Good day, ladies and gentlemen, and welcome to the Exelixis’ Third Quarter 2016 Financial Results Conference Call. My name is Sayed, and I'll be your operator for today. As a reminder, this conference call is being recorded for replay purposes. I would now like to turn the call over to your host for today, Ms. Susan Hubbard, Investor Relations. Ma'am you may proceed.

Thank you, Sayed, and thank you all for joining us for the Exelixis’ third quarter 2016 financial results conference call. Joining me on today's call are Mike Morrissey, our President and CEO; Chris Senner, our Chief Financial Officer; P.J. Haley, our Vice President of Commercial; Gisela Schwab, our Chief Medical Officer and Peter Lamb, our Chief Scientific Officer who will together review our corporate, financial, commercial and development progress for the quarter ended September 30, 2016, as well as recent key developments and corporate events. As a reminder, we are reporting our financial results on a GAAP basis only and as usual the complete press release with our results can be accessed through our website at Exelixis.com. During the course of this presentation, we will be making forward-looking statements regarding future events and the future performance of the company. This includes statements about possible developments regarding clinical, regulatory, commercial, financial and strategic matters. Actual events or results could, of course, differ materially. We refer you to the documents we file from time-to-time with the SEC, which under the heading Risk Factors identify important factors that could cause actual results to differ materially from those expressed by the company verbally and in writing today, including without limitation, risk and uncertainties related to product commercial success, market competition, regulatory review and approval processes, conducting clinical trials, compliance with the applicable regulatory requirements, the availability of data at reference times, our dependence on collaboration partners and our ability to maintain our rights under existing collaborations and the level of cost associated with commercialization, research and development and any other activities. With that I will turn the call over to Mike.

All right thank you, Susan and thanks to everyone for joining us on the call today. I'll provide a short overview of the key events for Q3 and then turn the call over to Chris, P.J. Geisel and Peter who will provide a more detailed review on our financials, the ongoing CABOMETYX launch and updates on updates on development activities for both cabozantinib and our partnered compounds. Key events from the third quarter includes first, our strong first full quarter of CABOMETYX revenues, reflecting the momentum of the launch driven by the strength of the METEOR data and the skill and energy of our commercial and medical affairs teams. Second the EU approval of CABOMETYX on September 9 for the treatment of advanced RCC patients following prior anti-VEGF therapy. Third the presentation of 15 abstracts featuring Exelixis discovered compounds cabozantinib and cobimetinib at ESMO including the first presentation of the CABOSUN data. And fourth the strong Q3 P&L performance from both the revenue and expense perspective, coupled with our improved balance sheet with the conversion of the 2019 notes. Exelixis remains in a solid financial position to pursue our mission of bringing innovative medicines to patients with cancer. We are pleased with the progress of our U.S. CABOMETYX launch. Total Q3 net product revenue for the cabozantinib franchise was $42.7 million as P.J. will highlight later in the call, cabozantinib continues to be prescribed for advanced RCC with increased frequency and rapidity by healthcare professionals in both the academic and community setting. We continue our broad efforts to maximize the impact of CABOMETYX within its labeled indication by educating physicians on the appropriate use of the drug. Meanwhile Ipsen is in the final stages of preparing for the EU CABOMETYX launch following the recent EMEA approval and first sales should…

Thanks Mike. Before I start, I want to note that I'll be speaking to the financial data referenced in slide 8 through 13 in our earnings presentation. These slides include comparisons to both the third quarter of 2015 and the second quarter of 2016 for your reference. Total revenues for the quarter ended September 30, 2016 were $62.2 million compared to $9.9 million for the comparable period in 2015. Revenues for the third quarter of 2016 include $42.7 million of net product revenue compared to $6.9 million for the comparable period in 2015. The increase in net product revenues for the three months ended September 30, 2016, as compared to the same period in 2015 reflects the impact of the first full quarter of CABOMETYX revenues since its commercial launch in late April 2016 as well as an increase in COMETRIQ revenues. Net product revenues of CABOMETYX and COMETRIQ were $31.2 million and $11.5 million respectively. Total revenues for the quarter ended September 30, 2016 include the recognition of $15 million of contract revenue from the Daiichi Sankyo CS 3150 milestone, $3.8 million of license revenues recognized under our collaboration and license agreement with Ipsen and $700,000 of royalties on ex-US net sales of COTELLIC. During the comparable period in 2015 there was $3 million of contract revenues for a milestone payment received from Merck related to the worldwide license of our PI3K-Delta program. Research and development expenses for the quarter ended September 30, 2016 were $20.3 million compared to $26.1 million for the comparable period in 2015. The decrease was primarily related to decreases in share-based compensation, clinical trial cost and the allocation of general corporate cost. Those decreases were partially offset by increases in personnel related expenses resulting from an increase in headcount predominantly associated with the build-out…

