# EXELIXIS, INC. (EXEL) FY 2025 MD&A

Verbatim Item 7 Management's Discussion and Analysis from EXELIXIS, INC.'s 10-K for fiscal year 2025.

SEC filing source: https://www.sec.gov/Archives/edgar/data/939767/000093976725000019/exel-20250103.htm
Accession: 0000939767-25-000019
Filing date: 2025-02-11
Report date: 2025-01-03
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/EXEL/
All MD&A years: /company/EXEL/mda/
Previous year: /company/EXEL/mda/fy2023/ (FY 2023)
Next year: /company/EXEL/mda/fy2026/ (FY 2026)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Some of the statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking statements. These statements are based on our 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 “Item 1A. Risk Factors” as well as those discussed elsewhere in this Annual Report on Form 10-K. 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.

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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 asset zanzalintinib, currently the focus of an extensive late-stage clinical 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 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 FDA and in 67 other countries: as CABOMETYX® (cabozantinib) tablets for advanced RCC (both alone and in combination with BMS’ nivolumab (OPDIVO®)), for previously treated HCC and for previously treated, RAI-refractory DTC; and as COMETRIQ® (cabozantinib) capsules for progressive, metastatic medullary thyroid cancer. 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 (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, potent, third-generation oral TKI that targets VEGF receptors, MET and the TAM kinases (TYRO3, AXL and MER). Our zanzalintinib program includes a series of ongoing and planned pivotal trials to explore its therapeutic potential in CRC, RCC, SCCHN and NET, as well as earlier-stage trials. Our other pipeline programs in phase 1 development each have best-in-class potential and 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; and XL495, a small molecule inhibitor of PKMYT1. We complement our internal drug discovery and development efforts by in-licensing investigational oncology assets or obtaining options to acquire other investigational oncology assets from third parties if those oncology assets demonstrate evidence of clinical success. Examples of this approach include XL309 and 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 ICI. In addition to RCC, in January 2019, the FDA approved CABOMETYX for the treatment of patients with HCC previously treated with sorafenib, and then 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.

The IRA introduced numerous substantial changes to drug pricing, reimbursement and access support in the U.S., including enabling the CMS to assert control over the prices of certain single-source drugs and biotherapeutics reimbursed under the Medicare Drug Price Negotiation Program. The IRA contains the limited small biotech exception. As of the date of this Annual Report on Form 10-K, CMS has informed us that 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 November 2023, CMS released final guidance on another program, the Part D Discount Program, which will require 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. We expect the increase in manufacturer

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discount will be 1% in 2025 and will further increase according to a schedule set by CMS until we are required to pay the full 20% discount paid by other manufacturers in 2031.

To develop and commercialize cabozantinib outside the U.S., we have entered into license agreements with Ipsen and 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 in other potential indications, 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 EU, 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. With respect to the Japanese market, Takeda received Manufacturing and Marketing Approvals from the Japanese PMDA 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.

We are also pursuing other indications for cabozantinib that have the potential to increase the number of cancer patients who could potentially benefit from this medicine. In August 2023, we announced positive results from CABINET, a phase 3 pivotal study that evaluated cabozantinib versus placebo in patients with NET who experienced progression after prior systemic therapy in two independently powered cohorts: one for patients with advanced pNET and another for patients with advanced epNET. The trial was unblinded and stopped early due to the dramatic improvement in efficacy with respect to the primary endpoint of PFS observed at interim analysis. Data from CABINET demonstrated that cabozantinib substantially prolonged PFS as assessed by blinded independent central review in both pNET and epNET cohorts, and that the safety profile of cabozantinib observed in the trial was consistent with its known safety profile. In August 2024, we announced that the FDA had accepted our sNDA seeking approval for cabozantinib to treat adult patients with previously treated, locally advanced/unresectable or metastatic, well- or moderately differentiated pNET or epNET, granted standard review in the U.S., and assigned a PDUFA target action date of April 3, 2025. The FDA also granted orphan drug designation to cabozantinib for the treatment of pNET. Detailed final results from CABINET were presented during the NETs and Endocrine Tumours Proffered Paper Session at the ESMO 2024 and were concurrently published in NEJM. In November 2024, we announced that our sNDA would be discussed at an ODAC meeting in March 2025; however, in January 2025, we announced that the FDA had notified us that our sNDA would no longer be the subject of discussion at an ODAC. CABINET was conducted by the Alliance through our CRADA with the NCI-CTEP, which along with our investigator-sponsored trial program, provides an avenue for independent investigations of cabozantinib. The Alliance presented results from a subgroup analysis of patients in the epNET cohort with advanced gastrointestinal NET in CABINET at the ASCO GI 2025.

Building on preclinical and clinical observations that cabozantinib in combination with ICIs may promote a more immune-permissive tumor environment, we have initiated several pivotal studies to further explore these combination regimens, including collaborations with Roche and BMS. In August 2023, we announced positive top-line results from CONTACT-02, a phase 3 pivotal trial sponsored by us and co-funded by Roche, evaluating the combination of cabozantinib and Roche’s ICI, atezolizumab, versus a second NHT in patients with measurable, extra-pelvic mCRPC who have progressed after treatment with one prior NHT. The trial met one of two primary endpoints, demonstrating a statistically significant improvement in PFS in the predefined PFS intent-to-treat population (i.e., the first 400 randomized patients), and these data were presented at the American Society of Clinical Oncology Genitourinary Cancers Symposium in January 2024. For the second primary endpoint of OS, the final analysis for CONTACT-02, which was presented during the GU Tumours Proffered Paper Session at ESMO 2024, showed a trend that favored the combination of cabozantinib and atezolizumab but was not statistically significant. Of note, the trend in OS benefit was consistently observed in key subgroups, including in patients with liver metastases—a subgroup of mCRPC patients with the poorest prognosis in need of new treatment options, and one we anticipate will grow in the coming years. The safety profile observed in the trial was reflective of the known safety profiles for each single agent and was consistent with the known tolerability profile of approved ICI-TKI combinations in advanced solid tumors. We continue to evaluate the timing of a potential regulatory submission with the FDA. Both Ipsen and Takeda opted into and are co-funding the trial.

