Exelixis, Inc.: Form 10-Q for the period ended Oct 3, 2025

This Quarterly Report on Form 10-Q contains forward-looking statements. These statements are based on Exelixis, Inc.’s (Exelixis, we, our or us) current expectations, assumptions, estimates and projections about our business and our industry and involve known and unknown risks, uncertainties and other factors that may cause our company’s or our industry’s results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied in, or contemplated by, the forward-looking statements. Our actual results and the timing of events may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such a difference include those discussed in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the Securities and Exchange Commission (SEC) on February 11, 2025 (Fiscal 2024 Form 10-K), as supplemented by the information appearing in Part II, Item 1A of our subsequent Quarterly Reports on Form 10-Q as well as those discussed elsewhere in this report. These and many other factors could affect our future financial and operating results. We undertake no obligation to update any forward-looking statement to reflect events after the date of this report.

This discussion and analysis should be read in conjunction with our condensed consolidated financial statements and accompanying notes included in this report and the consolidated financial statements and accompanying notes thereto included in the Fiscal 2024 Form 10-K.

Overview

We are an oncology company innovating next-generation medicines and combination regimens at the forefront of cancer care. We have produced four marketed pharmaceutical products, two of which are formulations of our flagship molecule, cabozantinib, and we are steadily advancing and evolving our product pipeline portfolio, including our lead clinical asset zanzalintinib, currently the focus of an extensive late-stage development program. With a rational and disciplined approach to investment, we are leveraging our internal experience and expertise, and the strength of strategic partnerships, to identify and pursue opportunities across the landscape of scientific modalities, including small molecules, biotherapeutics and antibody-drug conjugates (ADCs).

Sales related to cabozantinib account for the majority of our revenues. Cabozantinib is an inhibitor of multiple tyrosine kinases, including MET, AXL, VEGF receptors and RET and has been approved by the U.S. Food and Drug Administration (FDA) as CABOMETYX® (cabozantinib) tablets for: advanced renal cell carcinoma (RCC) (both alone and in combination with Bristol-Myers Squibb Company’s (BMS) nivolumab (OPDIVO®)), previously treated hepatocellular carcinoma (HCC), previously treated, radioactive iodine (RAI)-refractory differentiated thyroid cancer (DTC), and previously treated, unresectable, locally advanced or metastatic, well-differentiated pancreatic neuroendocrine tumors (pNET) and extra-pancreatic neuroendocrine tumors (epNET); and as COMETRIQ® (cabozantinib) capsules for progressive, metastatic medullary thyroid cancer (MTC). Additionally, CABOMETYX is approved in 68 other countries for all or a combination of the following: advanced RCC, previously treated HCC, previously treated RAI-refractory DTC, and/or previously treated, well-differentiated/unresectable, locally advanced, or metastatic pNET or epNET; and as COMETRIQ for progressive MTC. For physicians treating these types of cancer, cabozantinib has become or is becoming an important medicine in their selection of effective therapies.

The other two products resulting from our discovery efforts are: COTELLIC® (cobimetinib), an inhibitor of MEK, approved as part of multiple combination regimens to treat specific forms of advanced melanoma and marketed under a collaboration with Genentech, Inc. (a member of the Roche Group); and MINNEBRO® (esaxerenone), an oral, non-steroidal, selective blocker of the mineralocorticoid receptor, approved for the treatment of hypertension in Japan and licensed to Daiichi Sankyo Company, Limited.

We plan to continue leveraging our operating cash flows to advance a broad array of diverse biotherapeutics and small molecule programs for the treatment of cancer, as well as to support ongoing company-sponsored and externally sponsored trials evaluating cabozantinib. Furthest along in our pipeline is zanzalintinib, a novel oral kinase inhibitor that targets VEGF receptors, MET and the TAM kinases (TYRO3, AXL and MER). Our zanzalintinib development program includes a series of ongoing and planned pivotal trials to explore its therapeutic potential in colorectal cancer (CRC), RCC and neuroendocrine tumors (NET), as well as earlier-stage trials. Our pipeline programs in phase 1 development, each having best-in-class potential, include: XL309, a small molecule inhibitor of USP1, which has emerged as a synthetic lethal target in the context of BRCA-mutated tumors; XB010, an ADC consisting of a MMAE payload conjugated to a human mAb targeting the tumor antigen 5T4; XB628, a first-in-class bispecific antibody that simultaneously targets PD-L1 and natural killer cell receptor group 2A, identified as key regulators of innate and adaptive immune cell activity; and XB371, a next-generation tissue factor-targeting ADC with a topoisomerase inhibitor payload. We complement our internal drug discovery and development efforts by in-licensing or acquiring, or obtaining options to in-license or acquire, investigational oncology assets from third parties if those oncology assets demonstrate evidence or potential of clinical success. An example of this approach is ADU-1805, a clinical-stage and potentially best-in-class human mAb that targets SIRPα.

Cabozantinib Franchise

The FDA first approved CABOMETYX in the U.S. as a monotherapy for previously treated patients with advanced RCC in April 2016, and then for previously untreated patients with advanced RCC in December 2017. In January 2021, the CABOMETYX label was expanded to include first-line advanced RCC in combination with nivolumab, which was the first CABOMETYX regimen approved for treatment in combination with an immune checkpoint inhibitor (ICI). In addition to RCC, in January 2019, the FDA approved CABOMETYX for the treatment of patients with HCC previously treated with sorafenib, and in September 2021, the FDA approved CABOMETYX for the treatment of adult and pediatric patients 12 years of age and older with locally advanced or metastatic DTC that has progressed following prior VEGF receptor-targeted therapy and who are RAI-refractory or ineligible. In March 2025, the FDA approved CABOMETYX for the treatment of adult and pediatric patients 12 years of age and older with previously treated, unresectable, locally advanced or metastatic, well-differentiated pNET and epNET.

