Good day, ladies and gentlemen, and welcome to the Third Quarter 2008 Exelixis Earnings Conference Call. My name is Alexia and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will facilitate a question-and-answer session towards the end of this conference. [Operator Instructions]. I would now like to turn the presentation over to your host for today’s call, Mr. Charles Butler. Please proceed, sir. Charles Butler – Head of Investor Relations: Thank you for everyone joining us on our Q3 2008 earnings call and business update. As usual, joining us for the call today is George, our CEO, and Frank Karbe, our CFO, both will provide a business and financial update. Mike Morrissey, our President of R&D will also be joining us for the Q&A session. But before I will turn the call over to George, let me just say that we posted the earnings release as well as the slide presentation and the company’s prepared remarks on our website at exelixis.com. And before I 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 our year-end financial guidance, the timing and success of future partner and cost cutting efforts 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 the presentation materials, the comments made during this presentation, and the risk factor sections of our 10-Q for the quarter ended September 26, 2008, and our other reports filed with the Securities & Exchange Commission. We expressly disclaim any duty to make any updates or revisions to any forward-looking statements. With that, I will turn the call over to George.

Okay. Thanks Charles and good afternoon to everyone. I think this is, to quote Dickens, the best of time and the worst of time. On the one hand, it is a defining moment for Exelixis with the recent GSK announcement, we now have clarity on the ownership of our pipeline, the pipeline that we have been aggressively building over the last six years and which is now one of the broadest and deepest oncology pipelines in the industry. It’s a major achievement that we have retained almost promising and advanced asset XL184, which is in a pivotal trial with the high likelihood of success. We have also retained rights of several additional compounds in various stages of development that also show promising of clinic especially XL281 and 228. The relative data that we presented at the EORTC meeting last week and the enthusiasm among pharma companies, which soon will become apparent, have tested the quality of these companies. On the other hand we are operating in an economic environment unlike anything I have seen before. Raising money based on equity is either impossible or unacceptably dilutive. We realize that everyone’s chief concern now is cash. And while it’s true that we have an amazing pipeline and high quality compounds, it’s also true that we don’t have the resources to either financial or human to develop the pipeline. So how we are going to address the issue? Well, we’re going to do three things. First, we will partner many other compounds to bring in cash and gain expertise to bandwidth, again access to expertise and bandwidth. Second, we will reduce our cost substantially to bring our net cash usage inline with our cash balance and keep this independent of the capital markets for a substantial period. And third, we will focus…

[Operator Instructions]. And your first question comes from the line of Eric Schmidt with Cowen and Company. Please proceed.

Good afternoon. George, I am not sure I got exactly all of the language you used when you discussed decreasing your cost base to a level that sort of – not sure what you said here, roughly equal or sort of equal to net cash intake? What specifically are you guiding toward in terms of the future cash run rate versus the monies you can get from partnerships?

Yeah, I think Eric what by cash or what I am trying to say is we are going to -- we intend to bring in substantial cash through partnering activities and we're in a lot of discussions. We're quite confident that we can sign some attractive partnerships and bring in substantial amounts of cash. We obviously want to be independent of the capital markets for a substantial period of time. So each partnership that we sign does one of two things; either it brings in cash, and it will either off-load cost if a partner decides to take on the development, in which case we will eliminate obviously the external clinical costs and we can reduce headcount to reduce our internal costs. Or the partner can elect to pay us to continue the development in which case actually our costs wouldn't be decreased but our net cash usage or burn sometimes would be decreased. So we have to bring that burn, that cash usage, inline with the cash that we're able to bring in so that we're independent of the capital markets certainly through ‘09 and well grow beyond that period of time. Right now, in any case, let me be clear, regardless of how the partnering sorts out, we will reduce our cost basis from where it has been this year. We have to do that. The cost basis we have isn't sustainable in the current environment.

I think I follow you. All right.

I'm sorry, Eric. There are two components. One is reducing absolute cash use, period. How much we spend. And more importantly than that is reducing the net cash usage to burn.

Okay. So I guess the bottom line is you think that you can maintain roughly the same levels of cash that you have now, be financially independent of the markets, as you say, for the next year or two, based on the partnerships that you're kind of able to envision over that period of time?

That’s the plan.

Okay. And just getting sort of maybe parallel discussion is your decision to keep the discovery platform. Can you talk about how that impacts your cash, whether you're run that discovery platform any differently, whether you'll partner compounds that come out of that platform at an earlier stage or anything of that nature?

Thanks a lot.

Your next question comes from the line of Ted Tenthoff with Piper Jaffray. Please proceed.

Great, thanks. Speaking of maybe where you left off with Eric, on the partnering front, have you seen terms change? Have you seen interest levels change? In other term, I always hear turnaround in buyer's market. Is that $40 million preclinical still an appropriate level? And then I have one quick follow-up on some clinical data.

Yeah. I would say, yeah, we've seen a change in the interest. It has gone way up. We have really remarkable interest now from many pharma companies, and we've had huge amount of, let's say, inflow of interest post-announcement of the GSK decision. I think there are a lot of biotech companies trying to partner their compounds. That's true. There are a lot of compounds out there. There aren't so many really good compounds and there are even fewer really good compounds with good clinical data. So for compounds like we have, for 184, for 147, for 761, for 281, and others, we really have good clinical data. The compounds are well tolerated, they're hitting their targets, they're knocking down the pathway, many have clinical efficacy. We have good tolerability. So there aren't a lot of compounds like that. It’s not a buyer's market.