In August 2024, we announced the final analysis for the secondary endpoint of OS for COSMIC-313, a phase 3 pivotal trial evaluating the combination of cabozantinib, nivolumab and ipilimumab versus the combination of nivolumab and ipilimumab in patients with previously untreated advanced intermediate- or poor-risk RCC. At the final analysis, the experimental arm did not demonstrate an OS benefit over the control arm. Based on these results and the evolution of the

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first-line RCC treatment landscape since this study was initiated in May 2019, Exelixis will not pursue marketing authorization for COSMIC-313. Data from the final analysis of OS in COSMIC-313 will be presented at the ASCO GU 2025.

Pipeline Activities

Zanzalintinib

Zanzalintinib is a novel, potent, third-generation oral TKI 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 ASCO GI 2025. We anticipate initial clinical data readouts from STELLAR-002 in the first half of 2025. In addition, in December 2023, we initiated STELLAR-009 studying zanzalintinib in combination with AB521, an inhibitor of HIF-2α developed by Arcus; however, enrollment into STELLAR-009 was halted as of September 2024 following the joint decision between us and Arcus to wind down the study and end our clinical collaboration given the two companies’ differing strategies with respect to potential TKI-HIF combination regimens to treat RCC.

We have also initiated three pivotal trials evaluating zanzalintinib in combination with ICIs. 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 CRC; we announced completion of enrollment into STELLAR-303 in August 2024, and preliminary results are expected in the second half of 2025. 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 nccRCC; we anticipate completing enrollment into STELLAR-304 by mid-2025. In December 2023, we initiated STELLAR-305, a phase 2/3 pivotal trial evaluating zanzalintinib in combination with pembrolizumab, an anti-PD-1 ICI developed by Merck & Co., versus monotherapy pembrolizumab in patients with previously untreated PD-L1-positive recurrent or metastatic SCCHN; enrollment into STELLAR-305 is ongoing. We intend to initiate additional pivotal trials evaluating zanzalintinib across a broad array of future potential indications, including in STELLAR-311, a planned phase 3 pivotal trial evaluating zanzalintinib versus everolimus as a first oral therapy in patients with advanced NET, regardless of site of origin, which we anticipate initiating in the first half of 2025.

To further expand our exploration of the clinical potential of zanzalintinib, we entered into a clinical development collaboration with Merck to evaluate zanzalintinib in combination with KEYTRUDA® (pembrolizumab) in SCCHN and in combination with WELIREG® (belzutifan), Merck's oral HIF-2α inhibitor, in RCC. Under the collaboration, Merck will supply KEYTRUDA for our ongoing phase 3 STELLAR-305 trial in SCCHN. In addition, Merck will sponsor a phase 1/2 trial and two phase 3 pivotal trials in RCC; Merck will fund one of these phase 3 studies, and we will co-fund the phase 1/2 study and the other phase 3 study, as well as supply zanzalintinib and cabozantinib. We maintain all global commercial and marketing rights to zanzalintinib.

Biotherapeutics

Much 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. This approach has been validated by multiple regulatory approvals of ADCs in the past several years. 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 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, and enrollment is ongoing. Plans for ADU-1805 include investigating the compound’s potential in combination with approved ICIs, including

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pembrolizumab. In addition to the option deal with Sairopa, some of our active research collaborations for biotherapeutics programs are with:

•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, which is focused on the discovery and development of multiple ADCs using Catalent’s proprietary SMARTag site-specific bioconjugation technology; and

•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 August 2024, we announced the initiation of a phase 1 clinical trial evaluating XB010, both as a monotherapy and in combination with pembrolizumab, in patients with advanced solid tumors, following the FDA’s acceptance of our IND application, and enrollment is ongoing. XB010 is our first ADC advanced internally and consists of an MMAE payload conjugated to a mAb targeting the tumor antigen 5T4. XB010 was constructed using Catalent’s SMARTag site-specific bioconjugation platform, and its 5T4-targeting mAb was discovered in collaboration with Invenra. Over the next two years, we also intend to advance four additional biotherapeutic candidates toward potential IND filings, and each of these candidates was discovered, in part, in connection with our research collaborations and in-licensing arrangements, including: XB628, a bispecific antibody that targets both PD-L1 and NKG2A; XB371, a next-generation TF-targeting ADC that consists of a topoisomerase inhibitor payload conjugated to a mAb targeting TF; XB064, a high-affinity mAb that targets ILT2; and XB033, an ADC targeting the tumor antigen IL13Rα2.

In August 2024, we announced that we will discontinue the development of XB002, our TF-targeting ADC, as part of our portfolio prioritization efforts. Based on available data, the compound is unlikely to improve upon tisotumab vedotin or other competitor TF-targeting ADCs currently in development. We plan to disclose data from the phase 1 JEWEL-101 study, evaluating XB002 in advance solid tumors, at a later date. We plan to reallocate resources to new pivotal trials with zanzalintinib, advancing XL309 and our growing pipeline.

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:

•XL309 is a potentially best-in-class small molecule inhibitor of USP1, a synthetic lethal target in the context of BRCA-mutated tumors. It 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; enrollment is ongoing. XL309 has potential in patients whose tumors are no longer responsive to PARPi, including ovarian, breast and prostate cancers. XL309 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.

•XL495 is an inhibitor of PKMYT1 with best-in-class potential to treat solid tumors due to its improved selectivity and pharmacokinetic profiles. In October 2024, we announced the initiation of a phase 1 clinical trial evaluating XL495, both as a monotherapy and in combination with select cytotoxic agents, in patients with advanced solid tumors, following the FDA’s acceptance of our IND application.

Beyond these assets, we continue to make progress on multiple lead optimization programs for inhibitors of a variety of targets that we believe play significant roles in tumor growth, 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 targets that we believe have the greatest chance of becoming 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 Annual Report on Form 10-K,

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we expect to progress up to three new development candidates into preclinical development during 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.