The Inflation Reduction Act of 2022 (IRA) introduced numerous substantial changes to drug pricing, reimbursement and access support in the U.S., including enabling the Centers for Medicare & Medicaid Services (CMS) to assert control over the prices of certain single-source drugs and biotherapeutics reimbursed under Medicare Part B and Part D (the Medicare Drug Price Negotiation Program). CMS has begun to announce rounds of drugs eligible for negotiation under the Medicare Drug Price Negotiation Program. The IRA contains a limited exception for small biotech drug manufacturers, which applies on a drug-specific basis, and provides that qualifying drugs will be exempt from selection for pricing negotiation through 2028 and eligible for a lower limit (i.e., a price floor) on the potential maximum fair price in 2029 and 2030, if the manufacturers of those drugs continue to qualify each year (small biotech exception). We have qualified for the small biotech exception with respect to our cabozantinib franchise products through 2027, and we intend to apply to CMS to maintain the small biotech exception each year through 2030. Separately, in December 2024, CMS released final guidance on another program, the Medicare Part D Manufacturer Discount Program (Part D Discount Program), which requires manufacturers to take on more of the beneficiary cost previously subsidized by the federal government through the application of increased drug discounts. We have since received notice from CMS that we qualify for the "specified small manufacturer” designation and are thereby eligible for a phase-in of the increased manufacturer discounts under the Part D Discount Program, from 2025 to 2031. There also have been proposals from the current U.S. administration that aim to lower prescription drug costs, both through formal regulatory action and by encouraging voluntary compliance from manufacturers. These proposals include efforts to equalize the prices of drugs in the U.S. with the prices of those drugs in other developed countries (also known as most favored nation or MFN pricing), as well as efforts to sell drugs directly to consumers, if appropriate. The administration has directed agencies to pursue MFN pricing through new models and potential regulatory actions, but the scope, timing, and impact of these initiatives remain uncertain.

To develop and commercialize cabozantinib outside the U.S., we have entered into license agreements with Ipsen Pharma SAS (Ipsen) and Takeda Pharmaceutical Company Limited (Takeda). To Ipsen, we granted the rights to develop and commercialize cabozantinib outside of the U.S. and Japan, and to Takeda we granted such rights in Japan. Both Ipsen and Takeda also contribute financially and operationally to the further global development and commercialization of the cabozantinib franchise, and we work closely with them on these activities. Utilizing its regulatory expertise and established international oncology marketing network, Ipsen has continued to execute on its commercialization plans for CABOMETYX, having received regulatory approvals and launched in multiple territories outside of the U.S., including in the European Economic Area (EEA, which covers all 27 member states of the European Union and Norway, Lichtenstein and Iceland), the United Kingdom and Canada, as a treatment for advanced RCC (both as a monotherapy and in combination with nivolumab) and for previously treated HCC and DTC indications. In July, Ipsen received approval from the European Commission (EC) for the EEA, and health regulatory authorities in both Brazil and Australia for CABOMETYX as a treatment for previously treated, well-differentiated/unresectable, locally advanced, or metastatic pNET or epNET (with local labeling variations). With respect to the Japanese market, Takeda received Manufacturing and Marketing Approvals from the Japanese Pharmaceuticals and Medical Devices Agency for monotherapy CABOMETYX as a treatment of patients with curatively unresectable or metastatic RCC and as a treatment of patients with unresectable HCC that has progressed after cancer chemotherapy, as well as for CABOMETYX in combination with nivolumab as a treatment for unresectable or metastatic RCC.

Pipeline Activities

Zanzalintinib

Zanzalintinib is a novel oral kinase inhibitor that targets VEGF receptors, MET and the TAM kinases (TYRO3, AXL and MER) implicated in cancer’s growth and spread, and is our first in-house compound to enter the clinic following our re-initiation of drug discovery activities in 2017. We are evaluating zanzalintinib in a growing development program that builds on our prior experience with cabozantinib and targets indications with high unmet need. We have established collaborations and will continue to explore additional opportunities for novel combinations with zanzalintinib. To date, we have initiated two large phase 1b/2 clinical trials studying zanzalintinib as a monotherapy and in combination with ICIs (STELLAR-001 and STELLAR-002). Patient enrollment into STELLAR-001 was completed in 2023, and preliminary results from a randomized expansion cohort of patients with metastatic CRC were presented at the American Society of Clinical Oncology (ASCO) Gastrointestinal Cancers Symposium in January 2025. In May 2025, preliminary results from an expansion cohort of patients with previously untreated advanced clear cell RCC from STELLAR-002 were presented at the 2025 ASCO Annual Meeting, along with data from multiple dose-escalation cohorts.

We have also initiated four pivotal trials, three evaluating zanzalintinib in combination with ICIs and one evaluating zanzalintinib as a monotherapy. Our first such trial, STELLAR-303, was initiated in June 2022 and is evaluating zanzalintinib in combination with atezolizumab versus regorafenib in patients with metastatic, refractory non-microsatellite instability-high or non-mismatch repair-deficient (non-MSI-H/dMMR) CRC. In June 2025, we announced positive top-line results demonstrating a statistically significant improvement in overall survival (OS) versus regorafenib in all patients (i.e., in the intention-to-treat (ITT) population), and in October 2025, announced that the study demonstrated a 20% reduction in the risk of death versus regorafenib in the ITT population at the final analysis (stratified hazard ratio [HR]: 0.80; 95% confidence interval [CI]: 0.69-0.93; P=0.0045). At a prespecified interim analysis, data pertaining to the other dual primary endpoint, OS in patients without liver metastases showed a trend in OS favoring the combination (15.9 months versus 12.8 months; stratified HR: 0.79; 95% CI: 0.61-1.03; P=0.0875) at a median follow-up of 16.8 months. Detailed findings from the study, including OS and progression-free survival (PFS) in the ITT population and in the subset of patients without liver metastases, were presented at the 2025 European Society for Medical Oncology Congress in October 2025 (ESMO 2025) and simultaneously published in The Lancet. The trial will proceed to the planned final analysis for the dual primary endpoint of OS in patients without liver metastases. We intend to submit a New Drug Application for zanzalintinib in combination with atezolizumab for the treatment of previously treated metastatic colorectal cancer in the U.S. by the end of 2025, subject to limitations on the availability of government services, such as from the FDA, as a result of the ongoing U.S. federal government shutdown.

