Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM10-Q

ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberMarch 29, 20232024
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 000-30235
Exelixis_Logo_RGB_2023.jpg
EXELIXIS, INC.
(Exact name of registrant as specified in its charter)

Delaware04-3257395
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number)

1851 Harbor Bay Parkway
Alameda, CA 94502
(650) 837-7000
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $.001$0.001 Par Value per ShareEXELThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant:registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days). Yes ý No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerýAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No ý
As of October 23, 2023,April 22, 2024, there were 310,974,113291,292,704 shares of the registrant’s common stock outstanding.


Table of Contents
EXELIXIS, INC.
QUARTERLY REPORT ON FORM 10-Q
INDEX
Page
Item 1.
Item 2.
Item 3.
Item 4.
Item1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
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PART I - FINANCIAL INFORMATION
Item 1. Financial StatementsStatements.
EXELIXIS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
September 30, 2023December 31, 2022 March 31, 2024December 31, 2023
ASSETSASSETS
ASSETS
ASSETS
Current assets:Current assets:
Current assets:
Current assets:
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalentsCash and cash equivalents$396,859 $501,195 
Short-term investmentsShort-term investments706,528 807,273 
Trade receivables, netTrade receivables, net248,113 214,784 
InventoryInventory24,978 33,299 
Prepaid expenses and other current assets
Prepaid expenses and other current assets
Prepaid expenses and other current assetsPrepaid expenses and other current assets66,891 62,211 
Total current assetsTotal current assets1,443,369 1,618,762 
Long-term investmentsLong-term investments811,680 756,731 
Property and equipment, netProperty and equipment, net121,039 110,624 
Deferred tax assets, netDeferred tax assets, net230,990 231,110 
GoodwillGoodwill63,684 63,684 
Right-of-use assets and otherRight-of-use assets and other306,148 290,578 
Total assetsTotal assets$2,976,910 $3,071,489 
LIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:Current liabilities:
Current liabilities:
Current liabilities:
Accounts payable
Accounts payable
Accounts payableAccounts payable$26,450 $32,667 
Accrued compensation and benefitsAccrued compensation and benefits81,398 77,158 
Accrued clinical trial liabilitiesAccrued clinical trial liabilities62,842 65,072 
Rebates and fees due to customersRebates and fees due to customers54,374 50,350 
Accrued collaboration liabilitiesAccrued collaboration liabilities27,269 20,188 
Other current liabilitiesOther current liabilities124,483 78,924 
Total current liabilitiesTotal current liabilities376,816 324,359 
Long-term portion of operating lease liabilitiesLong-term portion of operating lease liabilities190,858 190,170 
Other long-term liabilitiesOther long-term liabilities61,616 68,533 
Total liabilitiesTotal liabilities629,290 583,062 
Commitments and contingencies (Note 10)Commitments and contingencies (Note 10)Commitments and contingencies (Note 10)
Stockholders' equity:Stockholders' equity:
Preferred stock, $0.001 par value, 10,000 shares authorized and no shares issuedPreferred 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: 310,970 and 323,951 at September 30, 2023, and December 31, 2022, respectively311 324 
Preferred stock, $0.001 par value, 10,000 shares authorized and no shares issued
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: 295,032 and 302,793 at March 31, 2024, and December 31, 2023, respectively
Additional paid-in capitalAdditional paid-in capital2,487,370 2,536,849 
Accumulated other comprehensive lossAccumulated other comprehensive loss(14,012)(14,521)
Accumulated deficitAccumulated deficit(126,049)(34,225)
Total stockholders’ equityTotal stockholders’ equity2,347,620 2,488,427 
Total liabilities and stockholders' equityTotal liabilities and stockholders' equity$2,976,910 $3,071,489 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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EXELIXIS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended March 31,
2023202220232022
Revenues:Revenues:
Revenues:
Revenues:
Net product revenues
Net product revenues
Net product revenuesNet product revenues$426,497 $366,482 $1,199,543 $1,023,824 
License revenuesLicense revenues42,367 34,384 133,406 123,977 
License revenues
License revenues
Collaboration services revenues
Collaboration services revenues
Collaboration services revenuesCollaboration services revenues3,056 10,872 17,607 39,344 
Total revenuesTotal revenues471,920 411,738 1,350,556 1,187,145 
Total revenues
Total revenues
Operating expenses:
Operating expenses:
Operating expenses:Operating expenses:
Cost of goods soldCost of goods sold18,774 15,305 50,794 41,989 
Cost of goods sold
Cost of goods sold
Research and development
Research and development
Research and developmentResearch and development332,585 198,837 799,401 554,989 
Selling, general and administrativeSelling, general and administrative138,144 114,983 411,264 340,605 
Selling, general and administrative