2024 Business Updates and Financial Highlights

Business Updates

•In January 2024, we appointed Mary C. Beckerle, Ph.D. and S. Gail Eckhardt, M.D. to our Board of Directors. Dr. Beckerle currently serves as Chief Executive Officer of the Huntsman Cancer Institute and Distinguished Professor of Biological and Oncological Sciences at the University of Utah. Dr. Eckhardt currently serves as Associate Dean of Experimental Therapeutics at Baylor College of Medicine and Associate Director of Translational Research at the College’s Dan L. Duncan Comprehensive Cancer Center.

•In January 2024, we announced that our Board of Directors had authorized a corporate restructuring plan (the 2024 Restructuring Plan) to reduce our workforce and rebalance our cost structure in alignment with our strategic priorities, including reducing real estate commitments and costs, and terminating certain licensing partnerships. The 2024 Restructuring Plan was initiated in the first quarter of 2024, and substantially completed in the second quarter of 2024.

•On March 27, 2024, we received a notice letter from Cipla asserting additional Paragraph IV Certifications arising from Cipla’s amendment of its ANDA with the FDA. In May 2024, we announced entry into a settlement agreement with Cipla, which resolved patent litigation we brought in response to Cipla’s ANDA. For a more detailed discussion of the Cipla matter, see “Note 12. Commitments and Contingencies – Legal Proceedings” of the “Notes to Consolidated Financial Statements” in Part II, Item 8 of this Annual Report on Form 10-K.

•In July 2024, Ipsen announced the expansion of our collaboration for the commercialization of cabozantinib to include pNET and epNET indications. Accordingly, Ipsen has sought marketing authorizations for CABOMETYX in these indications in certain territories outside of the U.S. and Japan, and in addition, Ipsen has opted into and is now co-funding the development costs for CABINET.

•In August 2024, we announced that the FDA had accepted our sNDA for CABOMETYX as a treatment for adult patients with previously treated, locally advanced/unresectable or metastatic, well- or moderately differentiated pNET and epNET, granted standard review and assigned a PDUFA target action date of April 3, 2025. In November 2024, we announced that our sNDA would be discussed at an ODAC meeting in March 2025; however, in January 2025, we announced that the FDA had notified us that our sNDA would no longer be the subject of discussion at an ODAC.

•In August 2024, we announced the initiation of a phase 1 clinical trial evaluating XB010, our first ADC advanced internally, following the FDA’s earlier acceptance of our IND filing.

•In August 2024, we announced the achievement of a $150.0 million commercial milestone, recognized as license revenues from Ipsen during the second quarter of 2024, following Ipsen’s achievement of $600.0 million in cumulative net sales of cabozantinib in its related license territory over four consecutive quarters, which milestone payment we received during the third quarter of 2024.

•In August 2024, we announced that our Board of Directors authorized the repurchase of up to $500 million of our common stock through the end of 2025, the third stock repurchase program undertaken by Exelixis since March 2023. Under this program, as of the end of fiscal year 2024, we have repurchased $205.6 million of our common stock, at an average price of $33.62 per share.

•In September 2024, we received a notice letter regarding an ANDA submitted to the FDA by Sun Pharmaceutical Industries Ltd. (Sun), including a Paragraph IV certification with respect to our U.S. Patent Nos. 8,877,776, 9,724,342, 10,034,873, 10,039,757, 11,091,439, 11,091,440, 11,098,015 and 11,298,349, the latest of which expires on February 10, 2032, requesting approval to market a generic version of CABOMETYX tablets prior to the expiration of the aforementioned patents. On October 30, 2024, we filed a complaint in the Delaware District Court for patent infringement against Sun asserting infringement of U.S. Patent Nos. 8,877,776, 11,091,440, and 11,098,015. On January 22, 2025, Sun filed its response to the complaint, alleging that the asserted claims of U.S. Patent No. 8,877,776, 11,091,439, 11,091,440 and 11098,015 are invalid and not infringed. Sun also filed counterclaims that, inter alia, seek a declaratory judgment that Sun’s ANDA would not infringe any valid and enforceable claim of U.S. Patent Nos. 8,877,776, 11,091,439, 11,091,440, 11,098,015, 9,724,342, 10,034,873, 10,039,757, and 11,298,349. We have not yet responded to Sun’s counterclaims.

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•In October 2024, we announced a clinical development collaboration with Merck to support the evaluation of the combination of zanzalintinib and KEYTRUDA in SCCHN through our ongoing STELLAR-305 phase 3 pivotal trial, as well as future evaluations of the combination of zanzalintinib and WELIREG in RCC, including a phase 1/2 trial and two phase 3 pivotal trials to be sponsored by Merck.

•In October 2024, the United States District Court for the District of Delaware (the Delaware District Court) issued a ruling in our two consolidated patent lawsuits against MSN Pharmaceuticals, Inc. (individually and collectively with certain of its affiliates, including MSN Laboratories Private Limited, referred to as MSN, and such lawsuits collectively referred to as MSN II), rejecting MSN’s invalidity challenge to each of U.S. Patents No. 11,091,439, 11,091,440 and 11,098,015, which expire January 15, 2030. The Delaware District Court had previously entered a stipulation that MSN’s proposed ANDA product infringes these patents. The Delaware District Court also ruled that our U.S. Patent No. 11,298,349 is not invalid and that MSN’s proposed ANDA product does not infringe this patent, which expires February 10, 2032. In accordance with these rulings, the Delaware District Court entered final judgment on October 23, 2024, that, should the FDA ultimately approve MSN’s ANDA, the effective date of any such approval shall not be a date earlier than January 15, 2030, the expiration date of each of U.S. Patents No. 11,091,439, 11,091,440 and 11,098,015, subject to our potential additional regulatory exclusivity. On November 22, 2024 MSN noticed an appeal to the Court of Appeals for the Federal Circuit and we noticed a cross-appeal on November 26, 2024. The Delaware District Court judgment is also subject to appeal by either party. In February 2025, we received notice that MSN submitted to the FDA a Paragraph IV certification regarding our Orange Book patent: U.S. Patent No. 12,128,039. For a more detailed discussion of the MSN II litigation matter, see “Note 12. Commitments and Contingencies – Legal Proceedings” of the “Notes to Consolidated Financial Statements” in Part II, Item 8 of this Annual Report on Form 10-K.