The second pivotal trial, STELLAR-304, was initiated in December 2022 and is evaluating zanzalintinib in combination with nivolumab versus sunitinib in previously untreated patients with advanced non-clear cell RCC. We expect top-line results in the second half of 2026, depending on event rates.

In June 2025, we initiated STELLAR-311, a phase 3 pivotal trial evaluating zanzalintinib versus everolimus in patients with advanced NET, regardless of site of origin, who had received up to one prior line of therapy.

To further expand our exploration of the clinical potential of zanzalintinib, we entered into a clinical development collaboration with MSD International Business GmbH, known as Merck within the United States and Canada (Merck) to evaluate zanzalintinib in combination with WELIREG® (belzutifan), Merck's oral HIF-2α inhibitor, in RCC as well as in combination with KEYTRUDA® in squamous cell carcinoma of the head and neck. Under the collaboration, we continue to retain all global commercial and marketing rights to zanzalintinib. Merck is sponsoring a phase 1/2 trial and two phase 3 pivotal trials in RCC and will fund one of these phase 3 studies; we will co-fund the phase 1/2 study and the other phase 3 study, as well as supply zanzalintinib and cabozantinib.

We intend to initiate additional pivotal trials evaluating zanzalintinib across a broad array of future potential indications.

Biotherapeutics

Part of our drug discovery activity focuses on discovering and advancing various biotherapeutics that have the potential to become anti-cancer therapies, such as bispecific antibodies, ADCs and other innovative treatments. ADCs in particular present a unique opportunity for new cancer treatments, given their capabilities to target the delivery of anti-cancer drug payloads to specific cells expressing the target; this increased precision should minimize collateral impact on healthy tissues that do not express the target. To facilitate the growth of our various biotherapeutics programs, we have established multiple research collaborations and in-licensing arrangements and have entered into other strategic transactions aimed at conserving capital and managing risks, collectively providing us access to antibodies, binders, payloads and conjugation technologies to generate next-generation ADCs or multispecific antibodies.

As part of our strategy to access clinical- or near-clinical-stage assets, we executed an exclusive option and license agreement and clinical development collaboration with Sairopa B.V. (Sairopa) to develop ADU-1805. ADU-1805 is currently being evaluated in a phase 1 clinical trial in patients with advanced or metastatic refractory solid tumors, as monotherapy and in combination with pembrolizumab. Enrollment is ongoing. In addition to the option deal with Sairopa, some of our active collaborations for biotherapeutics programs are with:

• Adagene Inc. (Adagene), which is focused on using Adagene’s SAFEbodyTM technology to develop novel masked ADCs or other innovative biotherapeutics with potential for improved therapeutic index;
• Catalent, Inc. (Catalent), which is focused on the discovery and development of multiple ADCs using Catalent’s proprietary SMARTag® site-specific bioconjugation technology; and
• Invenra, Inc. (Invenra), which is focused on the discovery and development of novel binders and multispecific antibodies for the treatment of cancer.

We have made significant progress under our research collaborations and in-licensing arrangements and believe we will continue to do so in 2025 and in future years. For example, in April 2025, we initiated the phase 1 study of XB628, a first-in-class bispecific antibody discovered, in part, in collaboration with Invenra, and in August 2025, following the FDA’s acceptance of our Investigational New Drug (IND) Application in July 2025, we initiated a phase 1 study of XB371, a next-generation tissue factor-targeting ADC with a topoisomerase inhibitor payload, which was discovered, in part, in collaboration with Catalent. We are also advancing XB064, a high-affinity mAb that targets ILT2, and XB773, an ADC targeting the tumor antigen DLL3 (each discovered, in part, in connection with our research collaborations and in-licensing arrangements) toward potential IND filings. As part of our rational and disciplined approach to investment, we have decided to discontinue further development of the XB033 program.

Other Small Molecules

The knowledge and experience gained through our efforts to discover cabozantinib, cobimetinib and esaxerenone, each of which were approved by regulatory authorities and are commercially distributed, informs our current strategy for discovering and developing additional small molecules with the potential to treat cancer, including XL309, a potentially best-in-class small molecule inhibitor of USP1, a synthetic lethal target in the context of BRCA-mutated tumors. XL309 is currently being evaluated in a phase 1 clinical trial as monotherapy and in combination with PARP1/2 inhibition in patients with advanced solid tumors and enrollment is ongoing. XL309 has potential in patients whose tumors are no longer responsive to PARP inhibitors (PARPi), including ovarian, breast and prostate cancers, and also has potential in combination with PARPi agents to deepen and prolong the response seen to PARPi, as well as to broaden the activity beyond that observed in patients with tumors that harbor a BRCA1/2 mutation.

Beyond these assets, we continue to make progress on multiple lead optimization programs for agents directed toward a variety of targets that we believe play significant roles in tumor biology, and we anticipate that some of these other programs could reach development candidate status in 2025 and beyond.

Future Expansion of our Pipeline

Increasing the number of novel anti-cancer agents in our pipeline is essential to our overall strategy and business goals. We are working to expand our oncology product pipeline through drug discovery efforts, which encompass our diverse biotherapeutics and small molecule programs exploring multiple modalities and mechanisms of action. This approach provides a high degree of flexibility with respect to target selection and modality of treatment and allows us to prioritize those programs that we believe have the greatest chance of delivering impactful therapeutics. As part of our strategy, our drug discovery activities have and will continue to include internal research, as well as external research, collaborations, in-licensing arrangements and other strategic transactions that collectively leverage a wide range of technology platforms and assets and increase our probability of success. As of the date of this Quarterly Report on Form 10-Q, we expect to progress up to two new development candidates into preclinical development later in 2025. We will continue to engage in pipeline expansion initiatives with the goal of discovering, acquiring and/or in-licensing promising investigational oncology assets and then further characterize and develop them utilizing our established preclinical and clinical development infrastructure.

