Table of clinical trials required to obtain regulatory approval for each pursued indication is subject to the input of the applicable regulatory authorities, and we have not yet sought such input for all potential indications that we may elect to pursue, and even after having given such input, applicable regulatory authorities may subsequently require additional clinical studies prior to granting regulatory approval based on new data generated by us or other companies, or for other reasons outside of our control. As a condition to any regulatory approval, we may also be subject to post-marketing development commitments, including additional clinical trial requirements. As a result of the uncertainties discussed above, we are unable to determine the duration of or complete costs associated with the development of cabozantinib or any other research and development projects.Contents

In any event, our potential therapeutic products are subject to a lengthy and uncertain regulatory process that may not result in receipt of the necessary regulatory approvals. Failure to receive the necessary regulatory approvals would prevent us from commercializing the product candidates affected, including cabozantinib in any additional indications. In addition, clinical trials of our potential product candidates may fail to demonstrate safety and efficacy, which could prevent or significantly delay regulatory approval. A discussion of the risks and uncertainties with respect to our research and development activities, including completing the development of our product candidates, and the consequences to our business, financial position and growth prospects can be found in “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Selling, General and Administrative Expenses

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


	Three Months Ended June 30,				Percent Change		Six Months Ended June 30,				Percent Change
	2023		2022				2023		2022
Selling, general and administrative expenses(1)	$	126,412	$	107,686	17	%	$	244,400	$	199,689	22	%

Stock-based compensation	15,311		15,073		2	%	28,720		25,933		11	%
Total selling, general and administrative expenses	$	141,723	$	122,759	15	%	$	273,120	$	225,622	21	%

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Selling, general and administrative expenses $ 38,129
$ 32,463
$ 113,116
$ 103,143
Dollar change $ 5,666
$ 9,973

Percentage change 17 % 10 %
____________________

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

Selling, general and administrative expenses consist primarily of personnel expenses, ~~consulting and outside services,~~ stock-based compensation, marketing ~~legal and accounting costs, facility~~ costs and ~~travel and entertainment.~~certain other administrative costs.

The ~~increase~~increases in selling, general and administrative expenses for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~,2023, as compared to the ~~comparable~~corresponding prior year periods, ~~in 2016, was~~were primarily related to increases in personnel expenses, ~~consulting and outside services, and for the nine months ended September 30, 2017,~~ legal and ~~accounting costs; those increases were partially offset by a decrease in marketing~~advisory fees related to the recent proxy contest and technology costs. Personnel expenses increased ~~by $2.0 million and $11.8 million for the three and nine months ended September 30, 2017, respectively, as compared to the comparable periods in 2016,~~ primarily due to ~~an increase~~increases in ~~general and~~ administrative headcount to support our commercial and research and development ~~organizations, incentive compensation~~organizations. The increases in technology costs include our investments in business technology initiatives to support productivity and ~~the accrual for bonuses. Consulting~~efficiency in our organization.

We project our selling, general and ~~outside services increased by $4.3~~

~~million and $6.0 million~~administrative expenses may increase for the ~~three and nine months ended September 30, 2017, respectively,~~remainder of 2023, as compared to the ~~comparable periods in 2016, primarily~~corresponding prior year period, due to increases in ~~consulting~~personnel expenses for marketing activities. Legal and accounting expenses increased by $3.8 million for the nine months ended September 30, 2017 as compared to the comparable period in 2016, primarily due to increases in costs related to our dispute with Genentech. Marketing costs decreased by $3.3 million and $14.6 million for the three and nine months ended September 30, 2017, respectively, as compared to the comparable periods in 2016, primarily due to a decrease in losses recognized under our collaboration agreement with Genentech driven by Genentech’s change in cost allocation approach in December 2016.similar reasons noted above.

~~Other~~Non-Operating Income ~~(Expense), Net~~

~~Other~~Non-operating income ~~(expense), net,~~ was as follows (dollars in thousands):


	Three Months Ended June 30,				Percent Change		Six Months Ended June 30,				Percent Change
	2023		2022				2023		2022
Interest income	$	22,541	$	4,757	374	%	$	42,043	$	6,579	539	%
Other income (expense), net	(5)		45		-111	%	(59)		209		-128	%
Non-operating income	$	22,536	$	4,802	369	%	$	41,984	$	6,788	519	%

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Interest income and other, net $ 3,408
$ 3,059
$ 6,098
$ 4,010
Interest expense —
(7,834 ) (8,679 ) (28,575 )
Loss on extinguishment of debt —
(13,773 ) (6,239 ) (13,773 )
Total other income (expense), net $ 3,408
$ (18,548 ) $ (8,820 ) $ (38,338 )
Dollar change $ 21,956
$ 29,518

Percentage change (118 )% (77 )%

~~Interest expense decreased by $7.8 million and $19.9 million~~The increases in non-operating income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017, respectively,~~2023, as compared to the ~~comparable~~corresponding prior year periods, ~~in 2016,~~were primarily ~~due to conversions and~~ the ~~redemption~~result of the 4.25% convertible senior subordinated notes due 2019, or the 2019 Notes, during the third and fourth quarters of 2016, the repayment of the Silicon Valley Bank term loan in March 2017 and the repayment of the Secured Convertible Notes due 2018, or the Deerfield Notes, in June 2017.

During the nine months ended September 30, 2017, we recognized a $6.2 million loss on extinguishment of debt resulting primarily from the prepayment penalty associated with the early the repayment of the Deerfield Notes. During the three and nine months ended September 30, 2016, we recognized a $13.8 million loss on extinguishment of debt associated with the conversion of $285.3 million in aggregate principal amount of the 2019 Notes for 53,704,911 shares of our Common Stock. See “Note 6 - Debt” in our “Notes to Condensed Consolidated Financial Statements” for more information on the repayment of our debt during 2017.

~~The~~an increase in interest income due to higher interest rates and ~~other, net~~higher investment balances.

Provision for Income Taxes

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


	Three Months Ended June 30,						Percent Change		Six Months Ended June 30,						Percent Change
	2023			2022					2023			2022
Provision for income taxes	$	19,208		$	17,836		8	%	$	27,458		$	34,492		-20	%
Effective tax rate	19.1		%	20.2		%			18.5		%	19.9		%

The effective tax rates for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023, differed from the U.S. federal statutory rate of 21%, ~~as compared~~primarily due to the ~~comparable periods in 2016, was primarily related to increases in interest income. Interest income increased~~generation of federal tax credits, partially offset by ~~$0.4 million and $1.8 million~~state taxes. The effective tax rates for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017, respectively, as compared to~~2022, differed from the ~~comparable periods in 2016,~~U.S. federal statutory rate of 21%, primarily due to both an increase in our investment balances and an increase in the yield earned on those investments. Interest income and other, net also included the recognition of a $2.3 million and $3.0 million gain during the three and nine months ended September 30, 2017, respectively,excess tax benefits related to the ~~sale~~exercise of ~~our 9% interest in Akarna Therapeutics, Ltd. to Allergan Holdco UK Limited in August 2016. We acquired our interest in Akarna in 2015, in exchange for intellectual property rights related to~~certain stock options during the ~~Exelixis discovered compound XL335.~~

~~Income Tax Expense~~

~~Income~~periods and the generation of federal tax ~~expense was as follows (in thousands):~~ credits, partially offset by state taxes.

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Income tax expense $ 3,206
$ —
$ 3,921
$ —

~~Income tax expense for the three and nine months ended September 30, 2017 primarily relates to state taxes in jurisdictions outside~~

Table of ~~California, for which we do not have net operating loss carry-forwards due to a limited operating history. Our historical losses are sufficient to fully offset any federal taxable income.~~Contents

Liquidity and Capital Resources

~~We have incurred net losses in every fiscal year since our inception, with the exception~~As of ~~the 2011 fiscal year,~~June 30, 2023 and ~~as of September 30, 2017,~~December 31, 2022, we had an accumulated deficit of $1.9 billion. Although we reported net income of $115.7 million for the nine months ended September 30, 2017, we may not be able to maintain or increase profitability on a quarterly or annual basis and we are unable to accurately predict the extent of long-range future profits or losses. We expect to continue to spend significant additional amounts to fund the continued development and commercialization of cabozantinib. In addition, we intend to expand our product pipeline through the measured resumption of drug discovery and the evaluation of in-licensing and acquisition opportunities that align with our oncology drug expertise, which efforts could involve substantial costs. As a result, we are unable to predict the extent of any future profits or losses because we expect to continue to incur substantial operating expenses and, consequently, we will need to generate substantial revenues to maintain or increase profitability.

Since the launch of our first commercial product in January 2013, through September 30, 2017, we have generated an aggregate of $463.0 million in net product revenues, including $253.3 million for the nine months ended September 30, 2017. Other than sales of CABOMETYX and COMETRIQ, we have derived substantially all of our revenues since inception from collaborative arrangements, including upfront and milestone payments and research funding we earn from any products developed from the collaborative research. The amount of our net profits or losses will depend, in part, on: the level of sales of CABOMETYX and COMETRIQ in the U.S. (which may be impacted by our ability to obtain FDA approval for cabozantinib for additional indications); achievement of clinical, regulatory and commercial milestones and the amount of royalties, if any, from sales of CABOMETYX and COMETRIQ under the Ipsen Collaboration Agreement; our share of the net profits and losses for the commercialization of COTELLIC in the U.S. under our collaboration with Genentech; the amount of royalties from COTELLIC sales outside the U.S. under our collaboration with Genentech; other license and contract revenues; and the level of our expenses, including commercialization activities for cabozantinib and any pipeline expansion efforts.

~~As of September 30, 2017, we had $422.3 million~~$2.1 billion in cash, cash equivalents and ~~investments, which included $417.6 million available for operations and $4.7 million of long-term restricted~~ investments. We anticipate that the aggregate of our current cash and cash equivalents, ~~and~~ short-term investments available for operations, net product revenues and collaboration revenues will enable us to maintain our operations for ~~a period of~~ at least 12 months ~~following~~and thereafter for the ~~filing date~~foreseeable future.

Our primary cash requirements for operating activities, which we project will increase for the remainder of ~~this report. The sufficiency of our cash resources depends on numerous assumptions, including assumptions~~2023, as compared to the corresponding period in 2022, are for: income tax payments; employee related expenditures; payments related to our development and discovery programs; royalty payments on our net product ~~sales~~sales; rent payments for our leased facilities; and ~~operating expenses, as well as~~contract manufacturing payments.

The Tax Cuts and Jobs Act, signed into law on December 22, 2017, modified the ~~other factors set forth~~tax treatment of research and development expenditures beginning in ~~“Risk Factors” under the headings “Risks Related to our Capital Requirements~~2022. Research and ~~Financial Results,” in Part II, Item 1A of this Quarterly Report on Form 10-Q. Our assumptions may prove to~~development expenditures are no longer currently deductible but instead must be ~~wrong~~amortized ratably over five years for domestic expenditures or ~~other factors may adversely affect our business, and as~~15 years for foreign expenditures. As a result, we anticipate a higher federal income tax liability in 2023 and expect to pay higher estimated federal taxes by the end of 2023. 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 sales, which we project will increase for the remainder of 2023, as compared to the corresponding period in 2022; 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 ~~not~~decrease for the remainder of 2023, as compared to the corresponding period in 2022. 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 also have cash requirements related to capital expenditures to support the planned growth of our business including investments in facilities and equipment. We project that we may continue to spend significant amounts of cash ~~resources~~ to fund the development and commercialization of cabozantinib and the development of other product candidates in our pipeline, including zanzalintinib and XB002. In addition, we intend to continue to expand our oncology product pipeline through our drug discovery efforts, including additional research collaborations, in-licensing arrangements and other strategic transactions that align with our oncology drug development, and regulatory and commercial expertise. In March 2023, our Board of Directors authorized the repurchase of up to $550 million of our common stock before the end of 2023. 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 funds for our current and future operating ~~plans. This in turn could require us to raise additional funds, which~~plans, we may ~~be unable~~choose to ~~do, which could have a material adverse effect on our business. We may also choose to~~incur debt or raise additional funds through the issuance of equity based on market conditions or ~~debt to meet our business objectives.~~strategic considerations.

Sources and Uses of Cash (dollars in thousands):


	June 30, 2023		December 31, 2022		Percent Change
Working capital	$	1,250,910	$	1,294,403	-3	%
Cash, cash equivalents and investments	$	2,105,430	$	2,066,681	2	%

Working capital:The ~~following table summarizes~~decrease in working capital as of June 30, 2023, as compared to December 31, 2022, was primarily due to repurchases of our common stock, purchases of long-term investments and purchases of long-term inventory, partially offset by the favorable impact to our net current assets resulting from our net income. 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.

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Cash, cash equivalents and investments: Cash and cash equivalents primarily consist of cash deposits held at major banks, commercial paper, money market funds and other securities with original maturities 90 days or less. Investments primarily consist of debt securities available-for-sale. For additional information regarding our cash, cash equivalents and investments, see “Note 4. Cash and Investments,” in our “Notes to Condensed Consolidated Financial Statements” included in Part I, Item 1 of this Quarterly Report on Form 10-Q. The increase in cash, cash equivalents and investments as of June 30, 2023, as compared to December 31, 2022, was primarily due to cash inflows generated by our operations from sales of our products and our commercial collaboration arrangements, partially offset by operating cash payments for employee-related expenditures, cash payments to support our development and discovery programs and repurchases of our common stock.

Cash flow activities were as follows (in thousands):

Nine Months Ended September 30,
2017 2016
Net cash provided by operating activities:
Net income (loss) $ 115,738
$ (105,345 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities 9,017
45,945
Changes in operating assets and liabilities (12,497 ) 184,695
Net cash provided by operating activities 112,258
125,295
Net cash provided by (used in) investing activities 54,628
(155,638 )
Net cash used in financing activities (169,215 ) (72 )
Net decrease in cash and cash equivalents (2,329 ) (30,415 )
Cash and cash equivalents at beginning of period 151,686
141,634
Cash and cash equivalents at end of period $ 149,357
$ 111,219


	Six Months Ended June 30,
	2023		2022
Net cash provided by operating activities	$	205,386	$	178,849
Net cash used in investing activities	$	(123,377)	$	(209,681)
Net cash provided by (used in) financing activities	$	(120,206)	$	4,627

Operating Activities

~~Cash flows provided by operating activities represent the cash receipts and disbursements related to all of our activities other than investing and financing activities.~~ Cash provided by operating activities is derived by adjusting our net income ~~(loss) for:~~for non-cash operating items such as deferred taxes, stock-based compensation, depreciation, ~~and amortization,~~ non-cash ~~interest~~lease expense ~~and share-based compensation charges;~~ and changes in operating assets and liabilities, which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in our Condensed Consolidated ~~Results~~Statements of ~~Operations. Our operating activities provided cash of~~ ~~$112.3 million~~ ~~for the~~ ~~nine months ended~~ ~~September 30, 2017, as compared to~~ ~~$125.3 million~~ ~~for the same period in 2016. The decrease in~~Income.

Net cash provided by operating activities ~~was~~for the six months ended June 30, 2023 increased, as compared to the corresponding prior year period, primarily due to an increase in cash received on sales of our products and a decrease in cash paid for certain operating expenses, primarily from collaboration related research and development payments, partially offset by the ~~upfront nonrefundable~~collection of a $100.0 million milestone payment ~~of $200.0 million received~~ from Ipsen in the ~~nine~~three months ended September 30, 2016 in consideration for the exclusive license and other rights contained in our collaboration and license agreement with Ipsen along with increasing operating expenses. That decrease was partially offset by a $169.8 million increase in net product revenues and the upfront nonrefundable payment of $50.0 million received from Takeda in the nine months ended September 30, 2017 in consideration for the exclusive license and other rights contained in the Takeda Collaboration Agreement.March 31, 2022.

Investing Activities

~~Our~~The changes in cash flows from investing activities ~~provided cash~~primarily relates to the timing of ~~$54.6 million~~ ~~for the~~ ~~nine months ended~~ ~~September 30, 2017, as compared~~marketable securities investment activity, acquisition of acquired in-process research and development technology and capital expenditures. Our capital expenditures primarily consist of investments to ~~$155.6 million~~ ofexpand our operations and acquire assets that further support our research and development activities.

Net cash used ~~during the same period~~ in ~~2016.~~

~~Cash provided by~~ investing activities for the ~~nine~~six months ended~~September~~ June 30, ~~2017~~ ~~was~~2023 decreased, as compared to the corresponding prior year period, primarily due to an increase in cash ~~provided by the maturity~~proceeds from maturities and sales of investments ~~of $277.0 million~~ and ~~the sale~~a decrease in purchases of investments, ~~of $37.3 million, less cash used for investment~~partially offset by an increase in purchases of ~~$259.2 million.~~

~~Cash used by investing activities for the nine months ended September 30, 2016 was primarily due~~in-process research and development technology related to ~~investment purchases~~certain of ~~$262.7 million, less cash from the maturity of unrestricted and restricted investments of $103.3 million.~~our in-licensing collaboration arrangements.

Financing Activities

~~Cash used~~The changes in cash flows from financing activities ~~was $169.2 million~~primarily relate to proceeds from employee stock programs, taxes paid related to net share settlement of equity awards, and payments for ~~the~~ ~~nine months ended~~ ~~September 30, 2017, as compared to $0.1 million during the same period in 2016.~~repurchases of common stock.

~~Cash~~Net cash was used in financing activities for the ~~nine~~six months ended ~~September~~ June 30, ~~2017 was~~ 2023, as compared to cash provided by financing operations in the corresponding prior year period, primarily ~~a result of $185.8 million paid~~due to payments for ~~all amounts outstanding under the Deerfield Notes and our term loan with Silicon Valley Bank.~~

~~Cash used in financing activities for the~~ ~~nine months ended~~ September 30, 2016 was primarily a result of payments on conversion of convertible notes and employees’ tax withholding paid to taxing authorities from shares withheld on stock awards which was almost completely offset by the issuancerepurchases of common ~~stock under our equity incentive plans.~~stock.