•In October 2024, we announced the initiation of a phase 1 clinical trial evaluating XL495, our small molecule inhibitor of PKMYT1, following the FDA’s earlier acceptance of our IND filing.

•In January 2025, preliminary results from a randomized expansion cohort of patients with metastatic CRC from STELLAR-001, and results from a subgroup analysis of patients in the epNET cohort with advanced gastrointestinal NET in CABINET, were presented at the ASCO GI 2025.

Financial Highlights

•Net product revenues for 2024 were $1,809.4 million, as compared to $1,628.9 million for 2023.

•Total revenues for 2024 were $2,168.7 million, as compared to $1,830.2 million for 2023.

•Research and development expenses for 2024 were $910.4 million, as compared to $1,044.1 million for 2023.

•Selling, general and administrative expenses for 2024 were $492.1 million, as compared to $542.7 million for 2023.

•Provision for income taxes for 2024 was $160.4 million, as compared to $49.8 million for 2023.

•Net income for 2024 was $521.3 million, or $1.80 per share, basic and $1.76 per share, diluted, as compared to $207.8 million, or $0.65 per share, basic and diluted, for 2023.

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, and possibly for other indications for which cabozantinib is currently being evaluated in potentially label-enabling clinical trials, if warranted by the data generated from these trials. However, we cannot be certain that the clinical trials we and our collaboration partners are conducting will demonstrate adequate safety and efficacy in these additional indications to receive regulatory approval in the major commercial markets where CABOMETYX is approved.

Even if the required regulatory approvals to market CABOMETYX for additional indications are achieved, we and our collaboration partners may not be able to commercialize CABOMETYX effectively and successfully in these additional indications. 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. In addition, 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

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healthcare cost burdens borne by pharmaceutical manufacturers, as well as expanding access to, and restricting the prices and growth in prices of, 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 versions of our marketed products, including the proposed generic versions of CABOMETYX tablets that are the subject of ANDAs submitted to the FDA by MSN, Teva, Cipla and Sun. 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 this Annual Report on Form 10-K.

Results of Operations

Impact of the Duration of Our Fiscal Year

We have adopted a 52- or 53-week fiscal year policy that generally ends on the Friday closest to December 31st. Fiscal year 2024, which was a 53-week fiscal year, ended on January 3, 2025; and fiscal year 2023, which was a 52-week fiscal year, ended on December 29, 2023. The 53-week fiscal year in 2024, as compared to the 52-week fiscal year in 2023, contributed to the year-over-year increases in certain revenues and expenses. For convenience, references in this report as of and for the fiscal years ended January 3, 2025 and December 29, 2023, are indicated as being as of and for the years ended December 31, 2024 and 2023, respectively. In fiscal year 2025, the annual period will end on January 2, 2026, and will be a 52-week fiscal year. The 52-week fiscal year in 2025 may result in a modest year-over-year impact on revenues and expenses, as compared to 2024.

This discussion and analysis generally addresses 2024 and 2023 items and year-over-year comparisons between 2024 and 2023. Discussions of 2022 items and year-over-year comparisons between 2023 and 2022 that are not included in this Annual Report on Form 10-K can be found in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 6, 2024.

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Revenues

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

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Percent Change"],["","2024","","2023"],["Net product revenues","$","1,809,395","","","$","1,628,879","","","11","%"],["License revenues","349,244","","","178,635","","","96","%"],["Collaboration services revenues","10,062","","","22,694","","","-56","%"],["Total revenues","$","2,168,701","","","$","1,830,208","","","18","%"]]
[[/GREPCENT_TABLE]]

Net Product Revenues

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

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Percent Change"],["","2024","","2023"],["Gross product revenues","$","2,518,246","","","$","2,272,533","","","11","%"],["Discounts and allowances","(708,851)","","","(643,654)","","","10","%"],["Net product revenues","$","1,809,395","","","$","1,628,879","","","11","%"]]
[[/GREPCENT_TABLE]]

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

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Percent Change"],["","2024","","2023"],["CABOMETYX","$","1,798,237","","","$","1,614,942","","","11","%"],["COMETRIQ","11,158","","","13,937","","","-20","%"],["Net product revenues","$","1,809,395","","","$","1,628,879","","","11","%"]]
[[/GREPCENT_TABLE]]

The increase in net product revenues for the year ended December 31, 2024, as compared to 2023, was primarily related to an 8.2% increase in the number of CABOMETYX units sold as a result of the FDA’s approval of CABOMETYX in combination with nivolumab as a first-line treatment of patients with advanced RCC and, to a lesser extent, a 2.9% increase in the average net selling price of CABOMETYX. The increase in sales volume is largely driven by refills, reflecting the longer duration of therapy for this combination, and an increase in related market share reflecting the continued evolution of the metastatic RCC, HCC and DTC treatment landscapes.

We project our net product revenues may increase in fiscal year 2025, as compared to 2024, 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” in Part II, Item 8 of this Annual Report on 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 increase in the amount of discounts and allowances for the year ended December 31, 2024, as compared to 2023, was primarily the result of an increase in the volume of units sold, and the increase in utilization and dollar amount of chargebacks under the Federal Supply Schedule program.

We project our discounts and allowances may increase during fiscal year 2025 for similar reasons noted above.

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License Revenues

License revenues 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; (b) royalty revenues; and (c) the profit on the U.S. commercialization of COTELLIC from Genentech.

See “Note 4. Collaborations and Business Development Activities—Cabozantinib Commercial Collaborations—Performance Obligations and Transaction Prices for our Ipsen and Takeda Collaborations” of the “Notes to Consolidated Financial Statements” in Part II, Item 8 of this Annual Report on Form 10-K for a discussion on the allocation of transaction price which impacts the proportion of milestone revenues allocated to license revenues and collaboration services revenues.

