I am thinking, for example, you know, you gave us a heads up on the PI3K collaboration or their assets that are more partnerable [ph] right now might be better off in clever hands in your own and you would like to highlight.

Sure, Eric. Yes, absolutely right. We did like both the BMS on XL184 and XL281 and then the Sanofi collaboration on the PI3K. At this point, we have several assets, some in early clinical developments, some in preclinical development that have gotten interest from multiple companies. We also have substantial interest from companies in our capabilities, drug discovery capabilities, some of our translational medicine capabilities, biology capabilities. So, we are in a number of discussions right now, and I could lay out for you many different permutations, because our discussions going around a single asset, our TGR5 molecule that Mike alluded to have garnered amazing level of interest I would say in the pharma industry. We have other assets in diabetes, so whether we sign a sign a single collaboration around TGR5 or broader diabetes for example, collaboration, we are having both of those discussions, and we will see how they pan out. The same is true for information. We have a number of interesting compounds coming for that are potentially potent anti-inflammatory; we are having some discussions there. And of course, we have our early clinical oncology compound, 228 and 888. We will have data on 228 at the EORTC meeting coming up. We have a very nice selective mTOR inhibitor coming forward. All of those have garnered interest in various combinations. So, other than that, I can’t be more specific, now that I can give you virtually any combination of those. Eric Schmidt – Cowen & Company: Certainly starts like it. Thanks George.

Okay.

Our next question comes from the line of George Farmer. Please proceed. George Farmer – Canaccord Adams: Hi, thanks for taking my question. My correct question on the non-small cell and cancel trial, it was 184 and Tarceva, are you holding the erlotinib dose constant, while changing the dose of 184, or they both being interchanged simultaneously. And secondly, in the randomized portion of the trial, why would you do the study 184 versus the combo as opposed to, say a best supportive care control.

I have the first, and I will give you very kind of high level summary on these different topics and questions. On the first question around the dosing, we had a pretty comprehensive phase 1b component to the dose range finding efforts, looking at varying both the XL184 and erlotinib combination I won’t go into detail. The actual amounts and those kinds of things, but it was one that we wanted to look at very carefully to really maximize our chance of success there, and we are taking MTD expansion cohorts forward with numerous patients to really get a good experience of what’s happening there. So, we have the best dose going forward. On the second question about looking at activity in the phase 2 part of that phase 1b/2 protocol, the question is really addressed to ask for outright activity of either XL184, which based upon the biology and the pathways involved in that stage if not small cell lung cancer, a potent net VEGF, our two inhibitors might have single edge activity by itself versus the combination of an EGFR inhibitor and excel wide for it. So, we weren’t – the phase 2 component of this is not powered to show a strong, say best of fact, that’s really to show a single agent activity in the context of a phase 1b/2 trial, second phase 2s or other trials based on the results from this trial. It could go in that direction, but it’s not designed to answer that question right now. George Farmer – Canaccord Adams: And do you think you will have randomized data by ASCO?

We are certainly very motivated to push that trial forward, and it certainly a major focus for us. So, we are certainly aiming for that. George Farmer – Canaccord Adams: Okay. And a quick question on 388, the mTOR inhibitor, is that a rapamycin lookalike or is it something novel?

No, it’s definitely something novel with the small molecule direct inhibitor of TORC1 and TORC2 complexes. Very, very nice package, beautiful pharmacodynamics, and pharmacology with the compounds. So, it’s one that we are very excited to take forward, and that we own solely in terms of that compound as well. George Farmer – Canaccord Adams: I am sorry, you said that was a TORC inhibitor, is that differentiated from mTOR?

Yes, TORC1, TORC2 is the mTOR complex. George Farmer – Canaccord Adams: Okay, right.

Complexes, yes. George Farmer – Canaccord Adams: Okay, great. Thanks very much.

Our next question comes from the line of Derek Jellinek. Please proceed. Mr. Jellinek, your line is now open. Derek Jellinek – Boenning & Scattergood: Hi, thanks for taking my question. Just a quick follow-up if I could on 184, back to you Mike, on the updated data we got in the 18 evaluable patients, (inaudible) given prior antiangiogenic therapy, we got the response in patients that were naïve there?

Yes, you are kind of cutting out. Could you repeat that please? Derek Jellinek – Boenning & Scattergood: Sure. On the updated 184 data we got in the 18 patients, of those 18 patients, did any of them receive prior antiangiogenic therapy, and if so, what was the response in that patients, because I believe the data we got was only in patients that were naïve?

Yes, in the data that was presented at SNO and that data is again available on our Website, the poster and the press release, there were numerous patients who have been treated previously with antiangiogenic therapy, I believe there were 4 patients in the waterfall that were analyzed by the IRF and have documented tumor shrinkage in that waterfall. Derek Jellinek – Boenning & Scattergood: Okay. And what was the median average daily dose?

Yes, we don’t have that data available at this time to be able to share with you. Derek Jellinek – Boenning & Scattergood: Okay, and then quickly just on the PI3K inhibitors, you said you are going to have the combo and monotherapy trials hopefully commencing before year-end, any idea of indication there?

Yes, absolutely. You know, we have a full phase 2 plan that we are ready to roll out around the EORTC timeframe. At the EORTC itself, we will have four presentations and posters on the existing phase 1b/2 combination trials, and then the phase 2 program will be announced and rolled out in that same timeframe. So, I would say, stay tuned and we will get that going. Derek Jellinek – Boenning & Scattergood: Okay, great. Thanks. And quickly just for Frank, in the quarter, with the 140 upfront from Sanofi, was that amortized over four years at 875 roughly a quarter, and looking at your contract line of popup, I am trying to figure ambling ahead in Q4, it looks like you are basing your guidance that wasn’t really adjusted upwards. There’s a better probability of being it down quarter sequentially. Maybe kind of give us a little more insight into the breakout of that revenue in that quarter. Thanks so much.

So, to your first part of the question, $140 million upfront payment from Sanofi is amortized over four years. Now, how did it hit all of our P&L? Remember that amortizations of upfront payment comes through on the license revenue line, not the contract revenue line. So, you would see on that line. On the contract revenue line on the other hand, you would see revenue in association with cost reimbursements and those are pretty substantial on the Sanofi agreement as well. Derek Jellinek – Boenning & Scattergood: Thanks so much, and once again going into Q4, it seems like it’s going to be going down sequentially, is that correct?

I can’t really comment on that. What I suggested, look at the year-to-date revenue that we have and compare that to the guidance that we have given, and again, the guidance remains unchanged, and I think you will get an idea where our quarterly revenue might come up. But one thing I will add that the positive impact from our new collaborations with BMS and Sanofi clearly is going to last for a while, because we are amortizing these upfront payments of several years, and we expect to receive cost reimbursements under these collaborations for several years. Derek Jellinek – Boenning & Scattergood: Right. Okay, thanks for taking the questions.

As a reminder, ladies and gentlemen, please press star one to ask your question. There are no further questions at this time.

Okay. There are no more questions. Let me just remind everybody. We will have several presentations at the upcoming EORTC meeting in Boston in November. On December 2nd, we will have our R&D Day in New York, which we will present a detailed overview of all of our R&D activities as we have for the past few years. So, we are looking forward to both of those events. I thank everybody again for your attention during the call today, and with that, we can sign off. Thanks a lot.

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Have a good day.