Thank you, Chris. We are very pleased with the progress of medics launch in Q3 CABOMETYX launch in Q3 cobimetinib franchise net revenue of $42.7 million. Q3 CABOMETYX net revenue of $31.2 million compares favorably with the Q2 net revenue of approximately $11 million after adjusting for the initial build of channel inventory. I would like to sincerely thank the entire commercial team for their tireless efforts and dedication to RCC patients and to tax Exelixis. Since approval, CABOMETYX is experiencing rapid and broad uptake in the advanced RCC marketplace. According to IMS's brand impact September report, CABOMETYX has achieved approximately 20% share in terms of new patients in the second line RCC setting. 8If we focus on just the TKI market in the second line setting, CABOMETYX has garnered 40% share, which is the highest of any TKI. In the third line setting, CABOMETYX has become the market leader with 35% of new patient share and 55% of new patients within the TKI market. Based on these data, CABOMETYX is now the most commonly used oral therapy for previously treated advanced RCC patients. We believe that significant opportunity remains to grow our market share in both the second and third line RCC settings by increasing the breath of our prescriber base and driving incremental utilization from our current prescribers. We hope to accomplish this by focusing on the points to differentiate CABOMETYX in this crowded marketplace. Our team continues to compete and focus on building market share by targeting prescribers with patients who would have historically received other oral agents in the second and third line. CABOMETYX has the attributes to become the oral agent of choice in this setting, where the market share for other oral agents is approximately 45% in the second as well as the third…

Thank you, P.J. I will start with the brief regulatory update where we continue to make good progress. CABOMETYX was approved in the European union on September 9 of 2016. This followed an accelerated review by CHMP and we’re pleased to report that our partner Ipsen is now launching CABOMETYX in the first countries in the EU. In today’s development discussion I will cover key data presented at ESMO 2016 in Copenhagen and particularly speak in more detail about the results and next steps for two clinical studies CABOSUN, the randomized Phase II trial in previously untreated patients with intermediate or poor risk RCC and the Phase IB combination study of cobimetinib and nivolumab in GU malignancies, data from which was also featured proximately at ESMO. And this year’s ESMO conference 15 presentations featured Exelixis discovered compounds. There were eight presentations on cabozantinib and seven presentations on cobimetinib data. Most notable but the oral presentation in the presidential symposium by Dr. Choueiri of the CABOSUN results showing significant improvement in progression free survival and objective response rate in first line RCC. CABOSUN is a randomized Phase II study comparing cabozantinib and sunitinib in the first line treatment of patients with advanced intermediate poor risk RCC this trial was performed by the alliance for clinical trials in oncology and elocreda with NCI-CTEP. CABOSUN enrolled 157 patients. Patients were stratified by the IMCU risk category, intermediate versus poor risk, and the presence of bone metastases, yes versus no. Progression free survival was the primary end point of the study. CABOSUN met its primary end point of significantly improving progression free survival compared sunitinib. Median PFS was 8.2 months was cabozantinib and 5.6 months with sunitinib for an HR of 0.69 and one sided P value of 0.012 representing a 31% reduction in…