Milestone revenues, which are allocated between license revenues and collaboration services revenues, were $169.3 million for the year ended December 31, 2024, as compared to $15.0 million for 2023. Milestone revenues by fiscal year included the following:

•For the year ended December 31, 2024, milestone revenues included: (1) $150.0 million in license revenues recognized in connection with a commercial milestone 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; (2) $2.2 million in license revenues recognized in connection with a commercial milestone from Ipsen upon its achievement of CAD$30.0 million in cumulative net sales of cabozantinib over four consecutive quarters in Canada; and (3) $11.4 million in revenues related to a $12.5 million regulatory milestone from Ipsen upon submission of a variation application the EMA for evaluating cabozantinib versus placebo in patients with either advanced pNET or advanced epNET who experienced progression after prior systematic therapy.

•For the year ended December 31, 2023, $10.0 million in revenues was recognized in connection with a commercial milestone of $11.0 million from Takeda upon their achievement of $150.0 million of cumulative net sales of cabozantinib in Japan.

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

Royalty revenues increased primarily as a result of an increase in Ipsen’s net sales of cabozantinib outside of the U.S. and Japan. Ipsen royalties were $154.0 million for the year ended December 31, 2024, as compared to $135.8 million for 2023. Ipsen’s net sales of cabozantinib have continued to grow since the first commercial sale of CABOMETYX in the Ipsen territories in 2016, primarily due to regulatory approvals in new territories, including regulatory approval in the EU for the combination therapy of CABOMETYX and nivolumab received in March 2021. Royalty revenues for the year ended December 31, 2024 also included $12.9 million, as compared to $12.7 million for 2023, related to Takeda’s net sales of cabozantinib. Takeda’s net sales of cabozantinib have continued to grow since Takeda’s first commercial sale of CABOMETYX in Japan in 2020; however, royalty revenues during the year ended December 31, 2024 were unfavorably impacted by foreign currency rate fluctuations, as compared to 2023. As of December 31, 2024, CABOMETYX is approved and commercially available in 67 countries outside of the U.S.

Our share of profits on the U.S. commercialization of COTELLIC under our collaboration agreement with Genentech was $10.6 million for the year ended December 31, 2024, as compared to $13.0 million for 2023. We also earned royalty revenues on ex-U.S. net sales of COTELLIC by Genentech of $3.0 million for the year ended December 31, 2024, as compared to $3.9 million for 2023.

We project our license revenues may decrease in fiscal year 2025, as compared to 2024, as a result of the anticipated achievement of fewer milestones in 2025, partially offset by an increase in royalty revenues related to an increase in product sales by Ipsen and Takeda.

Collaboration Services Revenues

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

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Development cost reimbursements were $25.8 million for the year ended December 31, 2024, as compared to $35.6 million for 2023. The decrease in development cost reimbursements during the year ended December 31, 2024 were primarily attributable to decreases in spending on the CONTACT-02, CheckMate -9ER and COSMIC-021 studies, partially offset by Ipsen’s decision to opt-in and co-fund CABINET development costs in the second quarter of 2024, which includes a cumulative catch-up for Ipsen’s share of global development costs incurred since the beginning of the study and through the opt-in date.

Collaboration services revenues were reduced by $21.3 million and $19.2 million for the years ended December 31, 2024 and 2023, respectively, to account for the 3% royalty we are required to pay on the net sales by Ipsen and Takeda of any product containing cabozantinib. As royalty generating sales of cabozantinib by Ipsen and Takeda have increased as described above, our royalty payments have also increased.

We project our collaboration services revenues may decrease in fiscal year 2025, as compared to 2024, primarily as a result of a decrease in development cost reimbursement revenues, and uncertainties regarding the timing and achievement of development, regulatory, and commercial milestone revenues.

Cost of Goods Sold

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

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Percent Change"],["","2024","","2023"],["Cost of goods sold","$","76,216","","","$","72,547","","","5","%"],["Gross margin %","96","%","","96","%"]]
[[/GREPCENT_TABLE]]

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 year ended December 31, 2024, as compared to 2023, was primarily due to the increase in royalties as a result of increased U.S. CABOMETYX sales, partially offset by a decrease in certain period costs. We project our gross margin in 2025 will remain consistent with fiscal year 2024.

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: (1) development; (2) drug discovery; and (3) 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.

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

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Percent Change"],["","2024","","2023"],["Development:"],["Clinical trial costs","$","284,335","","","$","281,338","","","1","%"],["Personnel expenses","183,951","","","167,879","","","10","%"],["License and other collaboration costs","45,000","","","80,036","","","-44","%"],["Consulting and outside services","46,086","","","43,586","","","6","%"],["Other development costs","106,475","","","96,401","","","10","%"],["Total development","665,847","","","669,240","","","-1","%"],["Drug discovery:"],["License and other collaboration costs","24,172","","","92,970","","","-74","%"],["Other drug discovery costs","70,670","","","122,115","","","-42","%"],["Total drug discovery","94,842","","","215,085","","","-56","%"],["Stock-based compensation","30,670","","","34,320","","","-11","%"],["Other research and development","119,049","","","125,426","","","-5","%"],["Total research and development expenses","$","910,408","","","$","1,044,071","","","-13","%"]]
[[/GREPCENT_TABLE]]

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 was primarily composed of cabozantinib and zanzalintinib. Biotherapeutics clinical development for the reported periods was primarily composed of XB002 and XB010.

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

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Percent Change"],["","2024","","2023"],["Small molecules:"],["Zanzalintinib","$","148,808","","","$","136,383","","","9","%"],["Cabozantinib","70,755","","","105,318","","","-33","%"],["Other small molecules","20,232","","","9,115","","","122","%"],["Total small molecules","239,795","","","250,816","","","-4","%"],["Biotherapeutics","44,540","","","30,522","","","46","%"],["Total clinical trial costs","$","284,335","","","$","281,338","","","1","%"]]
[[/GREPCENT_TABLE]]

The decrease in research and development expenses for the year ended December 31, 2024, as compared to 2023, was primarily related to decreases in license and other collaboration costs and other drug discovery costs, partially offset by an increase in other development costs, primarily related to manufacturing costs to support Exelixis’ development candidates and clinical trial costs.