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Contractual Obligations

AsIn May 2023, in connection with the commencement of ~~September 30, 2017, we have contractual obligations in the form~~our lease of ~~capital and operating leases, purchase obligations and other long-term liabilities.~~

On June 28, 2017, we repaid all amounts outstanding under the Deerfield Notes. On March 29, 2017, we repaid all amounts outstanding under our term loan with Silicon Valley Bank. See “Note 6 - Debt” in the accompanying Notes to the Condensed Consolidated Financial Statements for more information on the Deerfield Notes and our loan and security agreement with Silicon Valley Bank.

~~On May 2, 2017, we entered into a Lease Agreement, or the Lease, with Ascentris 105, LLC, or Ascentris, for an aggregate of 110,783 square feet of space in office and research~~laboratory facilities located ~~at 1851, 1801~~in Pennsylvania, we recognized a right-of-use asset and ~~1751 Harbor Bay Parkway, Alameda, California.~~an operating lease liability of $13.2 million. We ~~are obligated~~estimated the lease term to make lease payments totaling $24.1 million over the Lease term. The Lease further provides that we are obligated to pay to Ascentris certain costs, including taxes and operating expenses. See “Note 12. Commitments” in the accompanying Notes to the Condensed Consolidated Financial Statements for a description of the Lease.be 60 months taking into consideration our early termination rights.

There were no ~~other~~ material changes outside of the ordinary course of business in our contractual obligations as of June 30, 2023 from those asdisclosed in our Fiscal 2022 Form 10-K. For more information about our leases, and our other contractual obligations, see “Note 10. Commitments and Contingencies” in “Notes to Condensed Consolidated Financial Statements” included in Part I, Item I of ~~December 31, 2016.~~this Quarterly Report on Form 10-Q and see “Note 11. Commitments and Contingencies” of the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of our Fiscal 2022 Form 10-K.

~~Off-Balance Sheet Arrangements~~

~~As of~~ ~~September 30, 2017, 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 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, ~~revenue~~equity, revenues and expenses and related disclosures. An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our Condensed Consolidated Financial Statements. On an ongoing basis, management evaluates its estimates, including, but not limited ~~to,~~to: those related to revenue recognition, including ~~deductions from revenues (such~~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), the period of performance, identification of deliverables and evaluation of~~allowances as well as milestones ~~with respect to our collaborations,~~included in collaboration arrangements; the amounts of revenues and expenses under our profit and loss sharing ~~agreement,~~agreement; recoverability of ~~inventory,~~inventory; the accrual for certain ~~accrued~~ liabilities, including accrued clinical trial ~~liability,~~liabilities; valuations of equity awards used to determine stock-based compensation, including certain awards with vesting subject to market and/or performance conditions; and ~~stock-based compensation.~~the amounts of deferred tax assets and liabilities, including the related valuation allowance. We base our estimates on historical experience and on various other market-specific and ~~other~~ relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our senior management has discussed the development, selection and disclosure of these estimates with the Audit Committee of our Board of Directors. Actual results could differ materially from those estimates.

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

There have been no significant changes in our critical accounting policies and estimates during the ~~nine~~six months ended~~September~~ June 30, ~~2017~~,2023, as compared to the critical accounting policies and estimates disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part II, Item 7 of our ~~Annual Report on~~Fiscal 2022 Form ~~10-K for the year ended~~ ~~December 31, 2016~~ ~~filed with the SEC on February 27, 2017.~~10-K.

Recent Accounting Pronouncements

For a description of the expected impact of recent accounting pronouncements, see “Note ~~1 -~~1. Organization and Summary of Significant Accounting Policies” in the “Notes to Condensed Consolidated Financial Statements” included in Part I, Item 1 of this Quarterly Report on Form 10-Q and “Note 1 - Organization and Summary of Significant Accounting Policies” in the “Notes to Consolidated Financial Statements” included in our Annual Report on Form 10-K filed with the SEC on February 27, 2017.10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our market risks at ~~September~~as of June 30, ~~2017~~2023 have not changed significantly from those ~~discussed~~described in Part II, Item 7A of our ~~Annual Report on~~Fiscal 2022 Form ~~10-K for the year ended~~ ~~December 31, 2016, filed with the SEC on~~ ~~February 27, 2017~~.10-K.

~~Our exposure to market risk for changes in interest rates relates to our investment portfolio, and for prior periods, our debt. As~~

Table of ~~September 30, 2017~~, an increase in the interest rates of one percentage point would have had a net adverse change in the fair value of interest rate sensitive assets and liabilities of $(1.5) million as compared to a net positive change in the fair value of ~~$0.3 million~~ ~~as of~~ ~~December 31, 2016~~.Contents

~~In addition, we have exposure to fluctuations in certain foreign currencies in countries in which we conduct clinical trials. As of~~ ~~September 30, 2017, and~~ ~~December 31, 2016~~, approximately $1.7 million and $2.2 million, respectively, of our accrued clinical trial liability was owed in foreign currencies. An adverse change of one percentage point in the foreign currency exchange rates would not have resulted in a material impact as of either of the dates presented. We recorded losses of $0.2 million relating to foreign exchange fluctuations for both the nine months ended ~~September 30, 2017~~ ~~and~~ ~~2016~~.

Item 4. Controls and ~~Procedures.~~Procedures

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

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

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

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

MSN I ANDA Litigation

In September 2019, we received a notice letter regarding an ANDA submitted to the FDA by MSN Pharmaceuticals, Inc. (individually and collectively with certain of its affiliates, including MSN Laboratories Private Limited, referred to as MSN), requesting approval to market a generic version of CABOMETYX tablets. MSN’s initial notice letter included a Paragraph IV certification with respect to our U.S. Patents No. 8,877,776 (salt and polymorphic forms), 9,724,342 (formulations), 10,034,873 (methods of treatment) and 10,039,757 (methods of treatment), which are listed in the Orange Book, for CABOMETYX. MSN’s initial notice letter did not provide a Paragraph IV certification against U.S. Patents No. 7,579,473 (composition of matter) or 8,497,284 (methods of treatment), each of which is listed in the Orange Book. On ~~June 3, 2016,~~October 29, 2019, we filed a ~~Demand~~complaint in the United States District Court for ~~Arbitration before JAMS~~the District of Delaware (Delaware District Court) for patent infringement against MSN asserting infringement of U.S. Patent No. 8,877,776 arising from MSN’s ANDA filing with the FDA. On November 20, 2019, MSN filed its response to the complaint, alleging that the asserted claims of U.S. Patent No. 8,877,776 are invalid and not infringed. On May 5, 2020, we received notice from MSN that it had amended its ANDA to include additional Paragraph IV certifications. In particular, the May 5, 2020 amended ANDA requested approval to market a generic version of CABOMETYX tablets prior to expiration of two previously unasserted CABOMETYX patents: U.S. Patents No. 7,579,473 and 8,497,284. On May 11, 2020, we filed a complaint in ~~San Francisco, California~~the Delaware District Court for patent infringement against MSN asserting infringement of U.S. Patents No. 7,579,473 and 8,497,284 arising from MSN’s amended ANDA filing with the FDA. Neither of our complaints have alleged infringement of U.S. Patents No. 9,724,342, 10,034,873 and 10,039,757. On May 22, 2020, MSN filed its response to the complaint, alleging that the asserted claims ~~against Genentech (a member~~of U.S. Patents No. 7,579,473 and 8,497,284 are invalid and not infringed. On March 23, 2021, MSN filed its First Amended Answer and Counterclaims (amending its prior filing from May 22, 2020), seeking, among other things, a declaratory judgment that U.S. Patent No. 9,809,549 (salt and polymorphic forms) is invalid and would not be infringed by MSN if its generic version of CABOMETYX tablets were approved by the FDA. U.S. Patent No. 9,809,549 is not listed in the Orange Book. On April 7, 2021, we filed our response to MSN’s First Amended Answer and Counterclaims, denying, among other things, that U.S. Patent No. 9,809,549 is invalid or would not be infringed. The two lawsuits comprising this litigation (collectively referred to as MSN I), numbered Civil Action Nos. 19-02017 and 20-00633, were consolidated in April 2021.

On October 1, 2021, pursuant to a stipulation between us and MSN, the Delaware District Court entered an order that (i) MSN’s submission of its ANDA constitutes infringement of certain claims relating to U.S. Patents No. 7,579,473 and 8,497,284, if those claims are not found to be invalid, and (ii) upon approval, MSN’s commercial manufacture, use, sale or offer for sale within the U.S., and importation into the U.S., of MSN’s ANDA product prior to the expiration of U.S. Patents No. 7,579,473 and 8,497,284 would also infringe certain claims of each patent, if those claims are not found to be invalid. Then, on October 12, 2021, pursuant to a separate stipulation between us and MSN, the Delaware District Court entered an order dismissing MSN’s counterclaims with respect to U.S. Patent No. 9,809,549. In our MSN I complaints, we sought, among other relief, an order that the effective date of any FDA approval of MSN’s ANDA be a date no earlier than the expiration of all of U.S. Patents No. 7,579,473, 8,497,284 and 8,877,776, the latest of which expires on October 8, 2030, and equitable relief enjoining MSN from infringing these patents. In an effort to streamline the case, the parties narrowed their assertions. On April 8, 2022, MSN withdrew its validity challenge to U.S. Patent No. 8,877,776. On April 14, 2022, we agreed not to assert U.S. Patent No. 8,497,284 at trial and MSN, correspondingly, agreed to withdraw its validity challenges to U.S. Patent No. 8,497,284, as well as claims 1-4 and 6-7 of U.S. Patent No. 7,579,473. As a result of this narrowing, the trial addressed two issues: (1) infringement of claim 1 of the ~~Roche Group) related~~U.S. Patent No. 8,877,776; and (2) validity of claim 5 of the U.S. Patent No. 7,579,473. A bench trial for MSN I occurred in May 2022, and on January 19, 2023, the Delaware District Court issued a ruling rejecting MSN’s invalidity challenge to U.S. Patent No. 7,759,473. The Delaware District Court also ruled that MSN’s proposed ANDA product does not infringe U.S. Patent No. 8,877,776 and entered judgment that the effective date of any final FDA approval of MSN’s ANDA shall not be a date earlier than August 14, 2026, the expiration date of U.S. Patent No. 7,759,473. Final judgment was entered on January 30, 2023. This ruling in MSN I does not impact our separate and ongoing MSN II lawsuit (as defined below).

MSN II ANDA Litigation

On January 11, 2022, we received notice from MSN that it had further amended its ~~clinical development, pricing~~ANDA to assert additional Paragraph IV certifications. In particular, the January 11, 2022 amended ANDA requested approval to market a generic version of CABOMETYX tablets prior to expiration of three previously-unasserted CABOMETYX patents that are now listed in the Orange Book: U.S. Patents No. 11,091,439 (crystalline salt forms), 11,091,440 (pharmaceutical composition) and ~~commercialization~~

Table of ~~COTELLIC,~~Contents

11,098,015 (methods of treatment). On February 23, 2022, we filed a complaint in the Delaware District Court for patent infringement against MSN asserting infringement of U.S. Patents No. 11,091,439, 11,091,440 and ~~cost and revenue allocations~~11,098,015 arising from ~~COTELLIC’s commercialization~~MSN’s further amendment of its ANDA filing with the FDA. On February 25, 2022, MSN filed its response to the complaint, alleging that the asserted claims of U.S. Patents No. 11,091,439, 11,091,440 and 11,098,015 are invalid and not infringed. On June 7, 2022, we received notice from MSN that it had further amended its ANDA to assert an additional Paragraph IV certification. As currently amended, MSN’s ANDA now requests approval to market a generic version of CABOMETYX tablets prior to expiration of a previously-unasserted CABOMETYX patent that is now listed in the Orange Book: U.S. Our arbitration demand asserted that Genentech breached the parties’ December 2006 collaboration agreement for the development and commercialization of COTELLIC, by, amongst other breaches, failing to meet its diligence and good faith obligations.

Patent No. 11,298,349 (pharmaceutical composition). On July ~~13, 2016, Genentech asserted~~18, 2022, we filed a ~~counterclaim~~complaint in the Delaware District Court for ~~breach~~patent infringement against MSN asserting infringement of ~~contract seeking monetary damages and interest related~~U.S. Patent No. 11,298,349 arising from MSN’s further amendment of its ANDA filing with the FDA. On August 9, 2022, MSN filed its response to the ~~cost allocations under~~complaint, alleging that the ~~collaboration agreement. On December 29, 2016, however, Genentech withdrew~~asserted claims of U.S. Patent No. 11,298,349 are invalid and not infringed and amended its ~~counterclaim against us~~challenges to U.S. Patents No. 11,091,439, 11,091,440 and ~~stated~~11,098,015 to allege that ~~it would unilaterally change its approach~~these patents are not enforceable based on equitable grounds. The two lawsuits comprising this litigation (collectively referred to ~~the allocation of promotional expenses arising~~as MSN II), numbered Civil Action Nos. 22-00228 and 22-00945, were consolidated in October 2022 and involve Exelixis patents that are different from commercialization of the COTELLIC plus Zelboraf® combination therapy, both retrospectively and prospectively. The revised allocation approach substantially reduced our exposure to costs associated with promotion of the COTELLIC plus Zelboraf combinationthose asserted in the ~~U.S.~~MSN I litigation described above.

On June ~~8, 2017,~~21, 2022, pursuant to a stipulation between us and MSN, the Delaware District Court entered an order that (i) MSN’s submission of its ANDA constitutes infringement of certain claims relating to U.S. Patents No. 11,091,439, 11,091,440 and 11,098,015, if those claims are not found to be invalid, and (ii) upon approval, MSN’s commercial manufacture, use, sale or offer for sale within the U.S., and importation into the U.S., of MSN’s ANDA product prior to the expiration of U.S. Patents No. 11,091,439, 11,091,440 and 11,098,015 would also infringe certain claims of each patent, if those claims are not found to be invalid. In our MSN II complaints, we are seeking, among other relief, an order that the effective date of any FDA approval of MSN’s ANDA would be a date no earlier than the expiration of all of U.S. Patents No. 11,091,439, 11,091,440, 11,098,015 and 11,298,349, the latest of which expires on February 10, 2032, and equitable relief enjoining MSN from infringing these patents. A bench trial for MSN II has been scheduled for October 2023.

Teva ANDA Litigation

In May 2021, we received notice letters from Teva regarding an ANDA Teva submitted to the FDA, requesting approval to market a generic version of CABOMETYX tablets. Teva’s notice letters included a Paragraph IV certification with respect to our U.S. Patents No. 9,724,342 (formulations), 10,034,873 (methods of treatment) and 10,039,757 (methods of treatment), which are listed in the Orange Book. Teva’s notice letters did not provide a Paragraph IV certification against any additional CABOMETYX patents. On June 17, 2021, we filed a complaint in the Delaware District Court for patent infringement against Teva, asserting infringement of U.S. Patents No. 9,724,342, 10,034,873 and 10,039,757 arising from Teva’s ANDA filing with the FDA. On August 27, 2021, Teva filed its answer and counterclaims to the complaint, alleging that the asserted claims of U.S. Patents No. 9,724,342, 10,034,873 and 10,039,757 are invalid and not infringed. On September 17, 2021, we filed an answer to Teva’s counterclaims. On July 29, 2022, we received notice from Teva that it had amended its ANDA to assert an additional Paragraph IV certification. As amended, Teva’s ANDA now requests approval to market a generic version of CABOMETYX tablets prior to expiration of a previously-unasserted CABOMETYX patent that is now listed in the Orange Book: U.S. Patent No. 11,298,349 (pharmaceutical composition). On September 2, 2022, we filed a complaint in the Delaware District Court for patent infringement against Teva, asserting infringement of U.S. Patent No. 11,298,349 arising from Teva’s amended ANDA filing with the FDA.We are seeking, among other relief, an order that the effective date of any FDA approval of Teva’s ANDA be a date no earlier than the expiration of all of U.S. Patents No. 9,724,342, 10,034,873, 10,039,757 and 11,298,349, the latest of which expires on July 9, 2033, and equitable relief enjoining Tevafrom infringing these patents. On September 30, 2022, the parties ~~settled~~filed a stipulation to consolidate the ~~arbitration,~~two lawsuits, numbered Civil Action Nos. 21-00871 and 22-01168, and to stay all proceedings, which was ~~dismissed~~granted by the Delaware District Court on October 3, 2022. Following a similar order granted by the Delaware District Court on February 9, 2022 to stay all proceedings with ~~prejudice. The settlement~~respect to Civil Action No. 21-00871, this case remained administratively closed, and Civil Action No. 22-01168 was ~~memorialized in~~administratively closed on October 3, 2022. On July 18, 2023, we entered into a settlement and license agreement ~~dated July 19, 2017, that included a mutual release of all claims arising out of or related in any way~~(the Teva Settlement Agreement) with Teva to the causes of actions and/or claims that were asserted or could have been asserted based on the facts alleged in the arbitration. The settlement does not provide for payments in settlement of the asserted claims; as part of the settlement, on July 19, 2017, the parties entered into an amendment to the Genentech Collaboration Agreement.end these litigations. Pursuant to the terms of the ~~amendment,~~Teva Settlement Agreement, we ~~continue~~will grant Teva a license to ~~be entitled~~market its generic version of CABOMETYX in the U.S. beginning on January 1, 2031, if approved by the FDA and subject to the conditions and exceptions common to agreements of this type.