Third Quarter 2025 Business Updates and Financial Highlights

During the third quarter of 2025, we continued to execute on our business objectives, generating significant revenues from operations and enabling us to continue to seek to maximize the clinical and commercial potential of our products and expand our product pipeline. Significant business updates and financial highlights for the quarter and subsequent to quarter-end include:

Business Updates

• In August 2025, we announced the appointment of Dana T. Aftab, Ph.D. as Executive Vice President, Research and Development.
• In October 2025, we presented results from a subgroup analysis of the CABINET phase 3 pivotal trial evaluating CABOMETYX in advanced lung and thymic neuroendocrine tumors, and detailed results from the STELLAR-303 phase 3 pivotal trial evaluating zanzalintinib in combination with atezolizumab in metastatic CRC, at ESMO 2025. The results from STELLAR-303 were concurrently published in The Lancet.
• In October 2025, we announced that our Board of Directors had authorized the repurchase of up to $750 million of our common stock before December 31, 2026. This repurchase authorization is in addition to the two $500 million repurchase authorizations announced in August 2024 and February 2025. Under these programs, as of September 30, 2025, we have repurchased $895.3 million of our common stock, at an average price of $37.18 per share.

Financial Highlights

• Net product revenues for the third quarter of 2025 were $542.9 million, as compared to $478.1 million for the third quarter of 2024.
• Total revenues for the third quarter of 2025 were $597.8 million, as compared to $539.5 million for the third quarter of 2024.
• Research and development expenses for the third quarter of 2025 were $199.2 million, as compared to $222.6 million for the third quarter of 2024.
• Selling, general and administrative expenses for the third quarter of 2025 were $123.7 million, as compared to $111.8 million for the third quarter of 2024.
• Provision for income taxes for the third quarter of 2025 was $58.8 million, as compared to $36.8 million for the third quarter of 2024.
• Net income for the third quarter of 2025 was $193.6 million, or $0.72 per share, basic and $0.69 per share, diluted, as compared to net income of $118.0 million, or $0.41 per share, basic and $0.40 per share, diluted, for the third quarter of 2024.

See “Results of Operations” below for a discussion of the detailed components and analysis of the amounts above.

Outlook, Challenges and Risks

We will continue to face numerous challenges and risks that may impact our ability to execute on our business objectives. In particular, for the foreseeable future, we expect our ability to generate sufficient cash flow to fund our business operations and growth will depend upon the continued commercial success of CABOMETYX, both alone and in combination with other therapies, as a treatment for the highly competitive indications for which it is approved. In addition, CABOMETYX will only continue to be commercially successful if private third-party and government payers continue to provide coverage and reimbursement. As is the case for all innovative pharmaceutical therapies, obtaining and maintaining coverage and reimbursement for CABOMETYX is becoming increasingly difficult, both within the U.S. and in foreign markets. Further, healthcare policymakers in the U.S. continue to express concern over healthcare costs, and corresponding legislative and policy initiatives and activities have been launched aimed at increasing the healthcare cost burdens borne by pharmaceutical manufacturers, as well as expanding access to, and restricting the prices and growth in prices of, pharmaceuticals. Furthermore, the U.S. Presidential administration has suggested that it may impose tariffs on imported pharmaceuticals.

Achievement of our business objectives will also depend on our ability to maintain a competitive position in the shifting landscape of therapeutic strategies for the treatment of cancer, which we may not be able to do. On an ongoing basis, we assess the constantly evolving landscape of other approved and investigational cancer therapies that could be competitive, or complementary in combination, with our products, and then we adapt our development strategies for the cabozantinib franchise and our pipeline product candidates accordingly, such as by modifying our clinical trials to include evaluation of our therapies with ICIs and other targeted agents. Even if our current and future clinical trials produce positive results sufficient to obtain marketing approval by the FDA and other global regulatory authorities, it is uncertain whether physicians will choose to prescribe regimens containing our products instead of competing products and product combinations in approved indications.

In the longer term, we may eventually face competition from potential manufacturers of generic or other versions of our marketed products, including any cabozantinib (S)-malate tablets besides CABOMETYX that are the subject of ANDAs submitted to the FDA by MSN and Sun or the 505(b)(2) submitted to the FDA by Azurity. The approval of any of these ANDAs and subsequent launch of any generic version of CABOMETYX could significantly decrease our revenues derived from the U.S. sales of CABOMETYX and thereby materially harm our business, financial condition and results of operations.

Separately, our research and development objectives may be impeded by the challenges of scaling our organization to meet the demands of expanded drug development, unanticipated delays in clinical testing and the inherent risks and uncertainties associated with drug discovery operations, especially on the global level. In connection with efforts to expand our product pipeline, we may be unsuccessful in discovering new potential cancer treatments or identifying appropriate candidates for in-licensing or acquisition.

Some of these challenges and risks are specific to our business, others are common to companies in the biopharmaceutical industry with development and commercial operations, and an additional category are macroeconomic, affecting all companies. For a more detailed discussion of challenges and risks we face, see “Risk Factors” in Part I, Item 1A of our 2024 Form 10-K, as supplemented and, to the extent inconsistent or superseded in Part II, Item 1A of our Quarterly Reports on Form 10-Q.

Fiscal Year Convention

We have adopted a 52- or 53-week fiscal year policy that generally ends on the Friday closest to December 31. Fiscal year 2025, which is a 52-week fiscal year, will end on January 2, 2026 and fiscal year 2024, which was a 53-week fiscal year, ended on January 3, 2025. The 52-week fiscal year in 2025 may result in a modest year-over-year impact on revenues and expenses, as compared to 2024. For convenience, references in this report as of and for the fiscal periods ended October 3, 2025 and September 27, 2024, and as of and for the fiscal years ending January 2, 2026 and ended January 3, 2025, are indicated as being as of and for the periods ended September 30, 2025 and September 30, 2024, and the years ending December 31, 2025 and ended December 31, 2024, respectively.

