Exelixis, Inc. (“Exelixis,” “we,” “our”(Exelixis, we, our or “us”)us) is aan oncology-focused biotechnology company committedthat strives to accelerate the discovery, development and commercialization of new medicines for patients with difficult-to-treat cancers. Using our considerable drug discovery, development and commercialization resources and capabilities, we have invented and brought to market innovative therapies that appropriately balance patient benefits and risks; we will continue to build on this foundation as we strive to provide cancer patients with new treatment options that improve care and outcomesupon current standards of care.

Today, 4 products that originated in Exelixis laboratories are available to be prescribed to patients. Sales related to our flagship molecule, cabozantinib, account for people with cancer. Sincethe large majority of our founding in 1994, three products discovered at Exelixis have progressed through clinical development, received regulatory approval, and entered the marketplace. Two are derived from cabozantinib,revenues. Cabozantinib is an inhibitor of multiple tyrosine kinases including VEGF, MET, AXL, VEGF receptors and RET receptors:and has been approved by the U.S. Food and Drug Administration (FDA) and in 62 other countries as: CABOMETYX® (cabozantinib) tablets approved for previously treated advanced renal cell carcinoma (“RCC”)(RCC), both alone and in combination with Bristol-Myers Squibb Company’s (BMS) OPDIVO® (nivolumab), for previously treated hepatocellular carcinoma (HCC) and, currently by the FDA and European Commission (EC), for previously treated, radioactive iodine (RAI)-refractory differentiated thyroid cancer (DTC); and COMETRIQ® (cabozantinib) capsules approved for progressive, metastatic medullary thyroid cancer. cancer (MTC). For physicians treating these types of cancer, cabozantinib has become or is becoming an important medicine in their selection of effective therapies.

The third product,other 2 products resulting from our discovery efforts are: COTELLIC® (cobimetinib) tablets, is a reversible, 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, (aInc. a member of the Roche Group)Group (Genentech); and MINNEBRO® (esaxerenone), an oral, non-steroidal, selective blocker of the mineralocorticoid receptor approved for the treatment of hypertension in Japan and is approved as part of a combination regimenlicensed to treat advanced melanoma.Daiichi Sankyo Company, Limited (Daiichi Sankyo).

The condensed consolidated financial statementsaccompanying Condensed Consolidated Financial Statements include the accounts of Exelixis and those of our wholly-ownedwholly owned subsidiaries. These entities’ functional currency is the United States (“U.S.”) dollar. All intercompany balances and transactions have been eliminated.

We operate in 1 business segment that focuses on the discovery, development and commercialization of new medicines for anydifficult-to-treat cancers. Our Chief Executive Officer, as the chief operating decision-maker, manages and allocates resources to our operations on a total consolidated basis. Consistent with this decision-making process, our Chief

Executive Officer uses consolidated, single-segment financial information for purposes of evaluating performance, forecasting future period. Theseperiod financial statementsresults, allocating resources and notes should be readsetting incentive targets.

All of our long-lived assets are located in conjunction with the consolidated financial statementsU.S. See “Note 2. Revenues” for enterprise-wide disclosures about product sales, revenues from major customers and notes thereto for the year ended December 31, 2016, included in our Annual Report on Form 10-K filed with the SEC on February 27, 2017.revenues by geographic region.

The preparation of our condensed consolidated financial statementsthe accompanying 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, revenueequity, revenues and expenses, and related disclosures. On an ongoing basis, management evaluates its estimates including, but not limited to, those related to revenue recognition, including deductions from revenues (such as rebates, chargebacks, sales returns and sales allowances), the period of performance, identification of deliverables and evaluation of milestones with respect towe evaluate our collaborations, the amounts of revenues and expenses under our profit and loss sharing agreement, recoverability of inventory, certain accrued liabilities including accrued clinical trial liability, and stock-based compensation.significant estimates. 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. Actual results could differ materially from those estimates.

Certain prior period amounts in the condensed consolidated financial statementsaccompanying Condensed Consolidated Financial Statements have been reclassified to conform to the current period presentation. We reclassified $1.8 million in payableSuch reclassifications did not impact previously reported total revenues, income from operations, net income, total assets, total liabilities or total stockholders’ equity.

There have been no material changes to our customerssignificant accounting policies during the six months ended June 30, 2022, compared to the significant accounting policies disclosed 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 2021 Form 10-K.

The allowance for chargebacks, discounts for prompt payment and other are recorded as a reduction of trade receivables, net, and the remaining reserves are recorded as rebates and fees due to customers in the accompanying December 31, 2016 Condensed Consolidated Balance Sheet. Sheets.

We expect to reclassify deferred revenue

See “Note 3. Collaboration Agreements and Business Development Activities” of the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of our products. Additionally,Fiscal 2021 Form 10-K, as further described below, for alladditional information on certain of our collaboration arrangements, the timing of recognition of certain of our developmentagreements and regulatory milestones could change as a result of the variable consideration guidance included in ASU 2014-09. ASU 2014-09 will also require additional disclosures regarding our revenue transactions.in-licensing arrangements.