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Cipla ANDA Litigation

On February 6, 2023, we received a ~~share~~notice letter regarding an ANDA submitted to the FDA by Cipla, Ltd. and Cipla USA, Inc. (individually and collectively referred to as Cipla), including a Paragraph IV certification with respect to our U.S. Patents No. 8,877,776 (salt and polymorphic forms), 9,724,342 (formulations), 10,039,757 (methods of treatment), 11,091,439 (crystalline salt forms), 11,091,440 (pharmaceutical composition), 11,098,015 (methods of treatment) and 11,298,349 (pharmaceutical composition). Cipla’s notice letter did not provide a Paragraph IV certification against any additional CABOMETYX patents. On March 16, 2023, we filed a complaint in the Delaware District Court for patent infringement against Cipla asserting infringement of U.S. ~~profits~~Patents No. 8,877,776, 11,091,439, 11,091,440, 11,098,015 and ~~losses received in connection~~11,298,349 arising from Cipla’s ANDA filing with the ~~commercialization~~FDA. Cipla’s ANDA requests approval to market a generic version of COTELLIC in accordance with the profit share tiers as originally set forth in the collaboration agreement, which share continues to decrease as sales of COTELLIC increase. However, effective as of July 1, 2017, the revenue for each sale of COTELLIC appliedCABOMETYX tablets prior to the ~~profit and loss statement for the collaboration agreement, or the Collaboration P&L, is being calculated using the average~~expiration of the quarterly net selling prices of COTELLIC and any additional branded Genentech product(s) prescribed with COTELLIC in such sale. While we also continue to share U.S. commercialization costs for COTELLIC, the amendment expressly sets forthaforementioned patents. We are seeking, among other relief, an order that the ~~amount~~effective date of ~~commercialization costs Genentech is entitled~~any FDA approval of Cipla’s ANDA would be a date no earlier than the expiration of all of U.S. Patents No. 8,877,776, 11,091,439, 11,091,440, 11,098,015 and 11,298,349, the latest of which expires on February 10, 2032, and equitable relief enjoining Cipla from infringing these patents. On May 4, 2023, we filed, under seal, a stipulation and proposed order to ~~allocate to~~stay all proceedings, and the ~~Collaboration P&L is to be reduced based on~~Delaware District Court, in a sealed order, granted the ~~number of Genentech products in any given combination including COTELLIC. In addition,~~proposed order and administratively closed the amendment also sets forth the parties’ confirmation and agreement that we have exercised our co-promotion option and that, as such, we have the option to co-promote current and future Genentech combinations that include COTELLIC in the U.S.case.

We may also from time to time become a party or subject to various other legal proceedings ~~arising~~and claims, either asserted or unasserted, which arise in the ordinary course of business. Some of these proceedings have involved, and may involve in the future, claims that are subject to substantial uncertainties and unascertainable damages.

Item 1A. Risk Factors

~~In addition~~Below we are providing, in supplemental form, changes to our risk factors from those previously disclosed in Part I, Item 1A of our Fiscal 2022 Form 10-K. Our risk factors disclosed in Part I, Item 1A of our Fiscal 2022 Form 10-K provide additional discussion regarding these supplemental risks and we encourage you to read and carefully consider all of the risk factors ~~discussed elsewhere~~disclosed in ~~this report and~~Part I, Item 1A of our ~~other reports filed~~Fiscal 2022 Form 10-K, together with the ~~SEC,~~below, for a more complete understanding of the ~~following are important factors that could cause actual results or events to differ materially from those contained in any forward-looking statements made by us or on our behalf. The~~ risks and uncertainties ~~described below are not the only ones we face. Additional risks and uncertainties not currently known~~material to ~~us or that we deem immaterial also may impair~~ our ~~business operations. If any of the following risks or such other risks actually occurs, our business could be harmed.~~

We have marked with an asterisk (*) those risk factors below that reflect substantive changes in risks facing us from the risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 30, 2016 filed with the Securities and Exchange Commission on February 27, 2017.business.

Risks Related to the Commercialization of Our ~~Business and Industry~~

Our future prospects are critically dependent upon the commercial success of CABOMETYX for advanced RCC and the further clinical development and commercial success of cabozantinib in additional indications.

Our mission is to maximize the clinical and commercial potential of cabozantinib and cobimetinib and position Exelixis for future growth through the resumption of our discovery efforts and expansion of our development pipeline. We anticipate that for the foreseeable future our ability to generate meaningful revenue to fund our commercial operations and our development and discovery programs will be dependent upon the successful commercialization of CABOMETYX for the treatment of advanced RCC in territories where it has been or may soon be approved. The commercial potential of

CABOMETYX for the treatment of advanced RCC remains subject to a variety of factors, most importantly, CABOMETYX’s perceived benefit/risk profile as compared to the benefit/risk profiles of other treatments available or currently in development for the treatment of advanced RCC. If revenue from CABOMETYX decreases, we may need to reduce our operating expenses or raise additional funds to execute our business plan, which would have a material adverse effect on our business and financial condition, results of operations and growth prospects. Furthermore, as a consequence of the Ipsen Collaboration Agreement, we rely heavily upon Ipsen’s regulatory, commercial, medical affairs, and other expertise and resources for commercialization of CABOMETYX in territories outside of the U.S. and Japan. If Ipsen is unable to, or does not invest the resources necessary to successfully commercialize CABOMETYX for the treatment of advanced RCC in the European Union and other international territories where it may be approved, this could reduce the amount of revenue we are due to receive under Ipsen Collaboration Agreement, thus resulting in harm to our business and operations.

We also believe that there are commercial opportunities for cabozantinib in therapeutic indications beyond advanced RCC, and we are dedicating substantial proprietary resources to developing cabozantinib into a potentially broad and significant oncology franchise. Even following the approval of CABOMETYX for the treatment of advanced RCC in the U.S. and European Union, our success remains contingent upon, among other things, successful clinical development, regulatory approval and market acceptance of cabozantinib in additional indications, such as previously untreated advanced RCC, advanced HCC, non-small cell lung cancer, and other forms of cancer. We cannot be certain that that the clinical trials we and our collaboration partners are currently conducting, or may conduct in the future, will demonstrate adequate safety and efficacy in clinical testing to receive regulatory approval. Should we prove unsuccessful in advancing the further clinical development and commercialization of cabozantinib beyond MTC or advanced RCC, we may be unable to execute our business plan and our revenues and financial condition would be materially adversely affected.

We are heavily dependent on our partner, Genentech (a member of the Roche group), for the successful development, regulatory approval and commercialization of cobimetinib.*

The terms of our collaboration agreement provide Genentech with exclusive authority over the global development and commercialization plans for cobimetinib and the execution of those plans. We have limited effective influence over those plans and are heavily dependent on Genentech’s decision making. Any significant changes to Genentech’s business strategy and priorities, over which we have no control, could adversely affect Genentech’s willingness or ability to complete their obligations under our collaboration agreement and result in harm to our business and operations. Subject to contractual diligence obligations, Genentech has complete control over and financial responsibility for cobimetinib’s development program, regulatory and commercial strategy and execution, and we are not able to control the amount or timing of resources that Genentech will devote to the product. Of particular significance are Genentech’s development efforts with respect to the combination of cobimetinib with immuno-oncology agents, a promising and competitive area of clinical research. Regardless of Genentech’s efforts and expenditures for the further development of cobimetinib, the results of such additional clinical investigation may not prove positive and may not produce label expansions or approval in additional indications.

The commercial success of cabozantinib, as CABOMETYX tablets for advanced RCC and as COMETRIQ capsules for MTC, and if approved for additional indications, will depend upon the degree of market acceptance among physicians, patients, health care payers, and the medical community.

Our ability to successfully commercialize cabozantinib, as CABOMETYX tablets for advanced RCC and COMETRIQ capsules for MTC is, and if approved for additional indications, will be, highly dependent upon the extent to which cabozantinib gains market acceptance among physicians, patients, health care payers such as Medicare, Medicaid and commercial plans and the medical community. If cabozantinib does not achieve an adequate level of acceptance, we may not generate significant future product revenues. The degree of market acceptance of CABOMETYX and COMETRIQ will depend upon a number of factors, including:

~~the effectiveness, or perceived effectiveness, of cabozantinib in comparison to competing products;~~

~~the safety of cabozantinib, including the existence of serious side effects of cabozantinib and their severity in comparison to those of any competing products;~~

~~cabozantinib’s relative convenience and ease of administration;~~

~~unexpected results connected with analysis of data from future or ongoing clinical trials;~~

~~the timing of cabozantinib label expansions for additional indications, if any, relative to competitive treatments;~~

~~the price of cabozantinib relative to competitive therapies and any new government initiatives affecting pharmaceutical pricing;~~

~~the strength of CABOMETYX sales efforts, marketing, medical affairs and distribution support;~~

~~the sufficiency of commercial and government insurance coverage and reimbursement; and~~

~~our ability to enforce our intellectual property rights with respect to cabozantinib.~~

If we are unable to maintain or scale adequate sales, marketing, market access and distribution capabilities or enter into or maintain agreements with third parties to do so, we may be unable to maximize product revenues and our business, financial condition, results of operations and prospects may be adversely affected.*

Maintaining our sales, marketing, market access, medical affairs and product distribution capabilities requires significant resources. If we cannot maintain effective sales, marketing, market access, medical affairs and product distribution capabilities, we may be unable to maximize the commercial potential of cabozantinib in its approved indications. Also, to the extent that the commercial opportunities for cabozantinib grow over time, we may not properly judge the requisite size and experience of the commercialization teams or the scale of distribution necessary to market and sell cabozantinib successfully. If we are unable to maintain or scale our organization appropriately, we may not be able to maximize product revenues and our business, financial condition, results of operations and prospects may be adversely affected.

We currently rely on third-party providers to handle storage and distribution for our commercial supply of both CABOMETYX and COMETRIQ in the U.S. While we have expanded our U.S. distribution and pharmacy channels in connection with the approval of CABOMETYX by the FDA for the treatment of patients with advanced RCC in the U.S., we still rely on a relatively limited distribution network to dispense COMETRIQ in fulfillment of prescriptions in the U.S. Furthermore, we rely on our collaboration partners for the commercialization and distribution of CABOMETYX and COMETRIQ in territories outside of the U.S., as well as for access and distribution activities for the approved products under the Named Patient Use program or a similar program with the effect of introducing earlier patient access to COMETRIQ and CABOMETYX.

Our current and anticipated future dependence upon the activities, support, and legal and regulatory compliance, of third parties, may adversely affect our ability to supply cabozantinib to the marketplace on a timely and competitive basis. These third parties may not provide services in the time required to meet our commercial timelines and objectives or to meet regulatory requirements. We may not be able to maintain or renew our arrangements with third parties, or enter into new arrangements, on acceptable terms, or at all. Third parties could terminate or decline to renew our arrangements based on their own business priorities. If we are unable to contract for these third-party services related to the distribution of cabozantinib on acceptable terms, our commercialization efforts and those of our collaboration partners may be delayed or otherwise adversely affected, which could have material adverse impact on our business, financial condition, results of operations and prospects.

We are subject to certain healthcare laws, regulation and enforcement; our failure to comply with those laws could have a material adverse effect on our results of operations and financial condition.*

We are subject to certain healthcare laws and regulations and enforcement by the federal government and the states in which we conduct our business. Should our compliance controls prove ineffective at preventing or mitigating the risk and impact of improper conduct, the laws that may affect our ability to operate include, without limitation:

the federal Anti-Kickback Statute, or AKS, which governs our business activities, including our marketing practices, educational programs, pricing policies, and relationships with healthcare providers or other entities. The AKS prohibits, among other things, persons and entities from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs. Remuneration is not defined in the AKS and has been broadly interpreted to include anything of value, including for example, gifts, discounts, coupons, the furnishing of supplies or equipment, credit arrangements, payments of cash, waivers of payments, ownership interests and providing anything at less than its fair market value. The AKS has been broadly interpreted to apply to manufacturer arrangements with prescribers, purchasers and formulary managers, among others;

the Federal Food, Drug, and Cosmetic Act, or FDCA, and its regulations, which prohibit, among other things, the introduction or delivery for introduction into interstate commerce of any food, drug, device, or cosmetic that is adulterated or misbranded;

federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payers that are false or fraudulent, or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;

~~federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;~~

the Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and their implementing regulations, which impose certain requirements relating to the privacy, security and transmission of individually identifiable health information;

state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws, which may apply to items or services reimbursed by any third-party payer, including commercial insurers, and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts;

~~the Foreign Corrupt Practices Act, a U.S. law which regulates certain financial relationships with foreign government officials (which could include, for example, certain medical professionals);~~

~~federal and state consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers;~~

federal and state government price reporting laws that require us to calculate and report complex pricing metrics to government programs, where such reported prices may be used in the calculation of reimbursement and/or discounts on our marketed drugs, as well as certain state and municipal government price reporting laws that require us to provide justifications where drug prices exceed a certain price increase threshold (and participation in these programs and compliance with the applicable requirements may subject us to potentially significant discounts on our products, increased infrastructure costs, and could potentially affect our ability to offer certain marketplace discounts);

federal and state financial transparency laws, which generally require certain types of expenditures in the U.S. to be tracked and reported (and compliance with such requirements may require investment in infrastructure to ensure that tracking is performed properly, and some of these laws result in the public disclosure of various types of payments and relationships with healthcare providers and healthcare entities, which could potentially have a negative effect on our business and/or increase enforcement scrutiny of our activities);

proposals by state legislatures and regulators to impose caps on the amount that pharmaceutical manufacturers may compensate healthcare providers for certain services (which could potentially restrict, or increase enforcement scrutiny with respect to, certain of our activities); and

federal and state healthcare fraud and abuse laws, FDA rules and regulations, as well as false claims laws, including the civil False Claims Act, which govern certain marketing practices, including off-label promotion.

If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we, or our officers or employees, may be subject to penalties, including administrative civil and criminal penalties, damages, fines, regulatory penalties, the curtailment or restructuring of our operations, exclusion from participation in Medicare, Medicaid and other federal and state healthcare programs, reputational harm, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement, any of which would adversely affect our ability to sell our products and operate our business and also adversely affect our financial results. Of particular concern are suits filed under the civil False Claims Act, known as “~~qui tam~~” actions, which can be brought by any individual on behalf of the government. Such individuals, commonly known as “whistleblowers,” may potentially then share in amounts paid by the entity to the government in fines or settlement. The filing of ~~qui tam~~ actions has caused a number of pharmaceutical, medical device and other healthcare companies to have to defend civil False Claims Act actions. When an entity is determined to have violated the civil False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties for each separate false claim. Defending against any such actions can be costly, time-consuming and may require significant financial and personnel resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired.

The legislative and regulatory landscape for privacy and data protection continues to evolve, and there has been an increasing amount of focus on privacy and data protection issues with the potential to affect our business, including state security breach notification laws, state health information privacy laws and federal and state consumer protection laws,

govern the collection, use and disclosure of personal information. In addition, most healthcare providers who are expected to prescribe our products and from whom we obtain patient health information are subject to privacy and security requirements under HIPAA. Although we are not directly subject to HIPAA, we could be subject to criminal penalties if we knowingly obtain individually identifiable health information from a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA. Other countries also have, or are developing, laws governing the collection, use and transmission of personal information. For example, the EU Data Privacy Directive (95/46/EC), which will be replaced on May 28, 2018 by the more restrictive General Data Protection Regulation (Regulation (EU) 2016/679) and the Swiss Federal Act on Data Protection, regulate the processing of personal data within the European Union and between countries in the European Union and countries outside of the European Union, including the U.S. Failure to provide adequate privacy protections and maintain compliance with the new EU-U.S. Privacy Shield framework, which will replace the previous safe harbor mechanisms, could jeopardize business transactions across borders and result in significant penalties, These laws could create liability for us or increase our cost of doing business.

~~If we are unable to obtain both adequate coverage and adequate reimbursement from third-party payers for CABOMETYX or COMETRIQ, our revenues and prospects for profitability will suffer.~~

Our ability to commercialize CABOMETYX or COMETRIQ successfully is highly dependent on the extent to which coverage and reimbursement is, and will be, available from third-party payers, including governmental payers, such as Medicare and Medicaid, and private health insurers. Patients may not be capable of paying for CABOMETYX or COMETRIQ themselves and may rely on third-party payers to pay for, or subsidize, the costs of their medications, among other medical costs. If third-party payers do not provide coverage or reimbursement for CABOMETYX or COMETRIQ, our revenues and prospects for profitability will suffer. In addition, even if third-party payers provide some coverage or reimbursement for CABOMETYX or COMETRIQ, the availability of such coverage or reimbursement for prescription drugs under private health insurance and managed care plans, which often varies based on the type of contract or plan purchased, may not be sufficient for patients to afford cabozantinib. There has been negative publicity regarding, and increasing legislative and enforcement interest in the U.S. with respect to, drug pricing and the use of specialty pharmacies, which may result in physicians being less willing to participate in our patient access programs and thereby limit our ability to increase patient access and adoption of cabozantinib. Specifically, there have been several recent U.S. Congressional inquiries and proposed bills designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the price of drugs under Medicare, and reform government program reimbursement methodologies for drugs. If future legislation were to impose direct governmental price controls and access restrictions, it could have a significant adverse impact on our business and financial results.

In addition, in some foreign countries, particularly in the European Union, the pricing of prescription pharmaceuticals is subject to governmental control under the respective national health system. In these countries, price negotiations with governmental authorities or payers can take six to twelve months or longer after marketing authorization is granted for a product, which has the potential to substantially delay broad availability of the product in some of those countries. To obtain reimbursement and/or pricing approval in some countries, we and our collaboration partner, Ipsen, may be required to conduct a study that seeks to establish the cost effectiveness of CABOMETYX compared with other available established therapies to support health technology appraisal. The conduct of such a study could be expensive and result in delays in the commercialization of CABOMETYX. Third-party payers are challenging the prices charged for medicinal products and services, and many third-party payers limit reimbursement for newly-approved health care products. In particular, third-party payers may limit the indications for which they will reimburse patients who use CABOMETYX or COMETRIQ. Cost-control initiatives could decrease the price we and our collaboration partner, Ipsen, might establish for CABOMETYX, which would result in lower license revenues to us.