Results of Operations

Revenues

Revenues by category were as follows (dollars in thousands):

Net Product Revenues

Gross product revenues, discounts and allowances and net product revenues were as follows (dollars in thousands):

Net product revenues by product were as follows (dollars in thousands):

The increases in net product revenues for the three and nine months ended September 30, 2025, as compared to the corresponding prior year periods, were primarily related to increases of 17% and 21%, respectively, in the number of CABOMETYX units sold reflecting continuing demand for CABOMETYX in combination with nivolumab as a first-line treatment of patients with advanced RCC, and demand for previously treated advanced NET. The increases in sales volume were largely driven by refills, reflecting the longer duration of therapy for the combination of CABOMETYX with nivolumab, and increases in related market share reflecting the continued evolution of the metastatic RCC and NET treatment landscapes.

We project our net product revenues may increase for the remainder of 2025, as compared to the corresponding prior year period, as a result of the FDA’s approval in the first quarter of 2025, of CABOMETYX for patients with previously treated advanced NET and for similar reasons noted above.

We recognize product revenues net of discounts and allowances that are described in “Note 1. Organization and Summary of Significant Accounting Policies” of the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of our Fiscal 2024 Form 10-K.

Discounts and allowances have generally increased over time as the number of patients participating in government programs has increased and as the discounts given and rebates paid to government payers have also increased. The increases in the amount of discounts and allowances for the three and nine months ended September 30, 2025, as compared to the corresponding prior year periods, were primarily the result of increases in volume of units sold, and the increases in the utilization and the dollar amount of chargebacks under the 340B Drug Pricing Program.

We project our discounts and allowances may increase for the remainder of 2025, as compared to the corresponding prior year period, for similar reasons noted above.

License Revenues

License revenues primarily include: (a) the recognition of the portion of milestone payments allocated to the transfer of intellectual property licenses for which it had become probable, in the related period, that a milestone would be achieved and a significant reversal of revenues would not occur in future periods; and (b) royalty revenues.

Milestone revenues, which are allocated between license revenues and collaboration services revenues, were $5.8 million and $8.2 million for the three and nine months ended September 30, 2025, as compared to $14.6 million and $167.7 million, respectively, for the three and nine months ended September 30, 2024. Milestone revenues recognized included:

• For the three and nine months ended September 30, 2025, $4.7 million in revenues was recognized, in connection with a $5.0 million regulatory milestone payment from Ipsen, upon approval by the EC for the treatment of patients with either advanced pNET or advanced epNET.
• For the three and nine months ended September 30, 2024, $11.3 million in revenues was recognized in connection with a $12.5 million regulatory milestone payment from Ipsen upon submission of a variation application to the European Medicines Agency for evaluating cabozantinib versus placebo in patients with either advanced pNET or advanced epNET. The three and nine months ended September 30, 2024 also included $2.2 million in license revenues recognized in connection with a commercial milestone payment from Ipsen upon its achievement of CAD$30.0 million in cumulative net sales of cabozantinib over four consecutive quarters in Canada.
• For the nine months ended September 30, 2024, $150.0 million in license revenues was recognized in connection with a commercial milestone payment from Ipsen upon its achievement of $600.0 million in cumulative net sales of cabozantinib over four consecutive quarters in its related Ipsen license territory.

Royalty revenues for the three and nine months ended September 30, 2025 increased, as compared to the corresponding prior year periods, primarily as a result of increases in Ipsen’s net sales of cabozantinib outside of the U.S and Japan. Ipsen royalties were $43.0 million and $116.5 million, respectively, for the three and nine months ended September 30, 2025, as compared to $38.3 million and $113.0 million for the corresponding prior year periods. Royalty revenues for the three and nine months ended September 30, 2025 related to Takeda’s net sales of cabozantinib were $3.3 million and $9.9 million, respectively, as compared to $3.5 million and $9.5 million, respectively, for the corresponding prior year periods. CABOMETYX is approved and is commercially available in 68 countries outside the U.S.

Due to uncertainties surrounding the timing and achievement of regulatory and development milestones, it is difficult to predict future milestone revenues and milestones can vary significantly from period to period.

Collaboration Services Revenues

Collaboration services revenues include: (a) the development cost reimbursements earned under our collaboration agreements and product supply revenues, net of product supply costs; (b) the recognition of deferred revenues for the portion of upfront and milestone payments that have been allocated to research and development services performance obligations; offset by (c) the royalties we pay to Royalty Pharma plc (Royalty Pharma) on sales by Ipsen and Takeda of products containing cabozantinib.

Development cost reimbursements decreased in the three and nine months ended September 30, 2025, as compared to the corresponding prior year periods, due to decreases in spending on studies evaluating cabozantinib that are subject to reimbursement.

Recognition of deferred revenues for the portion of upfront and milestone payments that have been allocated to research and development services performance obligations were not material in the three and nine months ended September 30, 2025 and 2024, respectively.

Collaboration services revenues are reduced by the 3% royalty we are required to pay Royalty Pharma on the net sales by Ipsen and Takeda of any products containing cabozantinib. The royalty payments due to Royalty Pharma increased in the three and nine months ended September 30, 2025, as compared to the corresponding prior year periods, as a result of an increase in the royalty generating sales of cabozantinib by Ipsen.

We project our collaboration services revenues may decrease for the remainder of 2025, as compared to the corresponding prior year period, primarily as a result of a decrease in development cost reimbursements and an increase in royalty payments to Royalty Pharma on net sales by Ipsen for any products containing cabozantinib.