Ipsen Collaboration

In February 2016, we entered into a collaboration and license agreement (the “Ipsen Collaboration Agreement”) with Ipsen for the commercialization and further development of cabozantinib. Pursuant toUnder the terms of the Ipsen Collaboration Agreement,collaboration agreement, as amended, Ipsen received exclusive commercialization rights for current and potential future cabozantinib indications outside of the U.S., Canada and Japan (the “Ipsen Territory”). The Ipsen Collaboration Agreement was subsequently amended in December 2016 (the “Amendment”) to include commercialization rights in Canada in the Ipsen Territory.Japan. We have also agreed to collaborate with Ipsen on the development of cabozantinib for current and potential future indications. The parties’ efforts are governed through a joint steering committee and appropriate subcommittees established to guide and oversee the collaboration’s operation and strategic direction; provided, however, that we retain final decision-making authority with respect to cabozantinib’s ongoing development.

In consideration for the exclusive license and other rights contained in the Ipsen Collaboration Agreement, Ipsen paid us an upfront nonrefundable payment of $200.0 million in March 2016. Additionally, as a result of the Amendment, we received a $10.0 million upfront nonrefundable payment from Ipsen in December 2016 and, as a result of the approval of cabozantinib in second-line RCC by the European Commission (“EC”) in September 2016, we received a $60.0 million milestone in November 2016. We are receiving a 2% royalty on the initial $50.0 million of net sales by Ipsen, and are entitled to receive a 12% royalty on the next $100.0 million of net sales by Ipsen. After the initial $150.0 million of sales, we are entitled to receive a tiered royalty of 22% to 26% on annual net sales by Ipsen; these tiers will reset each calendar year. We are primarily responsible for funding cabozantinib-related development costs for those trials in existence at the time we entered into the Ipsen Collaboration Agreement; global development costs for additional trials are shared between the parties, with Ipsen reimbursing us for 35% of such costs, provided Ipsen opts in to participate in such additional trials. Pursuant to the terms of the Ipsen Collaboration Agreement, we will remain responsible for the manufacture and supply of cabozantinib for all development and commercialization activities. As part ofRevenues under the collaboration agreement we entered into a supply agreement pursuant to which we will supply finished, labeled drug product towith Ipsen for distribution in the Ipsen Territories at our cost,were as defined in the agreement, which excludes the 3% royalty we are required to pay GlaxoSmithKline (“GSK”) on Ipsen’s Net Sales of any product incorporating cabozantinib.follows (in thousands):

During the three months ended March 31, 2017, we reclassified $9.0 million of deferred revenue to Accrued collaboration liabilities and Other long-term liabilities, and accordingly adjusted our amortization of the upfront payment of $200.0 million as a result of a change in operational responsibilities for certain clinical programs in the Ipsen Territory. As of SeptemberJune 30, 2017, we had paid $2.1 million toward the $9.0 million of reimbursements due to Ipsen for these clinical programs.

Takeda Collaboration

OnIn January 30, 2017, we entered into a collaboration and license agreement (the “Takeda Collaboration Agreement”) with Takeda for the commercialization and further clinical development of cabozantinib in Japan.cabozantinib. Pursuant to the terms of thethis collaboration and license agreement, as amended, Takeda Collaboration Agreement, Takeda will havehas exclusive commercialization rights for current and potential future cabozantinib indications in Japan. The companiesJapan, and the parties have also agreed to collaborate on the clinical

Takeda will be responsible for 20% of the costs associated with the global cabozantinib development plan’s current and future trials, provided Takeda opts to participate in such future trials, and 100% of costs associated with cabozantinib development activities that are exclusively for the benefit of Japan. Pursuant to the terms of the Takeda Collaboration Agreement, we will remain responsible for the manufacture and supply of cabozantinib for all development and commercialization activitiesRevenues under the collaboration. As part of the collaboration the parties will enter into appropriate supply agreements for the manufacture and supply of cabozantinib for Takeda’s territory.

In December 2006, we out-licensed the development and commercialization of cobimetinib to Genentech under a worldwide collaboration agreement. In November 2015, the FDA approved cobimetinib, under the brand name COTELLIC, in combination with Genentech’s ZELBORAF® (vemurafenib) for the treatment of patients with BRAF V600E or V600K mutation-positive advanced melanoma. COTELLIC in combination with ZELBORAF has also been approved in the European Union and multiple additional countries for use in the same indication. In July 2020, the FDA also approved COTELLIC for use in combination with ZELBORAF and TECENTRIQ® (atezolizumab) for the treatment of patients with BRAF V600 mutation-positive advanced melanoma in previously untreated patients.

License revenues under the collaboration agreement was terminated during 2014, although GSK will continue to be entitled to a 3% royalty on net sales by us or our collaboration partners of any product incorporating cabozantinib, including COMETRIQ and CABOMETYX.