Now, I don't know if you guys have anyone out at ACR, since it is right in your neighborhood, but can you comment on what was seen with the RIGEL compound today and whether there is anything we can read into that from a cardiovascular or safety side into Jack, any cross-over from thick into Jack?

You know, Ted, I really can't comment. We're a little busy around here today. I did notice that their stock tanked today, but I didn't hear the data. I haven’t had a chance to look at it, so I really can't comment on.

Okay, thanks. Good luck with the partnering.

Okay, thanks.

Your next question comes from the line of May-Kin Ho with Goldman Sachs. Please proceed.

Hi George. A couple of questions about the different facilities that you have, for example, Deerfield. Can you discuss any covenants in that agreement, do you have to have a minimum cash requirement and similarly for your GSK agreement?

.:

Yes May-Kin, we do have certain covenants on both of those facilities, that’s both disclosed in detail in our 10-Q. But let me just summarize them for you. On the Deerfield side, the important I want to note here is that there are no performance requirements with regards to our stock price, which makes this facility different from many other facilities out there. There is, however, a covenant there that requires us to keep at least a minimum cash balance of $75 million. However, we can of course always meet that by simply drawing down on the Deerfield facility before we hit that threshold. With regards to GSK, there are two covenants, one is a minimum working capital covenant, the other one is a cash covenant. The minimum cash covenant here is below the Deerfield covenant, so it is a Deerfield one that we need to be focused on first.

So -- but my understanding, if I read this correctly, once you start drawing on the Deerfield facility, you have to start paying interest on the entire principal. Is that correct?

We have to start paying interest on the principal that was drawn, so as you may…

Just on the drawn.

Drawn facility in $15 million increments and we only pay interest on whatever amount of money we've drawn down.

Okay. And under what circumstances would you be required to accelerate the pay back of any of these?

Well, only in event of default.

Okay. And on the Symphony, at this point it looked like you're not going to pursue the compounds until you find a partner. So what happens to that agreement?

Well, Symphony provided us with $80 million for the development of three compounds; two that are in there now that still have some interest are 784 and 647. And we are working with Symphony to see if we can find partners for those compounds. We have said, I think clearly, that we will not spend our own money to develop those compounds or to reacquire them for Symphony. So in the case where we did not find partnerships, Symphony would own those assets.

But in your partner discussions you involve these compounds as well?

I am sorry.

In your partnership discussions you would also cover these compounds?

We do, yes.

And lastly also cash question, you plan to have about $20 million by the end of the year, so just based on my rough calculation, you probably have to add about $100 million or so between now and the end of the year and. And I guess, potentially there is $20 million milestone from Bristol but then from the new partnerships you would have to have some payments of about $80 million. Is that the right calculation?

Great, thank you very much.

[Operator Instructions]. And your next question comes from the line of Joel Sendek with Lazard Capital Markets. Please proceed.

Hi, thanks. I have two questions. First can you just go over the reason why GSK didn't opt in on an additional compound?

Well, look, GSK gives us a little insight into their thinking, but only a limited amount. So I can speculate a bit, but the bottom line is I really don't know. We've said for a while we weren't sure if they were going to take 184 because it has a similar mechanism of action to 880, which they've already taken. 880 is also a very nice looking compound moving forward by GSK, so I can imagine they wouldn't want to pay twice for a compound that have a similar mechanism. For the other compounds in the pipeline, I think it's from their part partially balancing their own pipeline, balancing their own needs, and I don't know what else, frankly.

Okay. And then just a financial question. Maybe I'm confused a little bit on the timing here. Obviously you know more about the state of your business development deals than we do. But I'm just wondering why you wouldn't be more -- wouldn't cut costs preemptively or more aggressively prior to making any of these partnership deals. And what your definition, you mentioned lean and mean, is that what you are now, or what you will be? Because certainly your R&D expense you don't look too lean and mean on an operational perspective. Can you just give a little more clarity on that, please?

Number one, I hope we know more about our partnering. But look, I think lean and mean means to me not having 10 people isn't necessary leaner than having 100 people is what you get done with those 10 people or 100 people. It’s output per head. So we are having a number of discussions with pharma companies now, some of them have clearly indicated they would prefer that we carry the development of the compounds further, they would cover the costs. So we're not in a position, nor would we would want to eliminate a lot of heads and being unable to carry the development of those compounds further. That makes no sense. And it doesn't matter from terms of cash usage. It actually is preferable for us to do the development and get paid to do it rather than just off-loading it to a pharma company. So we're pretty far along in these discussions. We are going to know within a reasonably short period of time here how these things are sorting out and we'll take the appropriate steps at that time. Now that being said, there are a group of people in a number of positions that can and will be reduced regardless of how the partnering sorts the stuff out because we have to bring our total cost down. That we'll do before we sign the partnership so we'll do some of it right now immediately, and we will have further reductions potentially once the partnerships become clear.

Okay, that helps. Thank you.

And we have no further questions at this time.

Okay. If there are no more questions, let me thank everybody for their attention today and we'll all get back to work. We have plenty to do. Thanks everybody.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.