Cost of Goods Sold

The cost of goods sold and our gross margins were as follows (dollars in thousands):

Cost of goods sold is related to our product revenues and consists of a 3% royalty payable on U.S. net sales of any product containing cabozantinib, as well as the cost of inventory sold, indirect labor costs, write-downs related to expiring, excess and obsolete inventory and other third-party logistics costs. The increase in cost of goods sold for the three and nine months ended September 30, 2025, as compared to the corresponding prior year periods, was primarily due to an increase in royalties as a result of increased U.S. CABOMETYX sales, partially offset by a decrease in certain period costs, including a decrease in write-downs for excess inventory. We project our gross margin will not change significantly during the remainder of 2025.

Research and Development Expenses

We do not track fully burdened research and development expenses on a project-by-project basis. We group our research and development expenses into three categories: (a) development; (b) drug discovery; and (c) other research and development. Our development group leads the development and implementation of our clinical and regulatory strategies and prioritizes disease indications in which our compounds are being or may be studied in clinical trials.

Development expenses include license and other collaboration costs, primarily composed of upfront license fees, development milestones and other payments associated with our clinical-stage in-licensing collaboration programs, clinical trial costs, personnel expenses, consulting and outside services and other development costs, including manufacturing costs of our drug development candidates. Our drug discovery group utilizes a variety of technologies, including in-licensed technologies, to enable the rapid discovery, optimization and extensive characterization of lead compounds and biotherapeutics such that we are able to select development candidates with the best potential for further evaluation and advancement into clinical development. Drug discovery expenses include license and other collaboration costs primarily composed of upfront license fees, research funding commitments, option exercise fees, development milestones and other payments associated with our in-licensing collaboration programs in preclinical development stage. Other drug discovery costs include personnel expenses, consulting and outside services and laboratory supplies. Other research and development expenses include the allocation of general corporate costs to research and development services and development cost reimbursements in connection with certain of our collaboration arrangements.

Research and development expenses by category were as follows (dollars in thousands):

In addition, we track our external clinical trial costs by product and product candidate and by scientific modalities, which are categorized as small molecule and biotherapeutics programs. Small molecule clinical development for the reported periods were primarily composed of cabozantinib and zanzalintinib. Biotherapeutics clinical development for the reported periods were primarily composed of XB010, XB628, and XB002.

Clinical trial costs by scientific modalities, by product and by product candidate were as follows (dollars in thousands):

The decreases in research and development expenses for the three and nine months ended September 30, 2025, as compared to the corresponding prior year periods, were primarily related to decreases in license and other collaboration costs, clinical trial costs and manufacturing costs to support our development candidates (presented as part of other development costs), partially offset by increases in stock-based compensation, and consulting and outside services.

Development-related license and other collaboration costs decreased for the three and nine months ended September 30, 2025, as compared to the corresponding prior year periods, primarily due to lower development milestone achievement in our clinical-stage in-licensing collaboration programs. Drug discovery-related license and other collaboration costs decreased for the three and nine months ended September 30, 2025, as compared to the corresponding prior year periods, primarily due to lower development milestone achievement in our discovery-stage in-licensing collaboration programs and lower research funding, partially offset by increases in upfront payments for in-process research and development technology.

Clinical trial costs decreased for the three and nine months ended September 30, 2025, as compared to the corresponding prior year periods, primarily due to lower costs associated with XB002 and with studies evaluating cabozantinib, partially offset by higher costs associated with zanzalintinib, XL309, and XB628 studies.

In addition to reviewing the three categories of research and development expenses described above, we principally consider qualitative factors in making decisions regarding our research and development programs. These factors include enrollment in clinical trials for our product candidates, preliminary data and final results from clinical trials, the potential market indications and overall clinical and commercial potential for our product candidates, and competitive dynamics. We also make our research and development decisions in the context of our overall business strategy.

We project that clinical trial costs may decrease for the remainder of 2025, as compared to the corresponding prior year period, primarily driven by lower costs associated with various studies evaluating cabozantinib, zanzalintinib, XL495 and XB002, partially offset by higher costs associated with the XB371, XB628 and XB010 studies.

To continue growing our pipeline, we are prioritizing investment in new molecules that are clinically differentiated with the potential to improve the standard of care for our cancer patients, including current and planned clinical trial programs evaluating zanzalintinib, XL309, XB628, XB371 and XB010. We are working to expand our oncology product pipeline through drug discovery efforts, which encompass our diverse biotherapeutics and small molecule programs exploring multiple modalities and mechanisms of action. This approach provides a high degree of flexibility with respect to target selection and allows us to prioritize those targets that we believe have the greatest chance of yielding impactful therapeutics. As part of our strategy, our drug discovery activities have included and continue to include internal research, as well as external research collaborations, in-licensing arrangements and other strategic transactions that collectively incorporate a wide range of technology platforms and assets and increase our probability of success. As of the date of this Quarterly Report on Form 10-Q, we expect to progress up to two new development candidates into preclinical development later in 2025. We will continue to engage in pipeline expansion initiatives with the goal of acquiring and in-licensing promising investigational oncology assets and then further characterize and develop them utilizing our established preclinical and clinical development infrastructure.

We project our research and development expenses may decrease for the remainder of 2025, as compared to the prior year period, primarily driven by decreases in license and other collaboration costs, manufacturing costs to support our development candidates, personnel expenses and clinical trial costs, partially offset by increases in consulting and outside services.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were as follows (dollars in thousands):

(1) Excludes stock-based compensation allocated to selling, general and administrative expenses.

Selling, general and administrative expenses consist primarily of personnel expenses, stock-based compensation, marketing costs and certain other administrative costs.

The increase in selling, general and administrative expenses for the three months ended September 30, 2025, as compared to the corresponding prior year period, was primarily due to increases in stock-based compensation and consulting and outside services. The increase in selling, general and administrative expenses for the nine months ended September 30, 2025, as compared to the corresponding prior year period, was primarily due to increases in stock-based compensation, marketing activities in support of the commercial launch of CABOMETYX for the treatment of patients with previously treated advanced NET, and personnel expenses, partially offset by a decrease in corporate giving.

We project our selling, general and administrative expenses may decrease for the remainder of 2025, as compared to the corresponding prior year period, primarily driven by a decrease in corporate giving and lower expenses as a result of the impact of the 2025 Plan.