Current healthcare laws and regulations and future legislative or regulatory reforms to the healthcare system may affect our ability to sell CABOMETYX and COMETRIQ profitably.*

The U.S. and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell CABOMETYX and COMETRIQ profitably. Among policy makers and payers in the U.S. and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the U.S., the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.

~~Since its enactment, there have been judicial and Congressional challenges to numerous provisions of the Affordable Care Act,as well as recent efforts by the Trump administration to repeal or replace certain aspects of the~~

Affordable Care Act. Since January 2017, President Trump has signed two Executive Orders designed to delay the implementation of any certain provisions of the Affordable Care Act or otherwise circumvent some of the requirements for health insurance mandated by the Affordable Care Act. The Trump administration has also announced that it will discontinue the payment of cost-sharing reduction (CSR) payments to insurance companies until Congress approves the appropriation of funds for the CSR payments. The loss of the CSR payments is expected to increase premiums on certain policies issued by qualified health plans under the Affordable Care Act. A bipartisan bill to appropriate funds for CSR payments has been introduced in the Senate, but the future of that bill is uncertain. Further, each chamber of Congress has put forth multiple bills this year designed to repeal or repeal and replace portions of the Affordable Care Act. Although none of these measures has been enacted by Congress to date, Congress may consider other legislation to repeal and replace elements of the Affordable Care Act. Moreover, certain politicians, including the President, have announced plans to regulate the prices of pharmaceutical products. Congress has also signaled an intent to address pharmaceutical pricing, with Senate hearings to examine the cost of prescription drugs held on June 13 and October 17, 2017. Federal legislators have proposed legislation that would require pharmaceutical manufacturers to report price increases and provide a public justification for increases that exceed given benchmarks and authorize the U.S. Department of Health and Human Services to negotiate the price of Part D prescription drugs. Other proposals would allow drug importation from Canada and potentially other countries. We cannot know what form any such measures may take or the market’s perception of how such proposals and provisions would affect us. Any reduction in reimbursement from government programs may result in a similar reduction in payments from private payers. The implementation of cost containment measures or other healthcare reforms may limit our ability to generate revenue or commercialize our current products and/or those for which we may receive regulatory approval in the future.

In August 2017, President Trump signed the FDA Reauthorization Act of 2017, which will reauthorize the FDA user fee programs for prescription drugs, generic drugs, medical devices, and biosimilars, under which manufacturers of such products partially pay for the FDA’s pre-market review of their product candidates. The legislation includes, ~~inter alia,~~ measures to expedite the development and approval of generic products, where generic competition is lacking even in the absence of exclusivities or listed patents. The FDA has also released a Drug Competition Action Plan, which proposes actions to broaden access to generic drugs and lower consumers’ health care costs by, among other things, improving the efficiency of the generic drug approval process and supporting the development of complex generic drugs. We cannot predict what form such regulatory actions may take and how they could affect us.

As a result of the overall trend towards cost-effectiveness criteria and managed healthcare in the U.S., third-party payers are increasingly attempting to contain healthcare costs by limiting both coverage and the level of reimbursement of new drugs. These entities could refuse or limit coverage for CABOMETYX and COMETRIQ, such as by using tiered reimbursement, which would adversely affect demand for CABOMETYX and COMETRIQ. They may also refuse to provide coverage for uses of CABOMETYX and COMETRIQ for medical indications other than those for which the FDA has granted market approval. As a result, significant uncertainty exists as to whether and how much third-party payers will cover newly approved drugs, which in turn will put pressure on the pricing of drugs. Due to the volatility in the current economic and market dynamics, we are unable to predict the impact of any unforeseen or unknown legislative, regulatory, third-party payer or policy actions, which may include cost containment and healthcare reform measures. Such policy actions could have a material adverse impact on our revenues and prospects for profitability.Products

Pricing for pharmaceutical products in the U.S. has come under increasing attention and scrutiny by federal and state governments, legislative bodies and enforcement agencies. ~~These activities~~Initiatives arising from this scrutiny may result in ~~actions~~changes that have the effect of reducing our revenue or harming our business or reputation.*

~~Many companies in our industry have received a governmental request~~There continue to be U.S. Congressional inquiries, hearings and proposed and enacted federal legislation and rules, as well as executive orders and sub-regulatory guidance, designed to, among other things: reevaluate, reduce or limit the prices of drugs and make them more affordable for ~~documents~~patients; implement additional data collection and ~~information relating to~~transparency reporting regarding drug pricing, rebates, fees and ~~patient support programs. We~~other remuneration provided by drug manufacturers; revise rules associated with the calculation of average manufacturer price and best price under Medicaid and make other changes to the Medicaid Drug Rebate Program (MDRP), including through a recent Centers for Medicare & Medicaid Services (CMS)-proposed rulemaking for this program, that could ~~receive~~significantly increase manufacturer rebate liability; eliminate the Anti-Kickback Statute (AKS) discount safe harbor protection for manufacturer rebate arrangements with pharmacy benefit managers and Medicare Part D plan sponsors; and create new AKS safe harbors applicable to certain point-of-sale discounts to patients and fixed fee administrative fee payment arrangements with pharmacy benefit managers. For instance in August 2022, President Biden signed the Inflation Reduction Act of 2022 (Inflation Reduction Act), which among other things: allows for the CMS to establish the prices of certain single-source drugs and biotherapeutics reimbursed under Medicare Part B and Part D (the Medicare Drug Price Negotiation Program); subjects drug manufacturers to potential civil monetary penalties and a ~~similar request,~~significant excise tax for offering a price that is not equal to or less than the government-imposed “maximum fair price” under the law; imposes Medicare rebates for certain Part B and Part D drugs where relevant pricing metrics associated with the products increase faster than inflation; and redesigns the funding and benefit structure of the Medicare Part D program, potentially increasing manufacturer liability while capping annual out-of-pocket drug expenses for Medicare beneficiaries. These provisions started taking effect incrementally in late 2022 and currently are subject to various legal challenges. As of the date of this report, for example, CMS has begun to implement aspects of the Inflation Reduction Act and has released initial guidance addressing the Medicare Part B and Medicare Part D inflation rebate provisions of the Inflation Reduction Act. These provisions generally require manufacturers of Medicare Part B and Part D rebatable drugs to pay inflation rebates to the Medicare program if pricing metrics associated with their products increase faster than the rate of inflation. In addition, in March 2023, CMS released initial guidance setting forth the requirements

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and procedures for implementing the Medicare Drug Price Negotiation Program for the first round of drug pricing evaluations, which ~~would require us to incur significant expense~~will occur in 2023 and 2024 and result in ~~distraction for our management team. Additionally,~~prices effective in 2026. Among other things, the initial guidance specifies how CMS intends to identify selected drugs, the ~~extent there are findings, or even allegations, of improper~~factors it may consider in establishing drug prices, how it may conduct on the part of the company, such findings could further harm our business, reputation and/or prospects. It is possible that such inquiries could result in negative publicity or other negative actions that could harm our reputation; changes in our product pricing and distribution strategies; reduced demand for our approved products and/or reduced reimbursement of approved products, including by federal health care programs such as Medicare and Medicaid and state health care programs.

~~In addition, the Trump Administration has indicated interest in taking measures pertaining to~~ drug pricing ~~including potential proposals relating to Medicare price negotiations, importation~~evaluation process and what requirements may be set for manufacturers of drugs from other countries and facilitating value-based arrangements between manufacturers and payers. At this time, it is unclear whether any of these proposals will be pursued and how they would impact our products or our future product candidates.

State and local governments continue to consider prescription drug pricing transparency proposals. In October 2017, California Governor Jerry Brown signed legislation requiring pharmaceutical manufacturers to report certain price increases. We will review the specific provisions of this new law to assess howselected drugs; CMS anticipates it will impact public perception or how it might otherwise affect us. Additionally, Ohio voters will consider a ballot initiative on November 7, 2017, which would require state agencies to pay no more for prescription drugs than the price paid by the U.S. Department of Veterans Affairs. We cannot predict the outcome of this ballot initiative, the market’s perception or the potential impact on us.

issue revised guidance later in 2023. Our ~~competitors~~revenues may ~~develop products and technologies that impair the value of cabozantinib, cobimetinib and any future product candidates.~~

The pharmaceutical, biopharmaceutical and biotechnology industries are highly diversified and are characterized by rapid technological change. In particular, the area of novel oncology therapies is a rapidly evolving and competitive field. Specifically, the indication of advanced RCC is highly competitive and several novel therapies and combinations of therapies are in advanced stages of clinical development in this indication, and may compete with or displace cabozantinib. We face, and will continue to face, intense competition from biotechnology, biopharmaceutical and pharmaceutical companies, as well as academic research institutions, clinical reference laboratories and government agencies that are pursuing research activities similar to ours. Some of our competitors have entered into collaborations with leading companies within our target markets, including some of our existing collaborators. Some of our competitors are further along in the development of their products than we are. Delays in the development ofbe significantly impacted if cabozantinib or cobimetinib for the treatment of additional tumor types, for example, could allow our competitors to bring products to market before us. Our future success will depend upon our ability to maintain a competitive position with respect to technological advances and the shifting landscape of therapeutic strategy following the advent of immunotherapy. Our products may become less marketable if we are unable to successfully adapt our development strategy to address the likelihood that this new approach to treating cancer with immuno-oncology agents will become prevalent in indications for which our products are approved, most notably advanced RCC, and in additional indications where we may seek regulatory approval. Furthermore, the complexities of such a strategy has and may continue to require collaboration with some of our competitors.

The markets for which we intend to pursue regulatory approval of cabozantinib and for which Roche and Genentech intend to pursue regulatory approval for cobimetinib are highly competitive. Further, our competitors may be more effective at using their technologies to develop commercial products. Many of the organizations competing with us have greater capital resources, larger research and development staff and facilities, more experience in obtaining regulatory approvals and more extensive product manufacturing and commercial capabilities than we do. As a result, our competitors may be able to more easily develop technologies and products that would render our technologies and products, and those of our collaborators, obsolete and noncompetitive. There may also be drug candidates of which we are not aware at an earlier stage of development that may compete with cabozantinib, cobimetinib, and our other product ~~candidates.~~

~~If competitors use litigation~~candidates are eventually selected for evaluation under this program (including based on a determination that certain exceptions to the program do not apply to our products, such as the “Small Biotech Exception”). Furthermore, in May 2023, CMS released draft guidance on the Medicare Part D Manufacturer Discount Program, and ~~regulatory means~~while the program will include a phase-in of the discount for certain smaller manufacturers (known as “specified manufacturers” and “specified small manufacturers”), it will ultimately require increases in manufacturer contributions towards reducing patient out-of-pocket costs. Over time, the Inflation Reduction Act could reduce the revenues we are able to ~~obtain approval~~collect from sales of our products, present challenges for ~~generic versions~~payor negotiations and formulary access for our products, and increase our government discount and rebate liabilities; however, the degree of ~~cabozantinib,~~impact that the Inflation Reduction Act will ultimately have upon our business ~~will suffer.~~

~~Under~~remains unclear. In addition, we cannot know the ~~FDCA, the FDA can approve an Abbreviated New Drug Application,~~final form or ~~ANDA, for a generic version~~timing of ~~a branded drug without the applicant undertaking the human clinical testing necessary to obtain approval to market a new drug. The FDA can also approve a 505(b)(2) NDA that relies~~any other legislative, regulatory and/or administrative measures, and some of these pending and enacted policy changes, if implemented as currently proposed, would likely have significant and far-reaching impacts on the ~~agency’s findings of safety and/or effectiveness for~~biopharmaceutical industry and therefore likely also have a ~~previously approved drug. The filing of an ANDA or 505(b)(2) NDA with respect to cabozantinib could have an~~material adverse impact on our stock price. Moreover, if any such ANDAs or 505(b)(2) NDAs were to be approved and the patents covering cabozantinib were not upheld in litigation, or if a generic competitor is found not to infringe these patents, the resulting generic competition would negatively affect our business, financial condition and results of operations.

At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biotherapeutic product pricing, including restrictions on pricing or reimbursement at the state government level, limitations on discounts to patients, marketing cost disclosure and transparency measures, and, in some cases, policies to encourage importation from other countries (subject to federal approval) and bulk purchasing, including the National Medicaid Pooling Initiative. In ~~this regard, generic equivalents,~~particular, the obligation to provide notices of price increases to purchasers under laws such as California’s SB-17 may influence customer ordering patterns for CABOMETYX and COMETRIQ, which ~~must meet~~in turn may increase the same quality standards as the branded drugs, would be significantly less costly than ours to bring to market. Companies that produce generic equivalents are generally able to offer their products at lower prices. Thus, regardless of the regulatory approval pathway, after the introduction of a generic competitor, a significant percentage of the sales of any branded product are typically lost to the generic product.

Clinical testing of product candidates is a lengthy, costly, complex and uncertain process and may fail to demonstrate safety and efficacy.*

Clinical trials are inherently risky and may reveal that a product candidate, even if it is approved for other indications, is ineffective or has an unacceptable safety profile that may significantly decrease the likelihood of regulatory approval in a new indication. For example, COMET-1 and COMET-2, our two phase 3 pivotal trials of cabozantinib in metastatic castration-resistant prostate cancer, or mCRPC, failed to meet their respective primary endpoints of

demonstrating a statistically significant increase in OS for patients treated with cabozantinib as compared to prednisone and to demonstrate improvement in pain response for patients treated with cabozantinib as compared to mitoxantrone/prednisone. Based on the outcome of the COMET trials, we deprioritized the clinical development of cabozantinib in mCRPC.

The results of preliminary studies do not necessarily predict clinical or commercial success, and later-stage clinical trials may fail to confirm the results observed in earlier-stage trials or preliminary studies. Although we have established timelines for manufacturing and clinical developmentvolatility of our ~~product candidates based on existing knowledge of our compounds in development and industry metrics, we may not be able to meet those timelines.~~

~~We may experience numerous unforeseen events, during or~~revenues as a ~~result~~reflection of ~~clinical testing, that could delay or prevent commercialization~~changes in inventory volumes. Furthermore, adoption of ~~our product candidates, including:~~

~~lack of efficacy or harmful side effects;~~

~~negative or inconclusive clinical trial results may require us to conduct further testing or to abandon projects that we had expected to be promising;~~

~~our competitors may discover or commercialize other compounds or therapies that show significantly improved safety or efficacy compared to our product candidates;~~

~~our inability to identify and maintain a sufficient number of trial sites, many of which may already be engaged in other clinical trial programs;~~

~~patient registration or enrollment in our clinical testing may be lower than we anticipate, resulting in the delay or cancellation of clinical testing;~~

~~failure by our collaborators to supply us on a timely basis with the product required for a combination trial;~~

~~failure of our third-party contract research organization or investigators to satisfy their contractual obligations, including deviating from trial protocol; and~~

regulators or institutional review boards may withhold authorization to commence or conduct clinical trials of a product candidate, or delay, suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or their determination that participating patients are being exposed to unacceptable health risks.

~~If we were to have significant delays in or termination of our clinical testing of our product candidates as a result of any of the events described above or otherwise, our expenses could increase~~these drug pricing transparency regulations, and our ~~ability to generate revenues could be impaired, either~~associated compliance obligations, may increase our general and administrative costs and/or diminish our revenues. Implementation of ~~which could adversely impact our financial results.~~

Wethese federal and/or state cost-containment measures or other healthcare reforms may not be able to rapidly or effectively continue the further development of our product candidates or meet current or future requirements of the FDA or regulatory authorities in other jurisdictions, including those identified based on our discussions with the FDA or such other regulatory authorities. Our planned clinical trials may not begin on time, or at all, may not be completed on schedule, or at all, may not be sufficient for registration of our product candidates or may not result in an approvable product.

Completion of clinical trials may take several years or more, but the length of time generally varies substantially according to the type, complexity, novelty and intended use of the product candidate. The duration and the cost of clinical trials may vary significantly over the life of a project as a result of factors relating to the clinical trial, including, among others:

~~the number of patients who ultimately participate in the clinical trial;~~

~~the duration of patient follow-up that is appropriate in view of the results or required by regulatory authorities;~~

~~the number of clinical sites included in the trials; and~~

~~the length of time required to enroll suitable patient subjects.~~

~~Any delay could~~ limit our ability to generate ~~revenues, cause us~~product revenue or commercialize our products, and in the case of drug pricing transparency regulations, may result in fluctuations in our results of operations.

Risks Related to ~~incur additional expense~~Growth of Our Product Portfolio and cause the market price of our common stock to decline significantly. Our partners under our collaboration agreements may experience similar risks with respect to the compounds we have out-licensed to them. If any of the events described above were to occur with such programs or compounds, the likelihood of receipt of milestonesResearch and ~~royalties under such collaboration agreements could decrease.~~

Development

The regulatory and pricing approval processes of the FDA and comparable foreign regulatory authorities are lengthy, uncertain and ~~uncertain,~~subject to change, and may not result in regulatory and pricing approvals for additional cabozantinib indications or for our other product candidates, which could ~~adversely affect~~have a material adverse impact on our ~~business.~~business, financial condition and results of operations.

The activities associated with the research, development and commercialization of the cabozantinib franchise, zanzalintinib and our ~~products and~~other product candidates are subject to extensive regulation by the FDA and other regulatory agencies in the U.S. ~~and~~, as well as by comparable regulatory authorities in other ~~countries. We have only limited experience in preparing and filing the applications necessary to gain regulatory approvals.~~territories. The ~~process~~processes of obtaining regulatory and pricing approvals in the U.S. and other foreign jurisdictions is expensive and often takes many years, if approval is obtained at all, and they can vary substantially based upon the type, complexity and novelty of the product candidates involved. For example, before an NDA or sNDA can be submitted to the FDA, or a marketing authorization application to the European Medicines Agency or any application or submission to comparable regulatory authorities in other jurisdictions, the product candidate must undergo extensive clinical trials, which can take many years and require substantial expenditures.