Thanks Gisela. First our partner Daiichi Sankyo recently initiated a registrational Phase 3 trial of a mineralocorticoid receptor antagonist CS 3150 or esaxerenone in Japanese patients with essential hypertension. Mineralocorticoids play an important role in regulating blood pressure, primarily through control of sodium re-absorption in the kidney, but also virus effect on other tissues. Steroidal mineralocorticoid antagonists such as spironolactone and eplerenone have been used as antihypertensive agents for some time, but suffer variously from poor selectivity, low potency, short half life and potentials for inducing Lemia and are not indicated for patients with diabetic nephropathy. In 2006 Exelixis and Daiichi Sankyo entered into a partnership to identify and develop novel mineralocorticoid antagonists with improved properties, which led to the discovery of CS 3150 a highly potent and selective nonsteroidal mineralocorticoid receptor antagonist with a long half life that is highly active in preclinical models of hypertension and diabetic nephropathy. Daiichi Sankyo subsequently conducted an extensive Phase 1 and 2 clinical program testing CS 3150 in Japanese patients with hypertension and in patients with diabetic nephropathy, but examine the effects of different doses of CS 3150 on blood pressure, urinary albumin creatinine ratio and rates of hypokalemia. In a Phase 2B study in hypertensive patients, there was a clear dose-dependent antihypertensive effect with 2.5 milligram to 5 milligram daily of 3150 providing similar blood pressure control to 100 mg daily of eplerenone. While in a Phase 2B study in patients with diabetic nephropathy, a significant reduction in urinary albumin creatinine ratio was observed versus placebo at all doses of CS 3150 tested. The induction of hypokalemia was low in all studies. The recently initiated pivotal Phase 3 registration trial we enrolled 930 Japanese patients with essential hypertension to one of three arms, CS 3150, 2.5 milligram or 5 milligram daily…

All right. Thank you, Peter. In closing, I could not be more pleased with our progress over this year to-date and we remain focused on the opportunities and significant milestones that are ahead of us. The Exelixis team consistently demonstrates our passion, urgency and commitment to help patients with cancer because that is true for the development of our compounds in areas of significant unmet medical need or by ensuring there are no barriers for the patients who could potentially benefit from access to our medicines. This quarter's achievements and financial results represent significant momentum toward delivering on our commitment to investors to drive the business to positive cash flow. Future financial success would give us the opportunity to reinvest in our business invigorate our organic R&D efforts as well as to potentially in license and/or acquire compounds were appropriate to provide new treatment options to patients with cancer. We are fully committed to this vision while maintaining a strong sense of disciplined expense management where new R&D initiatives are aligned with robust growth in product revenues. We look forward to updating you on our progress as we go forward. Thank you for your continued support and interest in Exelixis and were happy to now open the call for questions.

Thank you. [Operator Instructions] First question comes from Eric Schmidt with Cowen & Company. Your line open. Please go ahead.

Just a few questions, maybe starting on CABOMETYX, and congrats on a good quarter. It sounds like there was no stocking in Q3. Is that correct?

Eric, this is Chris. So, thanks for the question. Yes, there wasn't significant stocking at all. What we’re looking at now is the inventory being the range of three to four weeks in the trade and that's where we are expecting to remain as we go forward.

And Chris, I think, last quarter, you kind of commented that you didn't think there was a bolus of initial patient demand, and you were seeing sort of steady growth throughout the initial launch period. It certainly looks like that reflected itself in very, very strong Q3 numbers. But when you look forward, do you see any slowing of growth? And I ask because there are third-party sites like IMS that suggest that the growth has decelerated.

Yes, hi Eric this is PJ. Thanks for the question. Couple things we're certainly very pleased with the start to the launch. Certainly the $42.7 million in cabozantinib franchise revenue in Q3 was very encouraging and we're pleased with that. The third party sources of data that you guys look at and we look at definitely have a lot of the questions where they bounce around early in the launch phase as they of learn how to optimize their methodology and really track in on it. So we see a lot of data internally. We’re very confident in the data that we do see and see a lot of signs and demand. I would certainly look at the CABOMETYX, excuse me, brand revenue Q3 over Q2, after you account for the initial channel inventory fill and you see that nearly tripling, which is I think a good sign and then certainly what I point to is our market share growth seeing approximately 20% share in the second line, 35% share in the third line. We view it as a very encouraging sign and what we really look at there is there is a lot of opportunity as we go forward, we think we have opportunity to compete and gain market share relative to the other oral TKI's which have about 40% excuse me 45% share in the second and third line. And also immunotherapy in the second line setting where there's an incremental 38% share we can go after and we feel that continuing to differentiate, CABOMETYX with the trifecta of efficacy that we have, we continue to make progress in the marketplace.