Development-related license and other collaboration costs decreased for the year ended December 31, 2024, as compared to 2023, primarily due to an $80.0 million upfront payment made upon the execution of the exclusive license agreement with Insilico in 2023, partially offset by development milestone achievement in our clinical-stage in-licensing collaboration programs. Drug discovery-related license and other collaboration costs decreased for the year ended December 31, 2024, as compared to 2023, primarily due to lower development milestone achievement in our preclinical development stage in-licensing collaboration programs, lower upfront fees and lower research funding. Other drug discovery costs decreased for the year ended December 31, 2024, as compared to 2023, primarily due to decreases in personnel expenses, consulting and outside services, and laboratory supplies. Clinical trial costs, which include services performed by third-party contract research organizations and other vendors who support our clinical trials, increased for

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year ended December 31, 2024, as compared to 2023, primarily due to higher costs associated with studies evaluating zanzalintinib, XB010, XL309 and XL495, partially offset by lower costs associated with cabozantinib 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 continue to increase with higher costs associated with various studies evaluating zanzalintinib, XL309, XL495, and XB628, partially offset by decreases in costs associated with cabozantinib and XB002.

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, XL495, 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 Annual Report on Form 10-K, we expect to progress up to three new development candidates into preclinical development 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 increase for fiscal year 2025, as compared to the prior year, primarily driven by increases in license and other collaboration costs and clinical trial costs, including the current and planned trials evaluating zanzalintinib, XL309, XL495, and XB010, partially offset by lower manufacturing costs.

A discussion of the risks and uncertainties with respect to our research and development activities, and the consequences to our business, financial position, and growth prospects can be found in “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K.

Selling, General and Administrative Expenses

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

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Percent Change"],["","2024","","2023"],["Selling, general and administrative expenses(1)","$","428,962","","","$","470,680","","","-9","%"],["Stock-based compensation","63,166","","","72,025","","","-12","%"],["Total selling, general and administrative expenses","$","492,128","","","$","542,705","","","-9","%"]]
[[/GREPCENT_TABLE]]

____________________

(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 decrease in selling, general and administrative expenses for the year ended December 31, 2024, as compared to 2023, was primarily due to decreases in corporate giving, legal and advisory fees related to the 2023 proxy contest and a reduction in activities related to litigation, technology costs and stock-based compensation expenses, partially offset by an increase in personnel expenses.

We project our selling, general and administrative expenses may increase in fiscal year 2025, as compared to 2024, as a result of an increase in the Branded Prescription Drug Fee due to higher revenues and an increase in marketing

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activities in support of the anticipated commercial launch of CABOMETYX for the treatment of patients with either advanced pNET or advanced epNET who experienced progression after prior systemic therapy.

Impairment of Long-Lived Assets

Impairment of long-lived assets for the year ended December 31, 2024, relates to certain leased facilities at our Alameda campus. During fiscal year 2024, we listed certain buildings for sublease. 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 and recognized a $51.7 million non-cash impairment charge. See “Note 12. Commitments and Contingencies” of the “Notes to Consolidated Financial Statements” in Part II, Item 8 of this Annual Report on Form 10-K for additional information.

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

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Percent Change"],["2024","","2023"],["Impairment of long-lived assets","$","51,672","","","$","\u2014","","","n/a"]]
[[/GREPCENT_TABLE]]

Restructuring Expenses

Restructuring expenses resulted from the execution of the 2024 Restructuring Plan to reduce our workforce and rebalance our cost structure in alignment with our strategic priorities. Restructuring expenses consist of severance and employee-related costs, asset impairment, and contract termination costs. We incurred the majority of the charges related to the 2024 Restructuring Plan during the first quarter of 2024. See “Note 13. Restructuring” of the “Notes to Consolidated Financial Statements” in Part II, Item 8 of this Annual Report on Form 10-K for additional information.

Restructuring expenses were as follows (dollars in thousands):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Percent Change"],["","2024","","2023"],["Restructuring expenses","$","33,660","","","$","\u2014","","","n/a"]]
[[/GREPCENT_TABLE]]

Non-Operating Income

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

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Percent Change"],["","2024","","2023"],["Interest income","$","77,156","","","$","86,543","","","-11","%"],["Other income (expense), net","(133)","","","93","","","n/a"],["Non-operating income","$","77,023","","","$","86,636","","","-11","%"]]
[[/GREPCENT_TABLE]]

The decrease in non-operating income for the year ended December 31, 2024, as compared to 2023, was primarily the result of a decrease in interest income due to lower average interest-bearing investment balances, partially offset by higher average interest rates.

Provision for Income Taxes

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

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Percent Change"],["","2024","","2023"],["Provision for income taxes","$","160,373","","","$","49,756","","","222","%"],["Effective tax rate","23.5","%","","19.3","%"]]
[[/GREPCENT_TABLE]]

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The increase in provision for income taxes for the year ended December 31, 2024, as compared to 2023, was primarily due to an increase in pre-tax income. The effective tax rate for the year ended December 31, 2024 differed from the U.S. federal statutory rate of 21% primarily due to state taxes, partially offset by the generation of federal tax credits. The effective tax rate for the year ended December 31, 2023 differed from the U.S. federal statutory rate of 21% primarily due to the generation of federal tax credits, partially offset by non-deductible executive compensation. We project that our effective tax rate may be between 21% and 22% in fiscal year 2025.