Selling, general and administrative
Restructuring
Restructuring
Restructuring
Total operating expensesTotal operating expenses489,503 329,125 1,261,459 937,583 
Income (loss) from operations(17,583)82,613 89,097 249,562 
Total operating expenses
Total operating expenses
Income from operations
Income from operations
Income from operations
Interest incomeInterest income23,112 9,498 65,155 16,077 
Other income (expense), net289 (69)230 140 
Interest income
Interest income
Other expense, net
Other expense, net
Other expense, net
Income before income taxes
Income before income taxes
Income before income taxesIncome before income taxes5,818 92,042 154,482 265,779 
Provision for income taxesProvision for income taxes4,777 18,832 32,235 53,324 
Provision for income taxes
Provision for income taxes
Net income
Net income
Net incomeNet income$1,041 $73,210 $122,247 $212,455 
Net income per share:Net income per share:
Net income per share:
Net income per share:
Basic
Basic
BasicBasic$0.00 $0.23 $0.38 $0.66 
DilutedDiluted$0.00 $0.23 $0.38 $0.65 
Diluted
Diluted
Weighted-average common shares outstanding:
Weighted-average common shares outstanding:
Weighted-average common shares outstanding:Weighted-average common shares outstanding:
BasicBasic315,496 322,148 321,373 320,949 
Basic
Basic
Diluted
Diluted
DilutedDiluted319,247 325,066 324,277 324,420 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

EXELIXIS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
2024
Net income
Net income
Net incomeNet income$1,041 $73,210 $122,247 $212,455 
Other comprehensive income (loss):Other comprehensive income (loss):
Net unrealized gains (losses) on available-for-sale debt securities, net of tax impact of $(126), $2,457, $(121) and $4,752, respectively425 (8,621)509 (16,780)
Other comprehensive income (loss):
Other comprehensive income (loss):
Net unrealized gains (losses) on available-for-sale debt securities, net of tax impact of $433 and $(1,507), respectively
Net unrealized gains (losses) on available-for-sale debt securities, net of tax impact of $433 and $(1,507), respectively
Net unrealized gains (losses) on available-for-sale debt securities, net of tax impact of $433 and $(1,507), respectively
Comprehensive incomeComprehensive income$1,466 $64,589 $122,756 $195,675 
Comprehensive income
Comprehensive income
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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EXELIXIS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)

Three Months Ended March 31, 2024Three Months Ended March 31, 2024
Common StockCommon StockAdditional
Paid-in
Capital
Accumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders' Equity
Shares
Balance at December 31, 2023
Balance at December 31, 2023
Balance at December 31, 2023
Net income
Other comprehensive loss
Issuance of common stock under equity incentive plans
Stock transactions associated with taxes withheld on equity awards
Repurchases of common stock
Stock-based compensation
Balance at March 31, 2024
Three Months Ended September 30, 2023
Common StockAdditional
Paid-in
Capital
Accumulated Other Comprehensive LossRetained Earnings
(Accumulated Deficit)
Total Stockholders' Equity
SharesAmount
Balance at June 30, 2023320,253 $320 $2,530,869 $(14,437)$11,186 $2,527,938 
Three Months Ended March 31, 2023
Three Months Ended March 31, 2023
Three Months Ended March 31, 2023
Common StockCommon StockAdditional
Paid-in
Capital
Accumulated Other Comprehensive LossRetained Earnings (Accumulated Deficit)Total Stockholders' Equity
Shares
Balance at December 31, 2022
Balance at December 31, 2022
Balance at December 31, 2022
Net incomeNet income— — — — 1,041 1,041 
Other comprehensive incomeOther comprehensive income— — — 425 — 425 
Issuance of common stock under equity incentive plansIssuance of common stock under equity incentive plans1,052 7,089 — — 7,090 
Stock transactions associated with taxes withheld on equity awardsStock transactions associated with taxes withheld on equity awards— — (9,751)— — (9,751)
Repurchases of common stock(10,335)(10)(81,666)— (138,276)(219,952)
Stock-based compensationStock-based compensation— — 40,829 — — 40,829 
Balance at September 30, 2023310,970 $311 $2,487,370 $(14,012)$(126,049)$2,347,620 
Three Months Ended September 30, 2022
Common StockAdditional
Paid-in
Capital
Accumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders' Equity
SharesAmount
Balance at June 30, 2022321,800 $322 $2,477,117 $(8,917)$(77,262)$2,391,260 
Net income— — — — 73,210 73,210 
Other comprehensive loss— — — (8,621)— (8,621)
Issuance of common stock under equity incentive plans741 2,847 — — 2,848 
Stock transactions associated with taxes withheld on equity awards— — (4,906)— — (4,906)
Stock-based compensation— — 37,611 — — 37,611 
Balance at September 30, 2022322,541 $323 $2,512,669 $(17,538)$(4,052)$2,491,402 
Balance at March 31, 2023
Continued on next page


The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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EXELIXIS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITYCASH FLOWS
(in thousands)
(unaudited)
 Three Months Ended March 31,
20242023
Net income$37,317 $40,028 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation6,378 6,855 
Stock-based compensation19,113 16,661 