Great, thanks for that. Maybe just one last one, Mike. I think I heard you speak more on this call about in-licensing and building your pipeline maybe through external asset acquisitions. Obviously, there's a lot of competition in oncology these days. What makes you think that you are maybe better positioned as a buyer versus a seller?

Yes thanks Eric. Yes I think it's all round our ability to navigate the assets that are available from a variety of sources, we have to be I think very in-tune with both our capabilities, our pipeline, our record of success in doing discovery in the past, which was significant. We filed 20 IND's over about eight year period. So I think that that insight and that record of this knowledge allows us to operate in a way where we think we can uncover assets and compounds that may be may be asymmetrically valued as we go forward. So again we will take our time and do this right, we are not going to rush into doing anything that doesn't make sense and as we make progress there going forward, we will be sure to update you and other investors as we go.

Thanks. Congrats on the quarter.

Thank you.

Thank you. Our next question comes from Stephen Willey from Stifel. Your line is open, please go ahead.

Yes thanks for taking my questions and congrats on the quarter as well. I guess so can you maybe just speak to the timing of the VA, the DoD and the TRICARE access coming online and I guess just what fraction of the 224 million lives on the coverage that represents?

Yes Stephen happy to talk, this is P.J. So that recently came online, I think in the last five or six weeks but we did, I would just say importantly, we had seen purchases from the VA before that, you know so we the important thing though is we think we have significant opportunity there and upside with that in place certainly as it provides more access for our team to continue to get into those accounts and work with those healthcare professionals. It represents I believe about 6% to 8% give or take of the lives but I have to really double check that but what I look at across the board is really the feedback has been favorable and the shares growing, when I think about kind of the overall payer situations of the broader picture certainly very pleased with the 224 million covered lives at this point and the fact that we haven't had any significant barrier, so we really are having the opportunity to get CABOMETYX to the patients who can benefit from it.

Okay. That's helpful. And then, Gisela, I know you talked about there being several variables that are driving the timing of the sNDA submission for CABOSUN, and I think we are kind of all aware of the independent radiology review the needs to occur. But can you maybe just speak to some of the other variables that require some box-checking before this process can be undertaken?

Absolutely I think clearly we need to transfer the database from the alliance into Exelixis and subsequent to that, we can begin to prepare datasets in accordance with what is expected for regulatory filings. And also factoring as you mention the independent radiology review, which requires collection of all the images from the sites and central read. So there are number of things to accomplish and we are certainly looking hard on it it’s a top priority for us. I will certainly update as we move along and clear on the timing.

So I guess would you say that the centralized reads are kind of the rate-limiting step at this point?

There are number of activities that are somewhat time consuming. The centralized read is one of them and the collection of the scans is another so let in aggregate, gembrel can continue to be our highest priority.

Okay. And then the 3150 data looks pretty interesting, I guess. I'm not necessarily sure there's been much of a public disclosure with respect to the economics of the Daiichi Sankyo collaboration, I think because there's some mention maybe of double-digit royalties. But can you maybe provide some commentary around what the milestone flow might look like beyond just the initiation of the Phase III? Thanks.

Yes. This is Peter. I'm happy to speak to that. So, clearly we’re very excited to see another one of a partnered programs moving into like stage developments and we’re extremely happy with the support of the program has been getting from upon a Daiichi Sankyo. With respect to the actual agreement one of the terms of the agreement Daiichi Sankyo was solely responsible for all developments any future, potential commercialization and Exelixis is eligible for a series of regulatory and commercial milestones and you’re correct we’d also eligible flow double-digit royalties on any sales in the future.

Okay, but there hasn't been any quantification of remaining milestones.

No, there has been no public disclosure of that.

Okay. Thanks for taking my questions.

Thanks. Stephen.

Thank you. Our next question comes from Michael Schmidt from Leerink Partners. Your line is open. Please go ahead

Hi. Good afternoon. Thanks for taking my questions. I had one, a commercial questions, just looking at sort of as you monitor the initial launch. What are you seeing in terms of duration of therapy in clinical practice for CABOMETYX?