Any clinical trial may fail to produce results satisfactory to the FDA or regulatory authorities in other jurisdictions. For example, the FDA could determine that the design of a clinical trial is inadequate to produce reliable results. The regulatory process also requires preclinical testing, and data obtained from preclinical and clinical activities are susceptible to varying interpretations. The FDA has substantial discretion in the approval process and may refuse to approve any NDA or sNDA or decide that our data is insufficient for approval and require additional preclinical, clinical or other studies. For example, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent regulatory approval of cabozantinib for any individual, additional indications.

In addition, we may encounter delays or rejections ~~may be encountered~~ based upon changes in ~~regulatory~~ policy, ~~for product approval during the period of product development and regulatory agency review,~~ which ~~may~~could cause delays in the approval or rejection of an application for cabozantinib or for zanzalintinib or our other product candidates. For example, the FDA launched Project Optimus in 2021 as an initiative to reform the dose optimization and dose selection paradigm in oncology drug development, which was driven by the FDA’s concerns that the current paradigm for dose selection may result in doses and schedules of molecularly targeted therapies that are inadequately characterized before initiating pivotal trials. Through collaboration with the biopharmaceutical industry, academia and other stakeholders, the FDA’s goal for this initiative is to advance an oncology dose-finding and dose optimization paradigm that emphasizes dose selections that maximize efficacy as well as safety and tolerability. In support of this initiative, the FDA may request sponsors of oncology product candidates to conduct dose optimization studies pre- or post-approval, and the FDA also continues to develop and finalize guidance

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documents and implement initiatives regarding the development and clinical research of oncology product candidates. In January 2023, the FDA issued Draft Guidance for Industry, Optimizing the Dosage of Human Prescription Drugs and Biological Products for the Treatment of Oncologic Diseases, intended to assist sponsors in identifying the optimal dosages for these products during clinical development and prior to submitting an application for approval for a new indication and usage. In March 2023, the FDA issued another Draft Guidance for Industry, Clinical Trial Considerations to Support Accelerated Approval of Oncology Therapeutics, intended to provide recommendations to sponsors of anti-cancer drugs or biological products on considerations for designing trials intended to support accelerated approval.

Recently, in part due to questions raised by the process underlying the approval of an Alzheimer’s disease drug,government authorities and other stakeholders have been scrutinizing the accelerated approval pathway, with some stakeholders advocating for reforms. Even prior to this, the FDA had held Oncologic Drugs Advisory Committee meetings to discuss accelerated approvals for which confirmatory trials have not verified clinical benefit. Such scrutiny, among other factors, has resulted in voluntary withdrawals of certain products and indications approved on an accelerated basis. Section 3210 of the Food and Drug Omnibus Reform Act of 2022 (incorporated in the 2023 Appropriations Act) revised the accelerated approval pathway. Although this legislation did not change the standard for accelerated approval, it, among other things: requires the FDA to specify the conditions for required post-marketing trials; permits the FDA to require such trials to be underway prior to approval, or within a specific period after approval; requires sponsors to provide reports on post-marketing trial progress no later than 180 days after approval and every 180 days thereafter until such trials are completed; makes the failure to conduct required post-marketing trials with due diligence and the failure to submit the required reports prohibited acts; and details procedures the FDA must follow to withdraw an accelerated approval on an expedited basis. While it is not clear at this time how these legislative and regulatory initiatives will affect our plans to pursue accelerated approval for one or more of our product ~~candidates.~~candidates, these developments may have a material adverse impact on our business, financial condition and results of operations.

Even if the FDA or a comparable authority in another jurisdiction ~~approves~~grants an accelerated approval for cabozantinib ~~for~~in one or more new indications ~~beyond advanced RCC and MTC,~~ or for one of our other product candidates, ~~the~~including zanzalintinib, such accelerated approval may be limited, imposing significant restrictions on the indicated uses, conditions for use, labeling, distribution, ~~advertising, promotion, marketing~~ and/or production of the product and could impose ~~ongoing~~ requirements for ~~post-approval~~post-marketing studies, including additional research and ~~development~~clinical trials, all of which may result in significant expense and ~~clinical trials. For example,~~limit our and our collaboration partners’ ability to commercialize cabozantinib, zanzalintinib or our other product candidates in any new indications. Failure to complete post-marketing requirements of the FDA in connection with ~~the FDA’s~~a specific accelerated approval of COMETRIQ for the treatment of progressive, metastatic MTC, we are subject to post-marketing requirement to conduct a clinical study comparing a lower dose of cabozantinib to the approved dose of 140 mg daily cabozantinib in progressive, metastatic MTC. Failure to complete any post-marketing requirements in accordance with the timelines and conditions set forth by the FDA could significantly increase costs or delay, limit or ~~eliminate~~ultimately restrict the commercialization of ~~cabozantinib. Further, these~~cabozantinib, zanzalintinib or another product candidate in the approved indication. Regulatory agencies ~~may~~could also impose various administrative, civil or criminal sanctions for failure to comply with regulatory requirements, including withdrawal of product approval.

We Further, current or any future laws or executive orders governing FDA or foreign regulatory approval processes that may be ~~unable to expand our development pipeline, which could limit our growth and revenue potential.~~

We are committed to the discovery, development and promotion of new medicines with the potential to improve care and outcomes for people with cancer. In this regard, we have resumed internal drug discovery efforts with the goal of identifying new product candidates to advance into clinical trials. Internal discovery efforts to identify new product candidates require substantial technical, financial and human resources. These internal discovery efforts may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development for a number of reasons, including where the research methodology used may not be successful in identifying potential product candidates,enacted or where potential product candidates may, on further study, be shown to have inadequate efficacy, harmful side effects, suboptimal pharmaceutical profile or other characteristics suggesting that they are unlikely to be effective products. Apart from our internal discovery efforts, our strategy to expand our development pipeline is also dependent on our ability to successfully identify and acquire or in-license relevant product candidates. However, the in-licensing and acquisition of product candidates is a competitive area, and many other companies are pursuing the same or similar product candidates to those that we may consider attractive. Established companies, in particular, may have a competitive advantage over us due to their size, financial resources and more extensive clinical development and commercialization capabilities. Furthermore, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We may also be unable to in-license or acquire a relevant product candidate on acceptable terms that would allow us to realize an appropriate return on our investment. If we are unable to develop suitable product candidates through internal discovery effort or if we are unable to successfully obtain rights to suitable product candidates, our business, financial

condition and prospects for growth could suffer. Even if we succeed in our efforts to obtain rights to suitable product candidates, the competitive business environment may result in higher acquisition or licensing costs.

With respect to acquisitions, we may not be able to integrate the target company successfully into our existing business, maintain the key business relationships of the target, or retain key personnel of an acquired business. Furthermore, we could assume unknown or contingent liabilities or incur unanticipated expenses. Any acquisitions or investments made by us also could result in our spending significant amounts, issuing dilutive securities, assuming or incurring significant debt obligations and contingent liabilities, incurring large one-time expenses and acquiring intangible assets that could result in significant future amortization expense and significant write-offs, any of which could harm our operating results.

~~Risks Related to Our Capital Requirements and Financial Results~~

If additional capital is not available to us when we need it, we may be forced to limit the expansion of our product development programs or commercialization efforts.*

As of September 30, 2017, we had $422.3 million in cash and investments, which included $417.6 million available for operations and $4.7 million of long-term restricted investments. Our business operations grew substantially during 2016 and experienced further development during the nine months ended September 30, 2017. In order to maintain business growth and maximize the clinical and commercial opportunities for cabozantinib and cobimetinib, we plan to continue to execute on the U.S. commercialization plans for CABOMETYX, while reinvesting in our product pipeline through the continued development of cabozantinib, research and development activities, as well as through in-licensing and acquisition efforts. Our ability to execute on these business objectives will depend on many factors including but not limited to:

~~the commercial success of both CABOMETYX and COMETRIQ and the revenues we generate from those approved products;~~

~~costs associated with maintaining our expanded sales, marketing, medical affairs and distribution capabilities for CABOMETYX in advanced RCC and COMETRIQ in the approved MTC indications;~~

~~the achievement of stated regulatory and commercial milestones under the Ipsen Collaboration Agreement;~~

the commercial success of COTELLIC and the revenues generated through our share of related profits and losses for the commercialization of COTELLIC in the U.S. and royalties from COTELLIC sales outside the U.S. under our collaboration with Genentech;

~~the potential regulatory approval of cabozantinib as a treatment for patients with previously untreated advanced RCC, and in other indications, both in the U.S. and abroad;~~

~~our ability to timely prepare and submit an sNDA for cabozantinib as a treatment for patients with advanced HCC;~~

~~future clinical trial results;~~

~~our future investments in the expansion of our pipeline through drug discovery and corporate development activities;~~

~~our ability to control costs;~~

~~the cost of clinical drug supply for our clinical trials;~~

~~trends and developments in the pricing of oncologic therapeutics in the U.S. and abroad, especially in the European Union;~~

~~scientific developments in the market for oncologic therapeutics and the timing of regulatory approvals for competing oncologic therapies; and~~

~~the filing, maintenance, prosecution, defense and enforcement of patent claims and other intellectual property rights.~~

Our commitment of cash resources to CABOMETYX and the reinvestment in our product pipeline through the continued development of cabozantinib, continued research and development activities as well as through in-licensing and acquisition efforts, could require us to obtain additional capital. We may seek such additional capital through some or all of the following methods: corporate collaborations, licensing arrangements, and public or private debt or equity financings. We do not know whether additional capital will be available when needed, or that, if available, we will obtain additional capital on terms favorable to us or our stockholders. If we are unable to raise additional funds when we need them, we may

~~be required to limit the expansion of our product development programs or commercialization efforts, which~~executed could have a material adverse ~~effect~~impact on our business, ~~and growth prospects.~~

We have a history of net losses and may incur net losses in the future, and may be unable to maintain profitability.*

We have incurred net losses in every fiscal year since our inception, with the exception of the 2011 fiscal year, and as of September 30, 2017, we had an accumulated deficit of $1.9 billion. Although we reported net income of $115.7 million for the nine months ended September 30, 2017, we may not be able to maintain or increase profitability on a quarterly or annual basis and we are unable to accurately predict the extent of long-range future profits or losses. We expect to continue to spend significant additional amounts to fund the continued development and commercialization of cabozantinib. In addition, we intend to expand our product pipeline through the measured resumption of drug discovery and the evaluation of in-licensing and acquisition opportunities that align with our oncology drug expertise, which efforts could involve substantial costs. As a result, we are unable to predict the extent of any future profits or losses because we expect to continue to incur substantial operating expenses and, consequently, we will need to generate substantial revenues to maintain or increase profitability.

Since the launch of our first commercial product in January 2013, through September 30, 2017, we have generated an aggregate of $463.0 million in net product revenues, including $253.3 million for the nine months ended September 30, 2017. Other than sales of CABOMETYX and COMETRIQ, we have derived substantially all of our revenues since inception from collaborative arrangements, including upfront and milestone payments and research funding we earn from any products developed from the collaborative research. The amount of our net profits or losses will depend, in part, on: the level of sales of CABOMETYX and COMETRIQ in the U.S.; achievement of clinical, regulatory and commercial milestones and the amount of royalties, if any, from sales of CABOMETYX and COMETRIQ under the Ipsen Collaboration Agreement; our share of the net profits and losses for the commercialization of COTELLIC in the U.S. under our collaboration with Genentech; the amount of royalties from COTELLIC sales outside the U.S. under our collaboration with Genentech; other license and contract revenues; and the level of our expenses, including commercialization activities for cabozantinib and any pipeline expansion efforts.

~~We are exposed to risks related to foreign currency exchange rates.~~

Most of our foreign expenses incurred are associated with establishing and conducting clinical trials for cabozantinib. The amount of these expenses will be impacted by fluctuations in the currencies of those countries in which we conduct clinical trials. Our agreements with the foreign sites that conduct such clinical trials generally provide that payments for the services provided will be calculated in the currency of that country, and converted into U.S. dollars using various exchange rates based upon when services are rendered or the timing of invoices. When the U.S. dollar weakens against foreign currencies, the U.S. dollar value of the foreign-currency denominated expense increases, and when the U.S. dollar strengthens against these currencies, the U.S. dollar value of the foreign-currency denominated expense decreases. Consequently, changes in exchange rates may affect our financial position and results of operations.

Global credit and financial market conditions could negatively impact the value of our current portfolio of cash equivalents, short-term investments or long-term investments and our ability to meet our financing objectives.

Our cash and cash equivalents are maintained in highly liquid investments with remaining maturities of 90 days or less at the time of purchase. Our short-term and long-term investments consist primarily of readily marketable debt securities with remaining maturities of more than 90 days at the time of purchase. While as of the date of this report we are not aware of any downgrades, material losses, or other significant deterioration in the fair value of our cash equivalents, short-term investments or long-term investments since September 30, 2017, no assurance can be given that a deterioration in conditions of the global credit and financial markets would not negatively impact our current portfolio of cash equivalents or investments or our ability to meet our financing objectives.

Our financial results are impacted by management’s selection of accounting methods and certain assumptions and estimates.*

~~Our accounting policies and methods are fundamental to how we record and report our~~ financial condition and results of operations. Our management must exercise judgment in selecting and applying many of these accounting policies and methods so they comply with generally accepted accounting principles and reflect management’s judgment of the most appropriate manner to report our financial condition and results of operations. In some cases, management must select the accounting policy or method to apply from two or more alternatives, any of which may be reasonable under the

~~circumstances, yet may result in our reporting materially different results than would have been reported under a different alternative.~~

Certain accounting policies are critical to the presentation of our financial condition and results of operations. The preparation of our financial statements requires us to make significant estimates, assumptions and judgments that affect the amounts of assets, liabilities, revenues and expenses and related disclosures. Significant estimates that may be made by us include assumptions used in the determination of revenue recognition, discounts and allowances from gross revenue, inventory and stock-based compensation. Although we base our estimates and judgments on historical experience, our interpretation of existing accounting literature and on various other assumptions that we believe to be reasonable under the circumstances, if our assumptions prove to be materially incorrect, actual results may differ materially from these estimates.

In addition, future changes in financial accounting standards may cause adverse, unexpected revenue fluctuations and affect our financial position or results of operations. New pronouncements and varying interpretations of pronouncements have occurred with frequency in the past and are expected to occur again in the future and as a result we may be required to make changes in our accounting policies. Those changes could adversely affect our reported revenues and expenses, prospects for profitability or financial position. For example, in May 2014, the Financial Accounting Standards Board issued an Accounting Standards Update entitled Accounting Standards Update No. 2014-09, ~~Revenue from Contracts with Customers (Topic 606)~~, or ASU 2014-09, which will replace existing revenue recognition guidance in U.S. generally accepted accounting pronouncements when it becomes effective for us in the first quarter of fiscal year 2018. ASU 2014-09 will not have a material impact on the recognition of revenue from product sales. ASU 2014-09 will impact the timing of recognition of revenue for our Ipsen and Takeda collaboration arrangements. We expect to reclassify deferred revenue to accumulated deficit (a concept known as “lost revenue”) for amounts associated with these collaboration arrangements upon recording our transition adjustment in the first quarter of 2018, primarily due to the timing of recognition of revenue related to intellectual property licenses that we have transferred for development and commercialization of our products. Additionally, for all of our collaboration arrangements, the timing of recognition of certain of our development and regulatory milestones could change as a result of the variable consideration guidance included in ASU 2014-09. In any event, we will continue to evaluate the impact of the new standard on all of our revenues, including those mentioned above, and our preliminary assessments may change in the future based on our continuing evaluation. The application of existing or future financial accounting standards, particularly those relating to the way we account for revenues and costs, could have a significant impact on our reported results.

Risks Related to Our Relationships with Third Parties

We ~~are dependent upon~~lack our collaborations with major companies, which subjects us to a number of risks.*

~~We have established collaborations with leading pharmaceutical~~own manufacturing and biotechnology companies, including, Ipsen, Takeda, Genentech, Daiichi Sankyo, Merck (known as MSD outside of the U.S. and Canada), BMS and Sanofi for the development and ultimate commercialization of certain compounds generated from our research and development efforts. Our dependence on our relationships with existing collaborators for the development and commercialization of compounds under the collaborations subjects us to, and our dependence on future collaborators for development and commercialization of additional compounds will subject us to, a number of risks, including:

we are not able to control the amount and timing of resources that our collaborators or potential future collaborators will devote to the development or commercialization of drug candidates or to their marketing and distribution;

we are not able to control the U.S. commercial resourcing decisions made and resulting costs incurred by Genentech for cobimetinib, which costs we are obligated to share, in part, under our collaboration agreement with Genentech;

collaborators may delay clinical trials, fail to supply us on a timely basis with the product required for a combination trial, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a drug candidate, repeat or conduct new clinical trials or require a new formulation of a drug candidate for clinical testing;

disputes may arise between us and our collaborators that result in the delay or termination of the research, development or commercialization of our drug candidates, or that diminish or delay receipt of the economic benefits we are entitled to receive under the collaboration, or that result in costly litigation or arbitration that diverts management’s attention and resources;

~~collaborators may experience financial difficulties;~~

~~collaborators may not be successful in their efforts to obtain regulatory approvals in a timely manner, or at all;~~

collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our proprietary information or expose us to potential litigation;

~~collaborators may not comply with applicable healthcare regulatory laws;~~

~~business combinations or significant changes in a collaborator’s business strategy may adversely affect a collaborator’s willingness or ability to complete its obligations under any arrangement;~~

~~a collaborator could independently move forward with a competing drug candidate developed either independently or in collaboration with others, including our competitors;~~

~~we may be precluded from entering into additional collaboration arrangements with other parties in an area or field of exclusivity;~~

~~future collaborators may require us to relinquish some important rights, such as marketing and~~ distribution ~~rights; and~~

~~collaborations may be terminated or allowed to expire, which would delay, and may increase the cost of development of our drug candidates.~~

If any of these risks materialize, we may not receive collaboration revenue or otherwise realize anticipated benefits from such collaborations, our product development efforts could be delayed and our business, operating results and financial condition could be adversely affected.