Non-cash lease expense6,764 6,731 
Acquired in-process research and development technology19,500 36,500 
Other, net9,206 (3,743)
Changes in operating assets and liabilities:
Trade receivables, net(3,170)(19,178)
Inventory1,715 (8,370)
Prepaid expenses and other assets10,075 10,372 
Accrued collaboration liabilities(3,829)(1,864)
Accounts payable and other liabilities(34,247)416 
Net cash provided by operating activities68,822 84,408 
Cash flows from investing activities:
Purchases of property, equipment and other, net(9,691)(12,024)
Acquired in-process research and development technology(8,500)(36,500)
Purchases of investments(138,468)(311,837)
Proceeds from maturities and sales of investments268,452 310,769 
Net cash provided by (used in) investing activities111,793 (49,592)
Cash flows from financing activities:
Payments for repurchases of common stock(185,375)— 
Proceeds from issuance of common stock under equity incentive plans8,315 7,143 
Taxes paid related to net share settlement of equity awards(6,988)(2,557)
Net cash provided by (used in) financing activities(184,048)4,586 
Net increase (decrease) in cash and cash equivalents(3,433)39,402 
Cash and cash equivalents at beginning of period262,994 502,677 
Cash and cash equivalents at end of period$259,561 $542,079 

Nine Months Ended September 30, 2023
Common StockAdditional
Paid-in
Capital
Accumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders' Equity
SharesAmount
Balance at December 31, 2022323,951 $324 $2,536,849 $(14,521)$(34,225)$2,488,427 
Net income— — — — 122,247 122,247 
Other comprehensive income— — — 509 — 509 
Issuance of common stock under equity incentive and stock purchase plans3,962 24,413 — — 24,417 
Stock transactions associated with taxes withheld on equity awards— — (23,096)— — (23,096)
Repurchases of common stock(16,943)(17)(133,678)— (214,071)(347,766)
Stock-based compensation— — 82,882 — — 82,882 
Balance at September 30, 2023310,970 $311 $2,487,370 $(14,012)$(126,049)$2,347,620 
Nine Months Ended September 30, 2022
Common StockAdditional
Paid-in
Capital
Accumulated Other Comprehensive LossAccumulated DeficitTotal Stockholders' Equity
SharesAmount
Balance at December 31, 2021318,842 $319 $2,427,561 $(758)$(216,507)$2,210,615 
Net income— — — — 212,455 212,455 
Other comprehensive loss— — — (16,780)— (16,780)
Issuance of common stock under equity incentive and stock purchase plans3,699 18,676 — — 18,680 
Stock transactions associated with taxes withheld on equity awards— — (16,091)— — (16,091)
Stock-based compensation— — 82,523 — — 82,523 
Balance at September 30, 2022322,541 $323 $2,512,669 $(17,538)$(4,052)$2,491,402 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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EXELIXIS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 Nine Months Ended September 30,
20232022
Net income$122,247 $212,455 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation19,191 14,929 
Stock-based compensation82,039 81,718 
Non-cash lease expense21,475 11,931 
Acquired in-process research and development technology128,500 4,500 
Other, net(12,372)2,890 
Changes in operating assets and liabilities:
Trade receivables, net(33,804)66,890 
Inventory(14,503)(9,836)
Prepaid expenses and other assets2,430 (35,166)
Accrued collaboration liabilities1,081 (64,976)
Accounts payable and other liabilities6,469 3,585 
Net cash provided by operating activities322,753 288,920 
Cash flows from investing activities:
Purchases of investments(823,847)(1,079,411)
Proceeds from maturities and sales of investments884,989 826,768 
Acquired in-process research and development technology(122,500)(8,000)
Purchases of property, equipment and other(27,334)(17,989)
Net cash used in investing activities(88,692)(278,632)
Cash flows from financing activities:
Payments for repurchases of common stock(341,082)— 
Proceeds from issuance of common stock under equity incentive and stock purchase plans24,339 18,680 
Taxes paid related to net share settlement of equity awards(23,136)(16,091)
Net cash provided by (used in) financing activities(339,879)2,589 
Net increase (decrease) in cash and cash equivalents(105,818)12,877 
Cash and cash equivalents at beginning of period502,677 663,891 
Cash and cash equivalents at end of period$396,859 $676,768 
Supplemental cash flow disclosures:
Non-cash operating activities:
Right-of-use assets obtained in exchange for lease obligations$13,612 $121,958 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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EXELIXIS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Exelixis, Inc. (Exelixis, we, our or us) is an oncology company innovating next-generation medicines and combination regimens at the forefront of cancer care. Through the commitment of our drug discovery, development and commercialization resources, we have produced four marketed pharmaceutical products, two of which are formulations of our flagship molecule, cabozantinib. We continue to evolve our product portfolio, leveraging our investments, expertise and strategic partnerships, to target an expanding range of tumor types and indications with our clinically differentiated pipeline of small molecules and biotherapeutics, including antibody-drug conjugates and other biotherapeutics.(ADCs).