Impairment of Long-Lived Assets

Impairment of long-lived assets, for the three and nine months ended September 30, 2024, were related to certain leased facilities at our Alameda campus, which were listed for sublease during the third quarter of fiscal year 2024. As a result, we assessed the impacted asset groups for impairment and concluded that the related right-of-use assets and leasehold improvements were not fully recoverable as of September 30, 2024, and recognized a $51.7 million non-cash impairment charge. See “Note 6. Fair Value measurements” of the Notes to Condensed Consolidated Financial Statements” included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

Impairment of long-lived assets were as follows (dollars in thousands):

Restructuring Expenses

Restructuring expenses, for the three and nine months ended September 30, 2025, resulted from the execution of the 2025 Plan to reorganize our workforce and close our office located in King of Prussia, Pennsylvania. Restructuring expenses primarily consisted of severance and employee-related costs. See “Note 12. Restructuring” of the “Notes to Condensed Consolidated Financial Statements” included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

Restructuring expenses, for the three and nine months ended September 30, 2024, resulted from the execution of the 2024 Plan to reduce our workforce and rebalance our cost structure in alignment with our strategic priorities. Restructuring expenses consisted of severance and employee-related costs, asset impairment, and contract termination costs.

Restructuring expenses were as follows (dollars in thousands):

Non-Operating Income

Non-operating income was as follows (dollars in thousands):

The decreases in non-operating income for the three and nine months ended September 30, 2025, as compared to the corresponding prior year periods, were primarily the result of a decrease in interest income due to lower average interest-bearing investment balances, and lower average interest rates.

Provision for Income Taxes

The provision for income taxes and the effective tax rates were as follows (dollars in thousands):

The effective tax rate for the three and nine months ended September 30, 2025, differed from the U.S. federal statutory rate of 21%, primarily due to state taxes, offset by excess tax benefits related to certain stock grants. The effective tax rate for the three and nine months ended September 30, 2024, differed from the U.S. federal statutory tax rate of 21%, primarily due to state taxes, offset by the generation of federal tax credits.

Liquidity and Capital Resources

As of September 30, 2025, we had $1.6 billion in cash, cash equivalents and marketable securities, as compared to $1.7 billion as of December 31, 2024. We anticipate that the aggregate of our current cash, cash equivalents and marketable securities available for operations, net product revenues and collaboration revenues will enable us to maintain our operations for at least 12 months and thereafter for the foreseeable future.

Our primary cash requirements for operating activities, which we project will decrease for the remainder of 2025, as compared to the corresponding period in 2024, are employee-related expenditures; payments related to our collaboration and development programs; income tax payments; royalty payments on our net product sales; cash payments for inventory; rent payments for our leased facilities; and contract manufacturing payments.

The Tax Cuts and Jobs Act, signed into law on December 22, 2017, modified the tax treatment of research and experimental (R&E) expenditures beginning in fiscal year 2022, requiring that they must be capitalized and amortized ratably over five years for domestic R&E expenditures or 15 years for foreign R&E expenditures. The One Big Beautiful Bill Act was signed into law on July 4, 2025, which, among other provisions, permanently repeals the requirement to capitalize domestic R&E expenditures for federal income tax purposes for taxable years beginning after December 31, 2024, and allows for the accelerated deduction of any remaining unamortized domestic R&E expenditures. Foreign R&E expenditures are still required to be capitalized and amortized ratably over 15 years. The federal cash tax benefit for previously unamortized domestic R&E expenditures is estimated at $147 million with no corresponding impact to the federal income tax provision.

Our primary sources of operating cash are: cash collections from customers related to net product revenues, which we project may increase for the remainder of 2025, as compared to the corresponding period in 2024; cash collections related to milestones achieved and royalties earned from our commercial collaboration arrangements with Ipsen, Takeda and others; and cash collections for cost reimbursements under certain of our development programs with Ipsen and Takeda which we project may decrease for the remainder of 2025, as compared to the corresponding period in 2024. The timing of cash generated from commercial collaborations and cash payments required for in-licensing collaborations relative to upfront license fee payments, cost reimbursements, exercise of option payments and other contingent payments such as development milestone payments may vary from period to period.

We project that we may continue to spend significant amounts of cash to fund the development of product candidates in our pipeline, including zanzalintinib, XL309, XB628, XB371 and XB010, and the development and commercialization of cabozantinib. In addition, we may continue to expand our oncology product pipeline through additional research collaborations, in-licensing arrangements and other strategic transactions that align with our oncology drug development, regulatory and commercial expertise.

In August 2024, our Board of Directors authorized a stock repurchase program to acquire up to $500.0 million of our outstanding common stock before December 31, 2025. In February 2025, our Board of Directors authorized the repurchase of up to an additional $500.0 million of our outstanding common stock before December 31, 2025. Under these programs, as of September 30, 2025, we repurchased 24.1 million shares of common stock for an aggregate purchase price of $895.3 million. As of September 30, 2025, approximately $104.7 million remained available for future stock repurchases before December 31, 2025. In October 2025, our Board of Directors authorized the repurchase of up to an additional

$750.0 million of our outstanding common stock before December 31, 2026. Stock repurchases under these programs may be made from time to time through a variety of methods, which may include open market purchases, in block trades, Rule 10b5-1 trading plans, accelerated share repurchase transactions, exchange transactions, or any combination of such methods. The timing and amount of any stock repurchases under the stock repurchase programs 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 our common stock and general market conditions. These programs do not obligate us to acquire any amount of our common stock, and the stock repurchase programs may be modified, suspended or discontinued at any time without prior notice.

Financing these activities could materially impact our liquidity and capital resources and may require us to incur debt or raise additional funds through the issuance of equity. Furthermore, even though we believe we have sufficient funds for our current and future operating plans, we may choose to incur debt or raise additional funds through the issuance of equity based on market conditions or strategic considerations.