If third parties upon which we rely do not perform as contractually required or expected, we may not be able to obtain regulatory approval for or commercialize cabozantinib for the treatment of additional indications beyond advanced RCC and MTC.

We do not have the ability to conduct clinical trials for cabozantinib independently, including our post-marketing commitments in connection with the approval of COMETRIQ in progressive, metastatic MTC, so we rely on independent third parties for the performance of these trials, such as the U.S. federal government (including NCI-CTEP, a department of the National Institutes of Health, with whom we have our CRADA), third-party contract research organizations, medical institutions, clinical investigators and contract laboratories to conduct our clinical trials. If these third parties do not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines, if the third parties must be replaced or if the quality or accuracy of the data they generate or provide is compromised due to their failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our preclinical development activities or clinical trials may be extended, delayed, suspended or terminated, and we may not be able to obtain regulatory approval for or commercialize cabozantinib for additional indications beyond the advanced RCC and MTC.

~~We lack the manufacturing~~ capabilities necessary for us to produce ~~cabozantinib~~materials required for certain preclinical activities and to produce and distribute our products for clinical development or for commercial sale, and ~~rely~~our reliance on third parties ~~to do so, which~~for these services subjects us to various risks.*

We do not operate our own ~~or operate~~current Good Manufacturing Practice manufacturing or distribution facilities for chemistry, manufacturing and control (CMC) development activities, preclinical, clinical or commercial production and distribution ~~of CABOMETYX~~for our current products and ~~COMETRIQ.~~new product candidates. Instead, we ~~have multiple contractual agreements in place with~~mostly rely on various third-party contract manufacturing organizations ~~who,~~to conduct these operations on our ~~behalf, manufacture clinical and commercial supplies of CABOMETYX and COMETRIQ, and will~~behalf. As our operations continue to ~~do so for the foreseeable future.~~grow in these areas, we are advancing internal CMC development laboratories to augment our external network, while continuing to expand our external manufacturing and supply chain network through additional third-party contract manufacturers, distributors and suppliers. To establish and manage ~~this~~our manufacturing network and supply chain requires a significant financial commitment, the creation of numerous third-party contractual relationships and continued oversight of these third ~~parties.~~parties to fulfill compliance with applicable regulatory requirements. Although we maintain significant resources to directly and effectively oversee the activities and relationships with the companies in our ~~supply chain effectively,~~network, we do not have direct control over their operations.

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Our third-party contract manufacturers may not be able to produce or deliver material on a timely basis or manufacture material with the required quality standards, or in the quantity required to meet our preclinical, clinical development and commercial needs and applicable regulatory requirements. Although we have not yet experienced significant production delays or seen significant impairment to our supply chain as a result of the COVID-19 pandemic or the ongoing Russo-Ukrainian War, our third-party contract manufacturers, distributors and suppliers could experience operational delays due to lack of capacity or resources, facility closures and other hardships as a result of these types of global events, which could impact our supply chain by potentially causing delays to or disruptions in the supply of our preclinical, clinical or commercial products. If our third-party contract manufacturers, distributors and suppliers do not continue to supply us with our products or product candidates in a timely fashion and in compliance with applicable quality and regulatory requirements, or if they otherwise fail or refuse to comply with their obligations to us under our ~~supply~~manufacturing, distribution and ~~manufacturing~~supply arrangements, we may not have adequate remedies for any ~~breach, and~~breach. Furthermore, their failure to supply us could impair or preclude ~~our ability to meet our~~meeting commercial or clinical product supply requirements ~~or our supply needs~~ for ~~clinical trials, including those being conducted in collaboration with~~us or our partners, which could delay ~~our~~ product development ~~efforts~~ and our business, operating results and financial condition could be adversely affected. Additionally, as part of the Ipsen Collaboration Agreement, we are responsible for the manufacturing and supply of finished, labeled cabozantinib products. Failure to meet our supply obligations under the

~~collaboration could impair Ipsen’s ability to successfully commercialize cabozantinib and generate revenues to which we are entitled under the collaboration.~~

~~Risks Related to Our Intellectual Property~~

~~Data breaches and cyber-attacks could compromise our intellectual property or other sensitive information and cause significant damage to our business and reputation.~~

In the ordinary course of our business, we collect, maintain and transmit sensitive data on our networks and systems, including our intellectual property and proprietary or confidential business information (such as research data and personal information) and confidential information with respect to our customers, clinical trial patients and our business partners. We have also outsourced significant elements of our information technology infrastructure and, as a result, third parties may or could have access to our confidential information. The secure maintenance of this information is critical to our business and reputation. We believe that companies have been increasingly subject to a wide variety of security incidents, cyber-attacks and other attempts to gain unauthorized access. These threats can come from a variety of sources, ranging in sophistication from an individual hacker to a state-sponsored attack and motive (including corporate espionage). Cyber threats may be generic, or they may be custom-crafted against our information systems. Cyber-attacks continue to become more prevalent and much harder to detect and defend against. Our network and storage applications and those of our vendors may be subject to unauthorized access by hackers or breached due to operator error, malfeasance or other system disruptions. It is often difficult to anticipate or immediately detect such incidents and the damage caused by such incidents. These data breaches and any unauthorized access or disclosure of our information or intellectual property could compromise our intellectual property and expose sensitive business information. A data security breach could also lead to public exposure of personal information of our clinical trial patients, customers and others. Cyber-attacks could cause us to incur significant remediation costs, result in product development delays, disrupt key business operations and divert attention of management and key information technology resources. Our network security and data recovery measures and those of our vendors may not be adequate to protect against such security breaches and disruptions. These incidents could also subject us to liability, expose us to significant expense and cause significant harm to our reputation and business.

~~If we are unable to adequately protect our intellectual property, third parties may be able to use our technology, which could adversely affect our ability to compete in the market.~~

Our success will depend in part upon our ability to obtain patents and maintain adequate protection of the intellectual property related to our technologies and products. The patent positions of biopharmaceutical companies, including our patent position, are generally uncertain and involve complex legal and factual questions. We will be able to protect our intellectual property rights from unauthorized use by third parties only to the extent that our technologies are covered by valid and enforceable patents or are effectively maintained as trade secrets. We will continue to apply for patents covering our technologies and products as, where and when we deem appropriate. However, these applications may be challenged or may fail to result in issued patents. Our issued patents have been and may in the future be challenged by third parties as invalid or unenforceable under U.S. or foreign laws, or they may be infringed by third parties. As a result, we are from time to time involved in the defense and enforcement of our patents or other intellectual property rights in a court of law, U.S. Patent and Trademark Office inter partes review or reexamination proceeding, foreign opposition proceeding or related legal and administrative proceeding in the U.S. and elsewhere. The costs of defending our patents or enforcing our proprietary rights in post-issuance administrative proceedings and litigation may be substantial and the outcome can be uncertain. An adverse outcome may allow third parties to use our intellectual property without a license and negatively impact our business.

In addition, because patent applications can take many years to issue, third parties may have pending applications, unknown to us, which may later result in issued patents that cover the production, manufacture, commercialization or use of our product candidates. Our existing patents and any future patents we obtain may not be sufficiently broad to prevent others from practicing our technologies or from developing competing products. Furthermore, others may independently develop similar or alternative technologies or design around our patents. In addition, our patents may be challenged or invalidated or may fail to provide us with any competitive advantages, if, for example, others were the first to invent or to file patent applications for closely related inventions.

The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the U.S., and many companies have encountered significant problems in protecting and defending such rights in foreign jurisdictions. Many countries, including certain countries in Europe, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties (for example, the patent owner has failed to “work” the invention

in that country or the third party has patented improvements). In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of the patent. Compulsory licensing of life-saving drugs is also becoming increasingly popular in developing countries either through direct legislation or international initiatives. Such compulsory licenses could be extended to include our products or product candidates, which could limit our potential revenue opportunities. Moreover, the legal systems of certain countries, particularly certain developing countries, do not favor the aggressive enforcement of patent and other intellectual property protection, which makes it difficult to stop infringement. We rely on trade secret protection for some of our confidential and proprietary information. We have taken security measures to protect our proprietary information and trade secrets, but these measures may not provide adequate protection. While we seek to protect our proprietary information by entering into confidentiality agreements with employees, collaborators and consultants, we cannot assure you that our proprietary information will not be disclosed, or that we can meaningfully protect our trade secrets. In addition, our competitors may independently develop substantially equivalent proprietary information or may otherwise gain access to our trade secrets.

~~Litigation or third-party claims of intellectual property infringement could require us to spend substantial time and money and adversely affect our ability to develop and commercialize products.~~

Our commercial success depends in part upon our ability to avoid infringing patents and proprietary rights of third parties and not to breach any licenses that we have entered into with regard to our technologies and the technologies of third parties. Other parties have filed, and in the future are likely to file, patent applications covering products and technologies that we have developed or intend to develop. If patents covering technologies required by our operations are issued to others, we may have to obtain licenses from third parties, which may not be available on commercially reasonable terms, or at all, and may require us to pay substantial royalties, grant a cross-license to some of our patents to another patent holder or redesign the formulation of a product candidate so that we do not infringe third-party patents, which may be impossible to obtain or could require substantial time and expense. Third parties may accuse us of employing their proprietary technology without authorization. In addition, third parties may obtain patents that relate to our technologies and claim that use of such technologies infringes on their patents. Regardless of their merit, such claims could require us to incur substantial costs, including the diversion of management and technical personnel, in defending ourselves against any such claims or enforcing our patents. In the event that a successful claim of infringement is brought against us, we may be required to pay damages and obtain one or more licenses from third parties. We may not be able to obtain these licenses at a reasonable cost, or at all. Defense of any lawsuit or failure to obtain any of these licenses could adversely affect our ability to develop and commercialize products.

~~We may be subject to damages resulting from claims that we, our employees or independent contractors have wrongfully used or disclosed alleged trade secrets of their former employers.~~

Many of our employees and independent contractors were previously employed at universities or other biotechnology, biopharmaceutical or pharmaceutical companies, including our competitors or potential competitors. We may be subject to claims that these employees, independent contractors or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers, or used or sought to use patent inventions belonging to their former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and divert management’s attention. If we fail in defending such claims, in addition to paying money claims, we may lose valuable intellectual property rights or personnel. A loss of key research personnel and/or their work product could hamper or prevent our ability to commercialize certain product candidates, which could severely harm our business.

~~Risks Related to Employees and Location~~

~~If we are unable to manage our growth, our business, financial condition, results of operations and prospects may be adversely affected.~~

We have experienced and expect to continue to experience growth in the number of our employees and in the scope of our operations. This growth places significant demands on our management, operational and financial resources, and our current and planned personnel, systems, procedures and controls may not be adequate to support our growth. To effectively manage our growth, we must continue to improve existing, and implement new, operational and financial systems, procedures and controls and must expand, train and manage our growing employee base, and there can be no assurance that we will effectively manage our growth without experiencing operating inefficiencies or control deficiencies. We expect that we may need to increase our management personnel to oversee our expanding operations, and recruiting

and retaining qualified individuals is difficult. In addition, the physical expansion of our operations may lead to significant costs and may divert our management and capital resources. If we are unable to manage our growth effectively, or are unsuccessful in recruiting qualified management personnel, our business, financial condition, results of operations and prospects may be adversely affected.

~~The loss of key personnel or the inability to retain and, where necessary, attract additional personnel could impair our ability to operate and expand our operations.~~

We are highly dependent upon the principal members of our management, as well as clinical, commercial and scientific staff, the loss of whose services might adversely impact the achievement of our objectives. Also, we may not have sufficient personnel to execute our business plan. Retaining and, where necessary, recruiting qualified clinical, commercial and scientific personnel will be critical to support activities related to advancing the development program for cabozantinib and our other compounds, successfully executing upon our commercialization plan for cabozantinib and our internal proprietary research and development efforts. Competition is intense for experienced clinical, commercial and scientific personnel, and we may be unable to retain or recruit such personnel with the expertise or experience necessary to allow us to successfully develop and commercialize our products. Further, all of our employees are employed “at will” and, therefore, may leave our employment at any time.

~~Our collaborations with outside scientists may be subject to restriction and change.~~

We work with scientific and clinical advisors and collaborators at academic and other institutions that assist us in our research and development efforts. These advisors and collaborators are not our employees and may have other commitments that limit their availability to us. Although these advisors and collaborators generally agree not to do competing work, if a conflict of interest between their work for us and their work for another entity arises, we may lose their services. In such a circumstance, we may lose work performed by them, and our development efforts with respect to the matters on which they were working may be significantly delayed or otherwise adversely affected. In addition, although our advisors and collaborators sign agreements not to disclose our confidential information, it is possible that valuable proprietary knowledge may become publicly known through them.

~~Our headquarters are located near known earthquake fault zones, and the occurrence of an earthquake or other disaster could damage our facilities and equipment, which could harm our operations.~~

Our headquarters are located in the San Francisco Bay Area, California and, therefore our facilities are vulnerable to damage from earthquakes. We do not carry earthquake insurance. We are also vulnerable to damage from other types of disasters, including fire, floods, power loss, communications failures, terrorism and similar events since any insurance we may maintain may not be adequate to cover our losses. If any disaster were to occur, our ability to operate our business at our facilities could be seriously, or potentially completely, impaired. In addition, the unique nature of our research activities could cause significant delays in our programs and make it difficult for us to recover from a disaster. Accordingly, an earthquake or other disaster could materially and adversely harm our ability to conduct business.

We plan to move our headquarters and may face disruption and turnover of employees.*

In 2018, we plan to move our corporate headquarters from South San Francisco, California to Alameda, California. As a result, we expect to incur additional expenses, including those related to tenant improvements to and furniture for the new corporate headquarters, as well as moving and exit costs, and may encounter disruption of operations related to the move, all of which could have an adverse effect on our financial condition and results of operations. In addition, relocation of our corporate headquarters may make it more difficult to retain certain of our employees, and any resulting need to recruit and train new employees could be disruptive to our business.

~~Facility security breaches may disrupt our operations, subject us to liability and harm our operating results.~~

Any break-in or trespass at our facilities that results in the misappropriation, theft, sabotage or any other type of security breach with respect to our proprietary and confidential information, including research or clinical data, or that results in damage to our research and development equipment and assets, could subject us to liability and have a material adverse impact on our business, ~~operating~~financial condition and results of operations. In addition, through our third-party contract manufacturers and ~~financial condition.~~data service providers, we continue to provide serialized commercial products as required to comply with the Drug Supply Chain Security Act (DSCSA) and its foreign equivalents where applicable. If our third-party contract manufacturers or data service providers fail to support our efforts to continue to comply with DSCSA and its foreign equivalents, as well as any future electronic pedigree requirements, we may face legal penalties or be restricted from selling our products.

Risks Related to ~~Environmental~~Healthcare Regulatory and ~~Product Liability~~Other Legal Compliance Matters

~~We use hazardous chemicals~~Enhanced governmental and ~~radioactive~~private scrutiny over, or investigations or litigation involving, pharmaceutical manufacturer patient assistance programs and ~~biological materials in~~donations to patient assistance foundations created by charitable organizations could negatively impact our ~~business. Any claims relating~~business practices, harm our reputation, divert the attention of management and increase our expenses.

To help patients afford our products, we have a patient assistance program and also make periodic donations to ~~improper handling, storage or disposal~~independent charitable foundations that help financially needy patients. These types of ~~these materials could~~programs are designed to provide financial assistance to patients who might otherwise be ~~time consuming~~unable to afford pharmaceuticals that they have been prescribed by their physicians and ~~costly.~~

~~Our research~~have become the subject of Congressional interest and ~~development processes involve the controlled use~~enhanced government scrutiny. The HHS Office of hazardous materials, including chemicals and radioactive and biological materials. Our operations produce hazardous waste products. We cannot eliminate the risk of accidental contamination or discharge and any resultant injury from these materials. Federal, state and local laws and regulations govern the use, manufacture, storage, handling and disposal of hazardous materials. We may face liability for any injury or contaminationInspector General established guidelines permitting pharmaceutical manufacturers to make donations to charitable organizations that results from our use or the use by third parties of these materials, and such liability may exceed our insurance coverage and our total assets. Compliance with environmental laws and regulations may be expensive, and current or future environmental regulations may impair our research, development and production efforts.

~~In addition, our collaborators may use hazardous materials in connection with our collaborative efforts.~~provide co-pay assistance to Medicare patients, provided that manufacturers meet certain specified compliance requirements. In the event ~~of a lawsuit~~we are found not to have complied with these guidelines and other laws or ~~investigation,~~regulations respecting these arrangements, we could be ~~held responsible for any injury caused~~subject to ~~persons~~significant damages, fines, penalties or ~~property~~other criminal, civil or administrative sanctions or enforcement actions. Moreover, in December 2020, the CMS finalized changes to MDRP pricing calculations regarding the provision of co-payment assistance to patients that may be impacted by private insurer accumulator programs. The portion of this rule dealing with manufacturer co-payment assistance (and related support arrangements) was challenged and vacated by a federal court in May 2022 and was not appealed. Additionally, in May 2023, CMS issued a new proposed rulemaking that would repeal the changes implemented by the court-vacated December 2020 final rule regarding co-payment assistance programs. The May 2023 CMS proposed rulemaking would, however, adopt significant new changes in the MDRP. The changes, if finalized as drafted, could ultimately have significant impacts on our Medicaid rebate liability and potential exposure to ~~or release~~penalties for MDRP participation.