Thanks for the question Michael. This is P.J. generally what I say with regards to duration of therapy really far too early to be able to you mean any information is were still very early in the launch with regards to you know the trial what we saw on the METEOR trial ultimately was the median duration of therapy of 8.3 months so, again still too early to see what we saw on the commercial setting. Previously what we’ve talked about with regards to COMETRIQ as we saw for the RCC patients on COMETRIQ and duration of therapy that was approaching that in the seven month range but you know what I'd say is we’re really happy with what we’re seeing in feedback we’re hearing so far in the launch and really pleased that we had significant prescriber adoption adding about 150% more prescribers in Q3 relative to Q2 and broadening that community oncology prescriber base which is really I think encouraging forces we move forward.

Okay, thanks. And Gisela, a question on the ACC CELESTIAL trial. How is enrollment going there? And have you opened additional sites? I noted that you're still guiding to data in 2017 more broadly, but are there plans to accelerate enrollment in the study for example?

Enrollment in the study is ongoing globally and we haven’t provided any specific numbers but we are confident in having results in the 2017 timeframe and we haven’t specified that is yet we’re potentially do so when we get closer.

Okay. Thanks for taking my questions and congrats on a good quarter.

Thank you, Michael.

Thank you. Our next question comes from Ted Tenthoff from Piper Jaffray. Your line is open. Please go ahead.

Hi, Thanks. Can you hear me okay?

Yes, we can Ted. Go ahead.

Great. I had two quick questions and then actually a little bit of housekeeping, if I may. So, the first is on the milestones. How and when will you recognize the $60 million and $10 million milestones from Ipsen? And are these included in that guidance that you mentioned of $85 million in milestones due to that and the $15 million for Daiichi? Maybe you can give us a little bit of color on that.

Yes, Ted. Thanks. It’s Chris. So the $60 million milestone from its in was recognized in the third quarter and what we paid to us in the fourth quarter, so that $60 million is in the $85 million, that $60 million will get amortized over the life of the remaining patent which is out to 2030. The $15 million milestone for Daiichi was recognized as revenue in the third quarter and we as Peter mentioned, we already received that $15 million in the fourth quarter. And then the two $10 million milestones will be recognized as revenue when earned and so the one as Mike mentioned earlier, the Germany one, the $10 million will be recognized as revenue in the fourth quarter and also our expectation is to receive that cash in the fourth quarter. So the $60 million, the $15 million and the $10 million make up the $85 million. Now there is still another $10 million milestone out there for the one of the other EU big five countries launch and we will provide updates on that when that is when we do that.

Awesome, very helpful. And then a quick question with respect to the number of shares outstanding, if I may. On the 10-Q, on the front, as of October 26, you had 286.456 million shares. However, was there -- how many additional shares were issued from the remaining debt conversion post-October 26?

The exact -- post is not a big number, we have -- we didn’t have, we had less than two right about $1.5 million of debt outstanding. So there was, I don’t know the exact number on top of my head but that is not a big deal.

That is okay, that's helpful. Excellent. Congrats guys on the progress with the commercial side of things and also on the clinical and regulatory side. I'm looking forward to further updates. Thank you.

Great, thank you Ted.

Thank you. [Operator Instructions] Our next question comes from John Sonnier from William Blair. Your line is open, please go ahead.

Hey thanks for taking the question and congrats on a great quarter and all the progress. I guess a longer-term development question for Gisela. There was a lot of interest from your KOLs at ESMO in the idea of doing a frontline RCC study in combination with nivo. How do you think about that? Is that something you might consider if successfully approved in that setting?

Sure. So we are certainly very encouraged by the results of the early phase study that I outlined early on in the call is being conducted by Andrea Apolo at the NCI where we've seen good tolerability of the combination of cabozantinib and nivolumab and also an encourage 43% response rate in patients who heavily pre-treated genitourinary malignancies. So, that is certainly important data, we are discussing further trials and late stage trials certainly with our key opinion leaders as well as internally and we will definitely update you as we get little closer.

Maybe just a broader question, it might be for Mike as I know, when you're looking for an ex-US partner, one of the criteria you wanted was a partner that had an interest in developing the compound as broadly as possible. With the launch underway and RCC going successfully in a lot of new data, where do you see I guess the next development frontiers for cabo?