Sales related to cabozantinib account for the majority of our revenues. Cabozantinib is an inhibitor of multiple tyrosine kinases including MET, AXL, VEGF receptors and RET and has been approved by the U.S. Food and Drug Administration (FDA) and in 67 other countries as of the date of this Quarterly Report on Form 10-Q:countries: as CABOMETYX® (cabozantinib) tablets for advanced renal cell carcinoma (RCC) (both alone and in combination with Bristol-Myers Squibb Company’s OPDIVO® (nivolumab))(BMS) nivolumab), for previously treated hepatocellular carcinoma (HCC) and for previously treated, radioactive iodine-refractoryiodine (RAI)-refractory differentiated thyroid cancer;cancer (DTC); and as COMETRIQ® (cabozantinib) capsules for progressive, metastatic medullary thyroid cancer. For physicians treating these types of cancer, cabozantinib has become or is becoming an important medicine in their selection of effective therapies.
The other two products resulting from our discovery efforts are: COTELLIC® (cobimetinib), an inhibitor of MEK approved as part of multiple combination regimens to treat specific forms of advanced melanoma and marketed under a collaboration with Genentech, Inc. (a member of the Roche Group) (Genentech); and MINNEBRO® (esaxerenone), an oral, non-steroidal, selective blocker of the mineralocorticoid receptor, approved for the treatment of hypertension in Japan and licensed to Daiichi Sankyo Company, Limited (Daiichi Sankyo).
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of Exelixis and those of our wholly owned subsidiaries. These entities’ functional currency is the U.S. dollar. All intercompany balances and transactions have been eliminated.
We have adopted a 52- or 53-week fiscal year policy that generally ends on the Friday closest to December 31st. Fiscal year 2024, which is a 53-week fiscal year, will end on January 3, 2025 and fiscal year 2023, which was a 52-week fiscal year, ended on December 29, 2023. For convenience, references in this report as of and for the fiscal period ended March 29, 2024, and as of and for the fiscal years ending January 3, 2025 and ended December 29, 2023 are indicated as being as of and for the period ended March 31, 2024, and the years ending December 31, 2024 and ended December 31, 2023, respectively.
The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the U.S. for interim financial information and pursuant to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In our opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of our financial statements for the periods presented have been included. Operating results for the ninethree months ended September 30, 2023March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 20232024 or for any future period. The accompanying Condensed Consolidated Financial Statements and Notes thereto should be read in conjunction with our Consolidated Financial Statements and Notes thereto for the fiscal year ended December 31, 2022,2023, included in Part II, Item 8 of our Annual Report on Form 10-K, filed with the SEC on February 7,6, 2023 (Fiscal 20222023 Form 10-K).
We have adopted a 52- or 53-week fiscal year policy that ends on the Friday closest to December 31st. Fiscal year 2023, which is a 52-week fiscal year, will end on December 29, 2023 and fiscal year 2022, which was a 52-week fiscal year, ended on December 30, 2022. For convenience, references in this report as of and for the fiscal periods ended September 29, 2023, and as of and for the fiscal years ending December 29, 2023 and ended December 30, 2022 are indicated as being as of and for the periods ended September 30, 2023, and the years ending December 31, 2023 and ended December 31, 2022, respectively.
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Segment Information
We operate in one business segment that focuses on the discovery, development and commercialization of new medicines for difficult-to-treat cancers. Our Chief Executive Officer, as the chief operating decision-maker, manages and allocates resources to our operations on a total consolidated basis. Consistent with this decision-making process, our Chief Executive Officer uses consolidated, single-segment financial information for purposes of evaluating performance, forecasting future period financial results, allocating resources and setting incentive targets.