We also rely on a third-party hub provider and exercise oversight to monitor patient assistance program activities. Hub providers are generally hired by manufacturers to assist patients with insurance coverage, financial assistance and treatment support after the patients receive a prescription from their healthcare professional. For manufacturers of specialty pharmaceuticals (including our marketed products), the ability to have a single point of contact for their therapies helps ensure efficient medication distribution to patients. Accordingly, our hub activities are also subject to scrutiny and may create risk for us if not conducted appropriately. A variety of entities, including independent charitable foundations and pharmaceutical manufacturers, but not including our company, have received subpoenas from the U.S. Department of Justice (DOJ) and other enforcement authorities seeking information related to their patient assistance programs and support, and certain of these ~~hazardous materials used by these parties. Further, we may be required to indemnify our collaborators against all damages~~entities have entered into costly civil settlement agreements with DOJ and other ~~liabilities arising out of our development activities or products produced in connection with these collaborations.~~

~~We face potential product liability exposure far in excess of our limited insurance coverage.~~

~~We may be held liable if any product~~enforcement authorities that include requirements to maintain complex corporate integrity agreements that impose significant reporting and other requirements. Should we or our ~~collaborators develop~~hub providers receive a subpoena or ~~commercialize causes injury or is~~other process, regardless of whether we are ultimately found ~~otherwise unsuitable during product testing, manufacturing, marketing or sale. Regardless~~to have complied with the regulations governing patient assistance programs, this type of ~~merit or eventual outcome, product liability claims~~government investigation could ~~result in decreased demand for~~negatively impact our products and product candidates, injury to our reputation, withdrawal of patients from our clinical trials, product recall, substantial monetary awards to third parties and the inability to commercialize any products that we may develop. These claims might be made directly by consumers, health care providers, pharmaceutical companies or others selling or testing our products. We have obtained limited product liability insurance coverage for our clinical trials and commercial activities for cabozantinib in the amount of $20.0 million per occurrence and $20.0 million in the aggregate. However, our insurance may not reimburse us or may not be sufficient to reimburse us for expenses or losses we may suffer. Moreover, if insurance coverage becomes more expensive, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. On occasion, juries have awarded large judgments in class action lawsuits for claims based on drugs that had unanticipated side effects. In addition, the pharmaceutical, biopharmaceutical and biotechnology industries, in general, have been subject to significant medical malpractice litigation. A successful product liability claim or series of claims brought against us couldbusiness practices, harm our reputation, divert the attention of management and ~~business and would decrease~~increase our ~~cash reserves.~~expenses.

~~Risks Related to Our Common Stock~~

~~We expect that our quarterly results~~

Table of operations will fluctuate, and this fluctuation could cause our stock price to decline, causing investor losses.*Contents

Our quarterly operating results have fluctuated in the past and are likely to fluctuate in the future. A number of factors, many of which we cannot control, could subject our operating results to volatility, including:

~~the commercial success of both CABOMETYX and COMETRIQ and the revenues we generate from those approved products;~~

~~customer ordering patterns for CABOMETYX and COMETRIQ, which may vary significantly from period to period;~~

~~the overall level of demand for CABOMETYX and COMETRIQ, including the impact of any competitive products and the duration of therapy for patients receiving CABOMETYX or COMETRIQ;~~

~~costs associated with maintaining our sales, marketing, medical affairs and distribution capabilities for CABOMETYX, COMETRIQ and COTELLIC;~~

~~our ability to obtain regulatory approval for cabozantinib as a treatment for patients with previously untreated advanced RCC;~~

~~our ability to timely prepare and submit an sNDA for cabozantinib as a treatment for patients with advanced HCC;~~

~~the achievement of stated regulatory and commercial milestones, under our collaboration agreements;~~

~~the progress and scope of other development and commercialization activities for cabozantinib and our other compounds;~~

~~future clinical trial results;~~

~~our future investments in the expansion of our pipeline through drug discovery and corporate development activities;~~

~~the inability to obtain adequate product supply for any approved drug product or inability to do so at acceptable prices;~~

~~recognition of upfront licensing or other fees or revenues;~~

~~payments of non-refundable upfront or licensing fees, or payment for cost-sharing expenses, to third parties;~~

~~the introduction of new technologies or products by our competitors;~~

~~the timing and willingness of collaborators to further develop or, if approved, commercialize our product candidates out-licensed to them;~~

~~the termination or non-renewal of existing collaborations or third-party vendor relationships;~~

~~regulatory actions with respect to our product candidates and any approved products or our competitors’ products;~~

~~disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;~~

~~the timing and amount of expenses incurred for clinical development and manufacturing of cabozantinib;~~

~~adjustments to expenses accrued in prior periods based on management’s estimates after the actual level of activity relating to such expenses becomes more certain;~~

~~the impairment of acquired goodwill and other assets;~~

~~additions and departures of key personnel;~~

~~general and industry-specific economic conditions that may affect our or our collaborators’ research and development expenditures; and~~

~~other factors described in this “Risk Factors” section.~~

Due to the possibility of fluctuations in our revenues and expenses, we believe that quarter-to-quarter comparisons of our operating results are not a good indication of our future performance. As a result, in some future quarters, our operating results may not meet the expectations of securities analysts and investors, which could result in a decline in the price of our common stock.

Our stock price may be extremely volatile.*

The trading price of our common stock has been highly volatile, and we believe the trading price of our common stock will remain highly volatile and may fluctuate substantially due to factors such as the following, many of which we cannot control:

~~adverse results or delays in our or our collaborators’ clinical trials;~~

the announcement of FDA approval or non-approval, or delays in the FDA review process, of cabozantinib or our collaborators’ product candidates or those of our competitors or actions taken by regulatory agencies with respect to our, our collaborators’ or our competitors’ clinical trials;

~~the commercial success of both CABOMETYX and COMETRIQ and the revenues we generate from those approved products;~~

the timing of achievement of our clinical, regulatory, partnering and other milestones, such as the commencement of clinical development, the completion of a clinical trial, the filing for regulatory approval or the establishment of collaborative arrangements for cabozantinib or any of our other programs or compounds;

~~actions taken by regulatory agencies with respect to cabozantinib or our clinical trials for cabozantinib;~~

~~the announcement of new products by our competitors;~~

~~quarterly variations in our or our competitors’ results of operations;~~

~~developments in our relationships with our collaborators, including the termination or modification of our agreements;~~

~~the announcement of an in-licensed product candidate or strategic acquisition;~~

~~conflicts or litigation with our collaborators;~~

~~litigation, including intellectual property infringement and product liability lawsuits, involving us;~~

~~failure to achieve operating results projected by securities analysts;~~

~~changes in earnings estimates or recommendations by securities analysts;~~

~~the entry into new financing arrangements;~~

~~developments in the biotechnology, biopharmaceutical or pharmaceutical industry;~~

~~sales of large blocks of our common stock or sales of our common stock by our executive officers, directors and significant stockholders;~~

~~departures of key personnel or board members;~~

~~FDA or international regulatory actions;~~

~~third-party coverage and reimbursement policies;~~

~~disposition of any of our technologies or compounds; and~~

~~general market, economic and political conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors.~~

These factors, as well as general economic, political and market conditions, may materially adversely affect the market price of our common stock. In addition, the stock markets in general, and the markets for biotechnology and pharmaceutical stocks in particular, have historically experienced significant volatility that has often been unrelated or disproportionate to the operating performance of particular companies. For example, negative publicity regarding drug pricing and price increases by pharmaceutical companies has negatively impacted, and may continue to negatively impact, the markets for biotechnology and pharmaceutical stocks. Likewise, as a result of the United Kingdom’s pending withdrawal from the European Union and/or significant changes in U.S. social, political, regulatory and economic conditions or in laws and policies governing foreign trade and health care spending and delivery, including the potential repeal and/or replacement of all or portions of the Patient Protection and Affordable Care Act, as amended by the Health Care Education Reconciliation Act, or greater restrictions on free trade stemming from Trump Administration policies, the financial markets could experience significant volatility that could also negatively impact the markets for biotechnology and pharmaceutical stocks. These broad market fluctuations have adversely affected and may in the future adversely affect the trading price of our common stock. Excessive volatility may continue for an extended period of time following the date of this report.

In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted. A securities class action suit against us could result in substantial costs and divert management’s attention and resources, which could have a material and adverse effect on our business.

~~Future sales of our common stock or the perception that such sales or conversions may occur, may depress our stock price.~~

A substantial number of shares of our common stock are reserved for issuance upon the exercise of stock options, upon vesting of restricted stock unit awards, upon a purchase under our employee stock purchase plan and upon exercise of certain outstanding warrants. The issuance and sale of substantial amounts of our common stock or the perception that such issuances and sales may occur, could adversely affect the market price of our common stock and impair our ability to raise capital through the sale of additional equity or equity-related securities in the future at a time and price that we deem appropriate.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent or deter attempts by our stockholders to replace or remove our current management, which could cause the market price of our common stock to decline.

Provisions in our corporate charter and bylaws may discourage, delay or prevent an acquisition of us, a change in control, or attempts by our stockholders to replace or remove members of our current Board of Directors. Because our Board of Directors is responsible for appointing the members of our management team, these provisions could in turn affect any attempt by our stockholders to replace current members of our management team. These provisions include:

~~a classified Board of Directors;~~

~~a prohibition on actions by our stockholders by written consent;~~

~~the inability of our stockholders to call special meetings of stockholders;~~

the ability of our Board of Directors to issue preferred stock without stockholder approval, which could be used to institute a “poison pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our Board of Directors;

~~limitations on the removal of directors; and~~

~~advance notice requirements for director nominations and stockholder proposals.~~

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.

~~Our ability to use net operating losses to offset future taxable income may be subject to limitations.~~

Under the Internal Revenue Code, or the Code, and similar state provisions, certain substantial changes in our ownership could result in an annual limitation on the amount of net operating loss carry-forwards that can be utilized in future years to offset future taxable income. The annual limitation may result in the expiration of net operating losses and credit carry-forwards before utilization. We concluded, as of December 31, 2016, that an ownership change, as defined under Section 382, had not occurred. However, if there is an ownership change under Section 382 of the Code in the future, we may not be able to utilize a material portion of our net operating losses, or NOLs. Furthermore, our ability to utilize our NOLs, other than the NOLs expected to be utilized to offset income in 2017, is conditioned upon our attaining profitability and generating U.S. federal taxable income. We have incurred significant cumulative operating losses since our inception; thus, we do not know whether or when we will generate the U.S. federal taxable income necessary to utilize our remaining NOLs. A full valuation allowance has been provided for the entire amount of our remaining NOLs.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~On September 11, 2017, we issued an aggregate~~In March 2023, our Board of ~~877,451 shares~~Directors authorized a stock repurchase program to acquire up to $550 million of our outstanding common stock before the end of 2023. As of June 30, 2023, approximately $423.0 million remained available for future stock repurchases pursuant to our stock repurchase program.

The timing and amount of any stock repurchases under the ~~cashless exercises~~stock repurchase program will be based on a variety of warrants issued to an accredited investor transferee that were originally issued to Deerfield Partners, L.P. and Deerfield International Master Fund, L.P. in January 2014 in connection with a financing arrangement. The warrants were exercisable for an aggregatefactors, including ongoing assessments of ~~1,000,000 shares~~the capital needs of the business, alternative investment opportunities, the market price of our common stock and ~~had an exercise price~~general market conditions. Stock repurchases under the program may be made from time to time through a variety of ~~$3.445 per share.~~methods, which may include open market purchases, block trades, accelerated stock repurchase transactions, 10b5-1 trading plans, exchange transactions, or any combination of such methods. The ~~number~~program does not obligate us to acquire any particular amount of our common stock, and the stock repurchase program may be modified, suspended or discontinued at any time without prior notice.

The following table summarizes the stock repurchase activity for the three months ended June 30, 2023 and the approximate dollar value of shares ~~issued upon exercise was net of 122,549 shares withheld to effect the cashless exercise of such warrants in accordance with their terms.~~

~~All of the shares of common stock identified above were issued~~that may yet be purchased pursuant to the exemption from the registration requirements of the Securities Act of 1933, as amended, or the Securities Act, afforded by Section 3(a)(9) of the Securities Act. We received no cash proceeds from such issuances of common stock.our stock repurchase program (in thousands, except per share data):


	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program
April 1, 2023 - April 28, 2023	—	$	—	—	$	550,000
April 29, 2023 - May 26, 2023	2,382	$	19.32	2,382	$	503,980
May 27, 2023 - June 30, 2023	4,226	$	19.16	4,226	$	423,016
Total	6,608			6,608

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~Not applicable.~~Dana T. Aftab, our Executive Vice President, Discovery and Translational Research, and Chief Scientific Officer, an officer for purposes of Section 16 of the Exchange Act, entered into a pre-arranged stock trading plan on May 25, 2023. Mr. Aftab’s trading plan provides for the sale of up to 199,256 shares of our common stock (including shares obtained from the exercise of vested stock options covered by the trading plan) between August 24, 2023 and May 23, 2025. This trading plan is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act and Exelixis’ policies regarding transactions in Exelixis securities.

During the three months ended June 30, 2023, no other directors or Section 16 officers of the Company adopted or terminated any Rule 10b5-1 trading arrangement or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.

Table of Contents

Item 6. Exhibits

Exhibit

Number

Exhibit Description

Incorporation by Reference

Filed

Herewith

Form

File Number

Exhibit/

Appendix

Reference

Filing Date

3.1

Restated Certificate of Incorporation of Exelixis, Inc.

10-Q

000-30235

3.1

8/5/2021

3.2

Amended and Restated Bylaws of Exelixis, Inc.

8-K

000-30235

3.1

3/3/2021

10.1

Exelixis, Inc. Change in Control and Severance Benefit Plan, as amended and restated

31.1

Certification of Principal Executive Officer Pursuant to Exchange Act Rules 13a-14(a) and Rule 15d-14(a)

31.2

Certification of Principal Financial Officer Pursuant to Exchange Act Rules 13a-14(a) and Rule 15d-14(a)

32.1‡

Certifications of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350

101.INS

XBRL Instance Document

The XBRL instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

‡

This certification accompanies this Quarterly Report on Form 10-Q, is not deemed filed with the SEC and is not to be incorporated by reference into any filing of Exelixis, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of this Quarterly Report on Form 10-Q), irrespective of any general incorporation language contained in such filing.

Exhibit
Number
Exhibit Description Incorporation by Reference
Filed
Herewith
Form File Number
Exhibit/
Appendix
Reference
Filing Date
3.1
Amended and Restated Certificate of Incorporation of Exelixis, Inc.
10-K 000-30235 3.1 3/10/2010

Table of Contents

Exhibit
Number
Exhibit Description Incorporation by Reference
Filed
Herewith
Form File Number
Exhibit/
Appendix
Reference
Filing Date
3.2
Certificate of Amendment of Amended and Restated Certificate of Incorporation of Exelixis, Inc.
10-K 000-30235 3.2 3/10/2010
3.3
Certificate of Amendment of Amended and Restated Certificate of Incorporation of Exelixis, Inc.
8-K 000-30235 3.1 5/25/2012
3.4
Certificate of Ownership and Merger Merging X-Ceptor Therapeutics, Inc. with and into Exelixis, Inc.
8-K 000-30235 3.1 10/15/2014
3.5
Certificate of Change of Registered Agent and/or Registered Office of Exelixis, Inc.
8-K 000-30235 3.2 10/15/2014
3.6
Amended and Restated Bylaws of Exelixis, Inc.
8-K 000-30235 3.1 12/5/2011
4.1
Specimen Common Stock Certificate.

S-1,
as amended
333-96335 4.1 4/7/2000
10.1*
Third Amendment dated July 19, 2017, to Collaboration Agreement between Exelixis, Inc. and Genentech dated December 22, 2006
10-Q 000-30235 10.5 8/2/2017
10.2**
Second Amendment dated September 14, 2017, to Collaboration and License Agreement by and between Exelixis, Inc. and Ipsen Pharma SAS
X
10.3
Exelixis, Inc. Non-Employee Director Equity Compensation Policy
X
10.4
Exelixis, Inc. Change in Control and Severance Benefit Plan, as amended and restated.
X
12.1
Statement Re Computation of Earnings to Fixed Charges
X
31.1
Certification required by Rule 13a-14(a) or Rule 15d-14(a).
X
31.2
Certification required by Rule 13a-14(a) or Rule 15d-14(a).
X
32.1‡
Certification by the Chief Executive Officer and the Chief Financial Officer of Exelixis, Inc., as required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350).
X
101.INS XBRL Instance Document X
101.SCH XBRL Taxonomy Extension Schema Document X
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document X
101.DEF XBRL Taxonomy Extension Definition Linkbase Document X
101.LAB XBRL Taxonomy Extension Labels Linkbase Document X
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document X



*	~~Confidential treatment granted for certain portions of this exhibit.~~
**	~~Confidential treatment requested for certain portions of this exhibit.~~
‡	This certification accompanies this Quarterly Report on Form 10-Q, is not deemed filed with the SEC and is not to be incorporated by reference into any filing of Exelixis, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of this Quarterly Report on Form 10-Q), irrespective of any general incorporation language contained in such filing.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


				EXELIXIS, INC.