Liquidity and Capital Resources

As of December 31, 2024, we had $1.7 billion in cash, cash equivalents and marketable securities, as compared to $1.7 billion as of December 31, 2023. We anticipate that the aggregate of our current cash and cash equivalents, 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 increase in fiscal 2025 as compared to fiscal year 2024, are for: 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 development expenditures beginning in fiscal year 2022. Research and development expenditures are no longer currently deductible but instead must be amortized ratably over five years for domestic expenditures or 15 years for foreign expenditures. As a result, we generated a higher federal income tax liability in fiscal year 2024, which required higher estimated federal tax payments by the end of 2024. We will realize a reduction of our federal income tax liability in future years as the capitalized research and development expenditures are amortized for tax purposes.

Our primary sources of operating cash are: cash collections from customers related to net product revenues, which we project may increase for fiscal year 2025, as compared to 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 in 2025, as compared to 2024. The timing of cash generated from commercial collaborations and cash payments required for in-licensing collaborations relative to upfront license fee payments, research funding commitments, 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, XL495, XB010, and XB628, 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 January 2024, our Board of Directors authorized the repurchase of up to $450.0 million of our common stock before the end of 2024. As of June 30, 2024, we completed the repurchase of 20.3 million shares of common stock for an aggregate purchase price of $450.0 million pursuant to our stock repurchase program. 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 the end of 2025. Under this program, during the third and fourth quarter of 2024, we repurchased 6.1 million shares of common stock for an aggregate purchase price of $205.6 million. As of December 31, 2024, approximately $294.4 million remained available for future stock repurchases before the end of 2025. Stock repurchases under this program 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 program 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 Exelixis’ common stock and general market conditions.

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

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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):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Percent Change"],["","2024","","2023"],["Working capital","$","1,063,810","","","$","923,681","","","15","%"],["Cash, cash equivalents and marketable securities","$","1,748,567","","","$","1,724,019","","","1","%"]]
[[/GREPCENT_TABLE]]

Working capital: The increase in working capital as of December 31, 2024, as compared to December 31, 2023, was primarily due to the favorable impact to our net current assets resulting from our increase in net product revenues and collaboration revenues, including a total of $164.7 million in milestone payments earned from Ipsen and reduction of the duration of our investments, partially offset by repurchases of our common stock. 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 Consolidated Financial Statements” in Part II, Item 8 of this Annual Report on Form 10-K. The increase in cash, cash equivalents and marketable securities at December 31, 2024, as compared to December 31, 2023, was primarily due to cash inflows generated by our operations from sales of our products and our commercial collaboration arrangements, including $164.7 million in cash received from Ipsen for regulatory and commercial milestone payments earned, partially offset by cash payments to repurchase our common stock, cash payments to support our development and discovery programs, including acquisition of in-process research and development technology, tax payments and operating cash payments for employee-related expenditures and restructuring.

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

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Percent Change"],["","2024","","2023"],["Net cash provided by operating activities","$","699,971","","","$","333,324","","","110","%"],["Net cash used in investing activities","$","(116,783)","","","$","(26,955)","","","333","%"],["Net cash used in financing activities","$","(628,808)","","","$","(546,052)","","","15","%"]]
[[/GREPCENT_TABLE]]

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, 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 Consolidated Statements of Income.

Net cash provided by operating activities increased for the year ended December 31, 2024, as compared to 2023, primarily due to an increase in cash received on sales of our products, an increase in cash received upon achievement of milestones from Ipsen, and lower cash paid for operating expenses, partially offset by cash payments related to the 2024 Restructuring Plan.

Investing Activities

The changes in cash flows from investing activities primarily relates to the timing of marketable securities 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 used in investing activities increased for the year ended December 31, 2024, as compared to 2023. The increase in cash used in investing activities was primarily due to a decrease in cash proceeds from maturities and sales of

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marketable securities and an increase in purchases of marketable securities, partially offset by a decrease in purchases of in-process research and development technology related to certain in-licensing collaboration arrangements and a decrease in purchases of property and equipment.

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 year ended December 31, 2024, as compared to 2023. The increase in cash used in financing activities was primarily due to an increase in payments for repurchases of common stock.

Contractual Obligations

As of December 31, 2024, we anticipate the aggregate of our cash, cash equivalents and marketable securities and cash generated from operations to be sufficient to fund our contractual obligations, as well as cash requirements to support our ongoing operations and capital expenditures. Our contractual obligations as of December 31, 2024 primarily consist of:

Operating leases: We have certain lease agreements related to our corporate campus facilities and laboratory facilities located in Alameda, California and Greater Philadelphia area, under which we are obligated to make lease payments. As of December 31, 2024, we had $26.5 million of lease payments due in one year and $259.2 million due over the remaining lease term.

Purchase obligations: Purchase obligations include firm purchase commitments related to manufacturing of inventory, software services and other facilities and equipment. As of December 31, 2024, we had $63.4 million total purchase obligations due within one year and $13.3 million due after one year.

Contingent payments: We have committed to make certain contingent payments for potential future milestones, research funding commitments and royalties to certain collaboration partners, including contingent exercise fee payments if we decide to exercise certain of our options to in-license or acquire in-process research and development technology as part of our agreements with those parties. We do not expect these contingent payments to have a significant impact on our liquidity in the near term.

See “Notes 4. Collaboration Agreements and Business Development Activities” and “Note 12. Commitments and Contingencies” of the “Notes to Consolidated Financial Statements” in Part II, Item 8 of this Annual Report on Form 10-K for additional information regarding our contractual obligations and contingencies.

As of December 31, 2024, we did not have any material off-balance-sheet arrangements, as defined by applicable SEC regulations.

Critical Accounting Policies and Estimates

The preparation of our 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 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.

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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 Consolidated Financial Statements.

For a complete description of our significant accounting policies, see “Note 1. Organization and Summary of Significant Accounting Policies” of the “Notes to Consolidated Financial Statements” in Part II, Item 8 of this Annual Report on Form 10-K.