Thanks John. We have a lot of opportunities in terms of how we move forward with cabozantinib and I think we have talked generally over the last few months about doing a very careful analysis in the context of making sure that we're making the right investments as we go forward to be able to really maximize the potential of the asset builder franchise as best we can well certainly watching how we spend money. Right, so that analysis is ongoing and has been ongoing for a while, certainly as Gisela mentioned, GU indications looked very promising bladder, renal, etcetera. Very interested in doing other work, especially where we have data to date, if you look at -- look at lung as an example, there are other indications that we think has some traction as well. So again it's a wide open playing field for us, we think we've got good data, good momentum obviously the initial data that was at ESMO in terms of the combinability and the activity with nivo, the first PD-1 that we looked at was very encouraging in terms of the both tolerability the safety and the initial signs of activity especially in bladder so, we're encouraged by that and looking forward to do more. Wouldn't want to speculate on what we will do first, second and third as we go forward but that rest assured that as we generate that plan and as we get things moving will be able to update you guys in a very straightforward fashion.

No, that's fair enough. And just a quick one either I guess for Chris or PJ. With the VA and DoD coming online, does that change materially your gross to net? Should we think about that in terms different than I think you've kind of pointed towards 10% or so?

Hi, John its Chris so, I think that, the that were still guiding in that range I mean I think 10% is around where we think it's going to get to, as you can see in the quarter where closer to 9% this quarter and will right 9.7% last quarter so, I think were in that range. I don’t think DoD was a volume in the discount there will change it dramatically.

Perfect. Thanks a lot.

Hey, John one last thing. You sound kind of hoarse there. Were you up late last night in Wrigleyville celebrating?

That is a distinct possibility, here at the home of the World Champion Chicago Cubs.

There you go man.

Congratulations.

Yes, it’s awesome.

Thanks a lot.

Thank you. Our next question comes from Andrew Peters from Deutsche Bank.

Hey guys. Thanks for taking the question and congrats on the quarter, and also thanks for kind of all the detail on utilization. Maybe a question for PJ then on that point. So, you talked about kind of gaining share from the TKIs, both in the second and third line setting, but presumably the I/O agents are doing the same. Do you have any kind of feeling for who is gaining share faster? And as you think about maybe taking some of the share that you described from nivo, what do you think is really going to drive that switch in terms of the decision-making process for the physicians?

Yes, thanks for the question Andrew. I think the first words just very happy we feel we’re taking share, from all the agents and certainly all the classes of therapy in both lines is as this brand impact IMS data has showed over time so, very pleased with the strength of our launch, looking at that as well actually seeing particular in the second line setting really second and third line nivolumab declining so, really gives us confidence that our approach, our messages of differentiation and efficacy really resonating in and give us the opportunity to continue to take share from really the orals, the TKIs, as well as immunotherapy. We’ve lot of opportunities coming up this weekend actually where the kidney cancer Association in Miami with the lot of the top experts we just rolled out our branded campaign this month really focusing on the trifecta of efficacy so, we really feel good about moving forward our ability to strive and continue to take share from all the competitors.

Okay, great. And then just I guess a related question to what Eric asked earlier on kind of the relationship between some of the IMS data. Did you see any kind of seasonality in terms of uptake or use over the summer? And was there any kind of change as we got into the fall and people were coming back from vacations? Was there any kind of seasonal effect in the 3Q number, or was it pretty consistent?

With regards to that I know in former brands I worked on people I sort of discuss that and asked that but you know were in a launch and I think everything were seeing, Q2 to Q3 obviously end of Q3 being in the fall is really seeing demand headed in the right direction with regards to any metric we look at whether it's, end demand, revenue or sort of prescriber adoption and utilization so, we really didn't see any of that.

Okay, great. Thanks again and congrats on the quarter.

Thank you, Andrew.

Thank you. I’m showing no further questions at this time. I’d like to hand the conference back over the Miss. Hubbard for closing remarks.

Great. Thank you, Sayed and thank you all for joining us today. We welcome your follow-up calls with any additional questions you may have that we were unable to address on today’s call.

Ladies and gentlemen, thank you for participating in today's event. This concludes our program. You may all disconnect and have a wonderful day.