August 1, 2023			E~~XELIXIS,~~ I~~NC.~~
By:
~~November 1, 2017~~	~~By:~~	/s/ C~~HRISTOPHER~~ ~~J. SENNER~~
~~Date~~		Christopher J. Senner
Date				Christopher J. Senner
				Executive Vice President and Chief Financial Officer
				(Duly Authorized Officer and Principal Financial and Accounting Officer)

5646



Delaware						04-3257395
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.001 Par Value per Share	EXEL	The Nasdaq Stock Market LLC



	September 30, 2017			December 31, 2016*
ASSETS
Current assets:
Cash and cash equivalents	$	149,357		$	151,686
Short-term investments	217,741			268,117
Trade and other receivables	90,005			40,444
Inventory, net	5,806			3,338
Prepaid expenses and other current assets	8,012			5,416
Total current assets	470,921			469,001
Long-term investments	50,569			55,601
Long-term restricted cash and investments	4,650			4,150
Property and equipment, net	19,256			2,071
Goodwill	63,684			63,684
Other long-term assets	692			1,232
Total assets	$	609,772		$	595,739
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	5,988		$	6,565
Accrued compensation and benefits	19,914			20,334
Accrued clinical trial liabilities	16,181			14,131
Accrued collaboration liabilities	9,137			2,046
Current portion of deferred revenue	31,377			19,665
Convertible notes	—			109,122
Term loan payable	—			80,000
Other current liabilities	26,356			16,923
Total current liabilities	108,953			268,786
Long-term portion of deferred revenue	246,092			237,094
Other long-term liabilities	16,012			541
Total liabilities	371,057			506,421
Commitments
Stockholders’ equity
Preferred stock, $0.001 par value, 10,000,000 shares authorized and no shares issued	—			—
Common stock, $0.001 par value; 400,000,000 shares authorized; issued and outstanding: 295,700,576 and 289,923,798 at September 30, 2017 and December 31, 2016, respectively	296			290
Additional paid-in capital	2,106,132			2,072,591
Accumulated other comprehensive loss	(52		)	(416		)
Accumulated deficit	(1,867,661		)	(1,983,147		)
Total stockholders’ equity	238,715			89,318
Total liabilities and stockholders’ equity	$	609,772		$	595,739



	Three Months Ended September 30,					Nine Months Ended September 30,
	2017		2016			2017			2016
Revenues:
Net product revenues	$	96,416	$	42,742		$	253,297		$	83,459
Collaboration revenues	56,094		19,452			79,108			30,414
Total revenues	152,510		62,194			332,405			113,873
Operating expenses:
Cost of goods sold	4,658		2,455			10,875			4,700
Research and development	28,543		20,256			79,967			72,166
Selling, general and administrative	38,129		32,463			113,116			103,143
Restructuring (recovery) charge	—		(244		)	(32		)	871
Total operating expenses	71,330		54,930			203,926			180,880
Income (loss) from operations	81,180		7,264			128,479			(67,007		)
Other income (expense), net:
Interest income and other, net	3,408		3,059			6,098			4,010
Interest expense	—		(7,834		)	(8,679		)	(28,575		)
Loss on extinguishment of debt	—		(13,773		)	(6,239		)	(13,773		)
Total other income (expense), net	3,408		(18,548		)	(8,820		)	(38,338		)
Income (loss) before income taxes	84,588		(11,284		)	119,659			(105,345		)
Income tax expense	3,206		—			3,921			—
Net income (loss)	$	81,382	$	(11,284	)	$	115,738		$	(105,345	)
Net income (loss) per share, basic	$	0.28	$	(0.04	)	$	0.39		$	(0.44	)
Net income (loss) per share, diluted	$	0.26	$	(0.04	)	$	0.37		$	(0.44	)
Shares used in computing net income (loss) per share, basic	294,269		256,319			292,776			238,024
Shares used in computing net income (loss) per share, diluted	312,940		256,319			311,555			238,024


	June 30, 2023		December 31, 2022




ASSETS
Current assets:
Cash and cash equivalents	$	464,480	$	501,195
Short-term investments	802,335		807,273
Trade receivables, net	232,818		214,784
Inventory	28,635		33,299

Prepaid expenses and other current assets	62,259		62,211
Total current assets	1,590,527		1,618,762
Long-term investments	838,615		756,731
Property and equipment, net	115,004		110,624
Deferred tax assets, net	231,115		231,110
Goodwill	63,684		63,684
Right-of-use assets and other	303,523		290,578
Total assets	$	3,142,468	$	3,071,489
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	25,994	$	32,667
Accrued compensation and benefits	68,213		77,158
Accrued clinical trial liabilities	59,260		65,072
Rebates and fees due to customers	52,486		50,350
Accrued collaboration liabilities	22,960		20,188

Other current liabilities	110,704		78,924
Total current liabilities	339,617		324,359
Long-term portion of deferred revenues	6,724		6,582
Long-term portion of operating lease liabilities	194,694		190,170
Other long-term liabilities	73,495		61,951
Total liabilities	614,530		583,062
Commitments and contingencies (Note 10)
Stockholders' equity:
Preferred stock, $0.001 par value, 10,000 shares authorized and no shares issued	—		—
Common stock, $0.001 par value; 400,000 shares authorized; issued and outstanding: 320,253 and 323,951 at June 30, 2023, and December 31, 2022, respectively	320		324
Additional paid-in capital	2,530,869		2,536,849
Accumulated other comprehensive loss	(14,437)		(14,521)
Retained earnings (Accumulated deficit)	11,186		(34,225)
Total stockholders' equity	2,527,938		2,488,427
Total liabilities and stockholders' equity	$	3,142,468	$	3,071,489


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


¨☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




EXELIXIS, INC.
(Exact name of registrant as specified in its charter)


		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets ~~– September 30, 2017 and December 31, 2016~~(Unaudited)	3
	Condensed Consolidated Statements of ~~Operations – Three and Nine Months Ended September 30, 2017 and 2016~~Income (Unaudited)	4
	Condensed Consolidated Statements of Comprehensive Income ~~(Loss) – Three and Nine Months Ended September 30, 2017 and 2016~~(Unaudited)	4
	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows ~~– Nine Months Ended September 30, 2017 and 2016~~(Unaudited)	57
	Notes to Condensed Consolidated Financial Statements (Unaudited)	68
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2322
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3236
Item 4.	Controls and Procedures	3337
PART II - OTHER INFORMATION
~~Item 1.~~Item1.	Legal Proceedings	3438
Item 1A.	Risk Factors	3440
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5344
Item 3.	Defaults Upon Senior Securities	5344
Item 4.	Mine Safety Disclosures	5344
Item 5.	Other Information	5344
Item 6.	Exhibits	5345
SIGNATURES


*	~~The condensed consolidated balance sheet as of December 31, 2016 has been derived from the audited financial statements as of that date.~~


~~(1)~~	Other comprehensive income (loss) consisted solely of unrealized gains or losses, net, on available-for-sale securities arising during the periods presented. There were nominal or no reclassification adjustments to net income (loss) resulting from realized gains or losses on the sale of securities and there was no income tax expense related to other comprehensive income during those periods.


	Three Months Ended June 30, 2023
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Total Stockholders' Equity
	Shares	Amount
Balance at March 31, 2023	324,985	$	325	$	2,558,297	$	(9,289)	$	5,803	$	2,555,136
Net income	—	—		—		—		81,178		81,178
Other comprehensive loss	—	—		—		(5,148)		—		(5,148)
Issuance of common stock under equity incentive and stock purchase plans	1,876	2		10,245		—		—		10,247
Stock transactions associated with taxes withheld on equity awards	—	—		(10,822)		—		—		(10,822)
Repurchases of common stock	(6,608)	(7)		(52,012)		—		(75,795)		(127,814)
Stock-based compensation	—	—		25,161		—		—		25,161
Balance at June 30, 2023	320,253	$	320	$	2,530,869	$	(14,437)	$	11,186	$	2,527,938

	Three Months Ended June 30, 2022
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance at March 31, 2022	320,268	$	320	$	2,448,130	$	(6,665)	$	(147,934)	$	2,293,851
Net income	—	—		—		—		70,672		70,672
Other comprehensive loss	—	—		—		(2,252)		—		(2,252)
Issuance of common stock under equity incentive and stock purchase plans	1,532	2		10,317		—		—		10,319
Stock transactions associated with taxes withheld on equity awards	—	—		(6,225)		—		—		(6,225)
Stock-based compensation	—	—		24,895		—		—		24,895
Balance at June 30, 2022	321,800	$	322	$	2,477,117	$	(8,917)	$	(77,262)	$	2,391,260


	Six Months Ended June 30, 2023
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Retained Earnings (Accumulated Deficit)		Total Stockholders' Equity
	Shares	Amount
Balance at December 31, 2022	323,951	$	324	$	2,536,849	$	(14,521)	$	(34,225)	$	2,488,427
Net income	—	—		—		—		121,206		121,206
Other comprehensive income	—	—		—		84		—		84
Issuance of common stock under equity incentive and stock purchase plans	2,910	3		17,324		—		—		17,327
Stock transactions associated with taxes withheld on equity awards	—	—		(13,345)		—		—		(13,345)
Repurchases of common stock	(6,608)	(7)		(52,012)		—		(75,795)		(127,814)
Stock-based compensation	—	—		42,053		—		—		42,053
Balance at June 30, 2023	320,253	$	320	$	2,530,869	$	(14,437)	$	11,186	$	2,527,938

	Six Months Ended June 30, 2022
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance at December 31, 2021	318,842	$	319	$	2,427,561	$	(758)	$	(216,507)	$	2,210,615
Net income	—	—		—		—		139,245		139,245
Other comprehensive loss	—	—		—		(8,159)		—		(8,159)
Issuance of common stock under equity incentive and stock purchase plans	2,958	3		15,829		—		—		15,832
Stock transactions associated with taxes withheld on equity awards	—	—		(11,185)		—		—		(11,185)
Stock-based compensation	—	—		44,912		—		—		44,912
Balance at June 30, 2022	321,800	$	322	$	2,477,117	$	(8,917)	$	(77,262)	$	2,391,260


	June 30, 2023		December 31, 2022
Ipsen Pharma SAS	19	%	20	%
Affiliates of McKesson Corporation	18	%	22	%
Affiliates of AmerisourceBergen Corporation	17	%	18	%
Affiliates of CVS Health Corporation	15	%	18	%
Cardinal Health, Inc.	10	%	11	%


	Chargebacks, Discounts for Prompt Payment and Other		Other Customer Credits/Fees and Co-pay Assistance		Rebates		Total
Balance at December 31, 2022	$	26,881	$	14,924	$	35,426	$	77,231
Provision related to sales made in:
Current period	197,777		27,990		88,998		314,765
Prior periods	311		(1,113)		(2,514)		(3,316)
Payments and customer credits issued	(204,736)		(27,119)		(84,106)		(315,961)
Balance at June 30, 2023	$	20,233	$	14,682	$	37,804	$	72,719


ýFORM			10-Q


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
U.S.	$	416,043	$	349,615	$	783,484	$	663,680
Europe	36,731		62,240		70,265		96,767
Japan	17,074		7,572		24,887		14,960
Total revenues	$	469,848	$	419,427	$	878,636	$	775,407


	June 30, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt securities available-for-sale:
Commercial paper	$	646,523	$	—	$	—	$	646,523
Corporate bonds	828,044		174		(12,050)		816,168
U.S. Treasury and government-sponsored enterprises	413,747		9		(6,359)		407,397
Municipal bonds	11,140		—		(140)		11,000
Total debt securities available-for-sale	1,899,454		183		(18,549)		1,881,088

Money market funds	124,270		—		—		124,270
Certificates of deposit	100,072		—		—		100,072
Total cash, cash equivalents and investments	$	2,123,796	$	183	$	(18,549)	$	2,105,430


	December 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt securities available-for-sale:
Commercial paper	$	722,018	$	—	$	—	$	722,018
Corporate bonds	810,439		541		(13,132)		797,848
U.S. Treasury and government-sponsored enterprises	338,218		48		(5,679)		332,587
Municipal bonds	16,385		—		(223)		16,162
Total debt securities available-for-sale	1,887,060		589		(19,034)		1,868,615
Cash	41		—		—		41
Money market funds	94,344		—		—		94,344
Certificates of deposit	103,681		—		—		103,681
Total cash, cash equivalents and investments	$	2,085,126	$	589	$	(19,034)	$	2,066,681


	June 30, 2023		December 31, 2022



Contract assets (1)	$	1,256	$	1,659

Contract liabilities:
Current portion (2)	$	6,801	$	7,488
Long-term portion (3)	6,724		6,582
Total contract liabilities	$	13,525	$	14,070


~~(1)~~	A portion of the accrual for losses for the three and nine months ended September 30, 2016 were reversed in December 2016 when we were relieved of our obligation to pay certain disputed costs as a result of Genentech’s unilateral change to its approach to the allocation of promotional expenses arising from commercialization of the COTELLIC plus Zelboraf combination therapy.



	Three Months Ended September 30,		Nine Months Ended September 30,
Amortization of upfront payment	$	2,830	$	7,547
Development cost reimbursements	1,193		3,301
Collaboration revenues under the Takeda Collaboration Agreement	$	4,023	$	10,848



	September 30, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Cash and cash equivalents	$	149,357	$	—	$	—		$	149,357
Short-term investments	217,805		17		(81		)	217,741
Long-term investments	50,557		41		(29		)	50,569
Long-term restricted cash and investments	4,650		—		—			4,650
Total cash and investments	$	422,369	$	58	$	(110	)	$	422,317



	December 31, 2016
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Cash and cash equivalents	$	151,686	$	—	$	—		$	151,686
Short-term investments	268,234		13		(130		)	268,117
Long-term investments	55,792		1		(192		)	55,601
Long-term restricted cash and investments	4,150		—		—			4,150
Total cash and investments	$	479,862	$	14	$	(322	)	$	479,554



	Mature within One Year		After One Year through Five Years		Fair Value
Money market funds	$	42,797	$	—	$	42,797
Commercial paper	168,738		—		168,738
Corporate bonds	136,592		50,568		187,160
U.S. Treasury and government sponsored enterprises	14,644		—		14,644
Total investments	$	362,771	$	50,568	$	413,339



	September 30, 2017			December 31, 2016
Raw materials	$	378		$	863
Work in process	2,951			2,343
Finished goods	2,856			738
Total	6,185			3,944
Less: non-current portion included in Other long-term assets	(379		)	(606		)
Inventory, net	$	5,806		$	3,338



	September 30, 2017			December 31, 2016
Computer equipment and software	$	14,242		$	13,738
Leasehold improvements	4,715			6,646
Laboratory equipment	5,836			4,310
Furniture and fixtures	1,954			2,240
Construction-in-progress	15,627			19
	42,374			26,953
Less: accumulated depreciation and amortization	(23,118		)	(24,882		)
Property and equipment, net	$	19,256		$	2,071



	September 30, 2017		December 31, 2016
Secured Convertible Notes due 2018 (“Deerfield Notes”)	$	—	$	109,122
Term loan payable	—		80,000
Total debt	$	—	$	189,122


	June 30, 2023		December 31, 2022
Maturing in one year or less	$	1,042,473	$	1,114,884
Maturing after one year through five years	838,615		753,731
Total debt securities available-for-sale	$	1,881,088	$	1,868,615



	Stock Options
	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Risk-free interest rate	1.70	%	1.07	%	1.68	%	1.09	%
Dividend yield	—	%	—	%	—	%	—	%
Expected volatility	58	%	76	%	61	%	76	%
Expected life	4.0 years		4.5 years		4.1 years		4.4 years



	ESPP
	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Risk-free interest rate	1.14	%	0.37	%	0.88	%	0.39	%
Dividend yield	—	%	—	%	—	%	—	%
Expected volatility	55	%	63	%	61	%	66	%
Expected life	6 months		6 months		6 months		6 months



	Shares		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Options outstanding at December 31, 2016	24,999,665		$	4.91
Granted	821,260		$	21.60
Exercised	(4,282,847	)	$	3.94
Forfeited	(204,525	)	$	8.14
Options outstanding at September 30, 2017	21,333,553		$	5.72	4.08 years	$	395,212
Exercisable at September 30, 2017	15,961,685		$	4.41	3.59 years	$	316,415



	Shares		Weighted Average Grant Date Fair Value Per Share		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
RSUs outstanding at December 31, 2016	2,469,791		$	8.69
Awarded	331,847		$	22.03
Vested and released	(348,294	)	$	4.63
Forfeited	(111,603	)	$	10.89
RSUs outstanding at September 30, 2017	2,341,741		$	11.08	1.55 years	$	56,740


	June 30, 2023
	Level 1		Level 2		Total
Commercial paper	$	—	$	646,523	$	646,523
Corporate bonds	—		816,168		816,168
U.S. Treasury and government-sponsored enterprises	—		407,397		407,397
Municipal bonds	—		11,000		11,000
Total debt securities available-for-sale	—		1,881,088		1,881,088
Money market funds	124,270		—		124,270
Certificates of deposit	—		100,072		100,072
Total financial assets carried at fair value	$	124,270	$	1,981,160	$	2,105,430


Fair value of Exelixis common stock on grant date	$	19.48
Expected volatility	40.26		%
Risk-free interest rate	3.75		%
Dividend yield	—		%



	Operating leases		Other financing obligations⁽¹⁾
Remainder of 2017	$	1,006	$	—
Year Ending December 31,
2018	2,802		566
2019	605		1,477
2020	630		1,685
2021	637		1,745
2022	646		1,814
Thereafter	3,465		10,441
	$	9,791	$	17,728


~~(1)~~	~~Other financing obligations includes payments related to our build-to-suit lease.~~



	Chargebacks and discounts for prompt payment			Other customer credits and co-pay assistance			Rebates			Returns			Total
Balance at December 31, 2016	$	1,802		$	794		$	2,627		$	351		$	5,574
Provision related to sales made in:
Current period	22,823			5,135			8,389			—			36,347
Prior periods	(864		)	—			584			—			(280		)
Payments and customer credits issued	(22,221		)	(4,501		)	(7,533		)	(351		)	(34,606		)
Balance at September 30, 2017	$	1,540		$	1,428		$	4,067		$	—		$	7,035