Revenue Recognition

Net Product Revenues and Discounts and Allowances

We recognize revenues when our customers obtain control of promised goods or services, in an amount that reflects the consideration to which we are entitled to in exchange for those goods or services. We calculate gross product revenues based on the price that we charge to the specialty pharmacies and distributors in the U.S. We estimate our domestic net product revenues by deducting from our gross product revenues: (a) trade allowances, such as discounts for prompt payment; (b) estimated government rebates and chargebacks; (c) certain other fees paid to specialty pharmacies, distributors and commercial payors; and (d) returns. We record estimates for these deductions at the time we recognize the related gross product revenue. However, the actual rebate or chargeback on the sale of our product to a distributor is not invoiced to us until a future period, generally within three months from the date of sale. Due to this time lag, we must estimate the amount of rebates and chargebacks to accrue. We base our estimates for the expected utilization on customer and payer data received from the specialty pharmacies and distributors and historical utilization rates. We update our estimates every quarter to reflect actual claims and other current information. Actual rebates and chargebacks claimed for prior periods have varied from our estimates by less than 1% of the amount deducted from gross product revenues for the years ended December 31, 2024 and 2023. Our current estimates may differ significantly from actual results.

Collaboration Revenues

We enter into collaboration arrangements with third parties, under which we license certain rights to our intellectual property, and account for the arrangements as either license revenue or collaboration services revenue when the counterparty is a customer. The terms of these arrangements may include payments to us for one or more of the following: non-refundable, up-front license fees; development, regulatory and commercial milestone payments; product supply services; development cost reimbursements; profit sharing arrangements; and royalties on net sales of licensed products.

As part of the accounting for these arrangements, we must develop assumptions that require judgment to determine the standalone selling price for each performance obligation identified in the contract. We use key assumptions to determine the standalone selling price, which may include forecast revenues and costs, clinical development timelines and costs, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success. At the inception of each arrangement that includes development milestone payments, we evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price using the most likely amount method. At the end of each subsequent reporting period, we re-evaluate the probability of earning of such development milestones and any related constraint, and if necessary, adjust our estimate of the overall transaction price. For arrangements that may include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sale occurs or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). Development milestone adjustments are recorded on a cumulative catch-up basis, which would affect collaboration services revenues in the period of adjustment. In addition, in recording revenues for our research and development services performance obligations, we use projected development cost estimates to determine the amount of revenue to record as we satisfy this performance obligation.

Clinical Trial and Collaboration Accruals

We execute all of our clinical trials with support from contract research organizations and other vendors and we accrue costs for clinical trial activities performed by these third parties based upon the estimated amount of work completed on each trial. For clinical trial expenses, the significant factors used in estimating accruals include the number of patients enrolled, the activities performed for each patient, the number of active clinical sites and the duration for which the patients will be enrolled in the trial. Certain of our in-licensing collaboration arrangements include contingent payments in the form of development, regulatory and commercial milestones. We recognize expense for contingent payments when

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they are deemed probable of achievement which requires judgment as to the probability and timing of the achievement of the underlying milestones. To the extent actual results, or updated probability estimates, differ from current estimates, such amounts are recorded as an adjustment in the period estimates are revised. We monitor patient enrollment levels and assess the related research and development activities progress, including the probability of achieving milestones payments associated to the respective terms and conditions of our in-licensing and collaboration arrangements to the extent possible through internal reviews and estimates of the operational progress of our discovery and early-stage clinical development programs, correspondence with contract research organizations and review of contractual terms. We base our estimates on the best information available at the time. However, additional information may become available to us, which may allow us to make a more accurate estimate in future periods. If we do not identify costs that we have begun to incur or if we underestimate or overestimate the level of services performed or the costs of these services, our actual expenses could differ from our estimates.

Stock-based Compensation

Stock-based compensation expense requires us to estimate the fair value of performance-based restricted stock units (PSUs) and restricted stock units (RSUs) subject to market conditions, and estimate the number of shares subject to PSUs and RSUs with market conditions that will ultimately vest. To determine the fair value, we use models that require a number of complex and subjective assumptions including our stock price volatility, employee exercise patterns and risk-free interest rates. Monte Carlo simulation models are used to determine grant date fair value of awards with market conditions. The assumptions used in calculating the fair value of market conditions awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future.

We recognize stock-based compensation for PSUs over the requisite service period only for awards which we estimate will ultimately vest, which requires judgment as to the probability and timing of the achievement of the underlying performance goals. Significant factors we consider in making those judgments include forecasts of our product revenues and those of our collaboration partners, estimates regarding the operational progress of late-stage clinical development programs and discovery pipeline expansion performance targets. To the extent actual results, or updated estimates, differ from current estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised and as such, can materially affect our stock-based compensation expense in the current period and in the future. Compensation expense related to RSUs with market vesting conditions is recognized regardless of the outcome of the market conditions.

Income Taxes

We compute our income tax provision or benefit under the asset and liability method. Significant estimates are required in determining our income tax provision or benefit. We base some of these estimates on interpretations of existing tax laws or regulations. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined on the basis of the difference between the tax basis of assets and liabilities and their respective financial reporting amounts (temporary differences) at enacted tax rates in effect for the years in which the differences are expected to reverse. A valuation allowance is established for deferred tax assets for which it is more likely than not that some portion or all of the deferred tax assets, including net operating losses and tax credits, will not be realized. We periodically re-assess the need for a valuation allowance against our deferred tax assets based on various factors including our historical earnings experience by taxing jurisdiction, and forecasts of future operating results and utilization of net operating losses and tax credits prior to their expiration. Significant judgment is required in making this assessment and, to the extent that we deem a reversal of any portion of our valuation allowance against our deferred tax assets to be appropriate, we recognize a tax benefit against our income tax provision in the period of such reversal.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by tax authorities based on the technical merits of the position. The tax benefit recognized in the Consolidated Financial Statements for a particular tax position is based on the largest benefit that is more likely than not to be realized. The amount of unrecognized tax benefits is adjusted as appropriate for changes in facts and circumstances, such as significant amendments to existing tax law, new regulations or interpretations by tax authorities, new information obtained during a tax examination or resolution of an examination. We have elected to record interest and penalties in the accompanying Consolidated Statements of Income as a component of income taxes.

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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 Consolidated Financial Statements” in Part II, Item 8 of this Annual Report on Form 10-K.