Sources and Uses of Cash (dollars in thousands):

Working Capital: The decrease in working capital as of September 30, 2025, as compared to December 31, 2024, was primarily due to repurchases of our common stock, partially offset by the favorable impact to our net current assets resulting from our increase in net product revenues. In the future, our working capital may be impacted by one of these factors or other factors, the amounts and timing of which are variable.

Cash, Cash Equivalents and Marketable Securities: Cash and cash equivalents primarily consist of deposits at major banks, money market funds, commercial paper and other securities with original maturities 90 days or less. Marketable securities primarily consist of debt securities available-for-sale and certificates of deposit. For additional information regarding our cash, cash equivalents and marketable securities, see “Note 5. Cash and Marketable Securities” of the “Notes to Condensed Consolidated Financial Statements” included in Part I, Item 1 of this Quarterly Report on Form 10-Q. The decrease in cash, cash equivalents and marketable securities as of September 30, 2025, as compared to December 31, 2024, was primarily due to cash payments to repurchase our common stock, payments to support our development and discovery programs and cash payments for employee-related expenditures, partially offset by cash inflows generated by our operations from sales of our products and our commercial collaboration arrangements.

Cash flow activities were as follows (dollars in thousands):

Operating Activities

Cash provided by operating activities is derived by adjusting our net income for non-cash operating items such as deferred taxes, stock-based compensation, depreciation and amortization, non-cash lease expense, impairment of long-lived assets, acquired in-process research and development technology, and changes in operating assets and liabilities, which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in our Condensed Consolidated Statements of Income.

Net cash provided by operating activities increased for the nine months ended September 30, 2025, as compared to the corresponding prior year period, primarily due to an increase in cash received on sales of our products and a decrease in cash paid for certain operating expenses.

Investing Activities

The changes in cash flows from investing activities primarily relates to the timing of marketable securities investment activity, acquisition of in-process research and development technology and capital expenditures. Our capital expenditures primarily consist of investments to expand our operations and acquire assets that further support our research and development activities.

Net cash was provided by investing activities for the nine months ended September 30, 2025, as compared to net cash used in investing activities in the corresponding prior year period. The increase in cash provided by investing activities was primarily due to an increase in cash proceeds from maturities and sales of marketable securities and decreases in purchases of marketable securities, purchases of property and equipment, and purchases of in-process research and development technology related to certain in-licensing collaboration arrangements.

Financing Activities

The changes in cash flows from financing activities primarily relate to payments for repurchases of common stock, proceeds from employee stock programs and taxes paid related to net share settlement of equity awards.

Net cash used in financing activities increased for the nine months ended September 30, 2025, as compared to the corresponding prior year period, primarily due to increases in payments for repurchases of common stock and withholding taxes remitted to the government related to net share settlements of equity awards.

Contractual Obligations

There were no material changes outside of the ordinary course of business in our contractual obligations as of September 30, 2025 from those disclosed in our Fiscal 2024 Form 10-K. For more information about our leases and our other contractual obligations, see “Note 12. Commitments and Contingencies” of the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of our Fiscal 2024 Form 10-K.

Critical Accounting Policies and Estimates

The preparation of our Condensed Consolidated Financial Statements conforms to accounting principles generally accepted in the U.S. which requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosures. An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our Condensed Consolidated Financial Statements. On an ongoing basis, management evaluates its estimates, including, but not limited to: those related to revenue recognition, including determining the nature and timing of satisfaction of performance obligations, and determining the standalone selling price of performance obligations, and variable consideration such as rebates, chargebacks, sales returns and sales allowances as well as milestones included in collaboration arrangements; the accrual for certain liabilities, including accrued clinical trial liabilities; and valuations of equity awards used to determine stock-based compensation, including certain awards with vesting subject to market or performance conditions; and the amounts of deferred tax assets and liabilities, including the related valuation allowance. We base our estimates on historical experience and on various other market-specific and other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our senior management has discussed the development, selection and disclosure of these estimates with the Audit Committee of our Board of Directors. Actual results could differ materially from those estimates.

We believe our critical accounting policies relating to revenue recognition, clinical trial and collaboration accruals, stock-based compensation and income taxes reflect the more significant estimates and assumptions used in the preparation of our Condensed Consolidated Financial Statements.

There have been no significant changes in our critical accounting policies and estimates during the nine months ended September 30, 2025, as compared to the critical accounting policies and estimates disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part II, Item 7 of our Fiscal 2024 Form 10-K.

Recent Accounting Pronouncements

For a description of the expected impact of recent accounting pronouncements, see “Note 1. Organization and Summary of Significant Accounting Policies” of the “Notes to Condensed Consolidated Financial Statements” included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Our market risks, as of September 30, 2025, have not changed significantly from those described in Part II, Item 7A of our Fiscal 2024 Form 10-K.

Evaluation of Disclosure Controls and Procedures

Based on the evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)) required by Rules 13a-15(b) or 15d-15(b) of the Exchange Act, our Chief Executive Officer and Chief Financial Officer have concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective at the reasonable assurance level.

Limitations on the Effectiveness of Controls

A control system, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within an organization have been detected. Accordingly, our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met and, as set forth above, our principal executive officer and principal financial officer have concluded, based on their evaluation as of the end of the period covered by this report, that our disclosure controls and procedures were effective to provide reasonable assurance that the objectives of our disclosure control system were met.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In addition to the information discussed elsewhere in this Quarterly Report on Form 10-Q, you should carefully review and consider the risk factors disclosed in Part I, Item 1A of our Fiscal 2024 Form 10-K, as updated by the information appearing in Part II, Item 1A of our subsequent Quarterly Reports on Form 10-Q (Forms 10-Q). These risks could materially and adversely affect our business, financial condition and results of operations. The risks and uncertainties described therein are not the only ones we face. Additional risks and uncertainties not currently known to us or that we deem immaterial also may impair our business operations. As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors described in our Fiscal 2024 Form 10-K and Forms 10-Q.