All of our long-lived assets are located in the U.S. See “Note 2. Revenues” for enterprise-wide disclosures about product sales, of products, revenues from major customers and revenues by geographic region.
Use of Estimates
The preparation of the accompanying Condensed Consolidated Financial Statements conforms to accounting principles generally accepted in the U.S., which requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosures. On an ongoing basis, we evaluate our significant estimates. We base our estimates on historical experience and on various other market-specific and other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially from those estimates.
Reclassifications
Certain prior period amounts in the accompanying Condensed Consolidated Financial Statements have been reclassified to conform to the current period presentation. Such reclassifications did not impact previously reported total revenues, income from operations, net income, total assets, total liabilities or total stockholders’ equity.
Significant Accounting Policies
There have been no material changes to our significant accounting policies during the ninethree months ended September 30, 2023,March 31, 2024, as compared to the significant accounting policies disclosed in “Note 1. Organization and Summary of Significant Accounting Policies” of the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of our Fiscal 20222023 Form 10-K.
Recently Adopted Accounting Pronouncements
There were no new accounting pronouncements adopted by us since our filing of the Fiscal 20222023 Form 10-K, which could have a significant effect on our Condensed Consolidated Financial Statements.
Recent Accounting Pronouncements Not Yet Adopted
There were no new accounting pronouncementsIn November 2023, the Financial Accounting Standards Board (FASB) issued sinceASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which enhances the disclosures required for operating segments in our filingannual and interim consolidated financial statements. ASU 2023-07 is effective for us in our annual reporting for fiscal 2024 and for interim period reporting beginning in fiscal 2025 on a retrospective basis. Early adoption is permitted. We are currently evaluating the impact of the Fiscal 2022 Form 10-K, which could have a significant effectASU 2023-07 on our Condensed Consolidated Financial Statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances the disclosures required for income taxes in our annual consolidated financial statements. ASU 2023-09 is effective for us in our annual reporting for fiscal 2025 on a prospective basis. Early adoption and retrospective reporting are permitted. We are currently evaluating the impact of ASU 2023-09 on our Consolidated Financial Statements.
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NOTE 2. REVENUES
Revenues consisted of the following (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
2024
Product revenues:
Product revenues:
Product revenues:Product revenues:
Gross product revenuesGross product revenues$590,442 $496,141 $1,674,937 $1,427,451 
Gross product revenues
Gross product revenues
Discounts and allowances
Discounts and allowances
Discounts and allowancesDiscounts and allowances(163,945)(129,659)(475,394)(403,627)
Net product revenuesNet product revenues426,497 366,482 1,199,543 1,023,824 
Net product revenues
Net product revenues
Collaboration revenues:
Collaboration revenues:
Collaboration revenues:Collaboration revenues:
License revenuesLicense revenues42,367 34,384 133,406 123,977 
License revenues
License revenues
Collaboration services revenues
Collaboration services revenues
Collaboration services revenuesCollaboration services revenues3,056 10,872 17,607 39,344 
Total collaboration revenuesTotal collaboration revenues45,423 45,256 151,013 163,321 
Total collaboration revenues
Total collaboration revenues
Total revenuesTotal revenues$471,920 $411,738 $1,350,556 $1,187,145 
Total revenues
Total revenues
The percentage of total revenues by customer who individually accounted for 10% or more of our total revenues were as follows:
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
2024
Affiliates of AmerisourceBergen Corporation
Affiliates of AmerisourceBergen Corporation
Affiliates of AmerisourceBergen Corporation
Affiliates of McKesson Corporation
Affiliates of McKesson Corporation
Affiliates of McKesson Corporation
Affiliates of CVS Health Corporation
Affiliates of CVS Health Corporation
Affiliates of CVS Health Corporation
Accredo Health, Incorporated
Accredo Health, Incorporated
Accredo Health, Incorporated
Affiliates of Optum Specialty Pharmacy
Affiliates of Optum Specialty Pharmacy
Affiliates of Optum Specialty Pharmacy
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Affiliates of McKesson Corporation18 %18 %17 %18 %
Affiliates of AmerisourceBergen Corporation18 %18 %17 %16 %
Affiliates of CVS Health Corporation17 %19 %17 %17 %
Accredo Health, Incorporated12 %11 %12 %10 %
Affiliates of Optum Specialty Pharmacy10 %%10 %%
Ipsen Pharma SAS%%%11 %
The percentage of trade receivables by customer who individually accounted for 10% or more of our trade receivables were as follows:
September 30, 2023December 31, 2022
March 31, 2024
March 31, 2024
March 31, 2024
Affiliates of McKesson Corporation
Affiliates of McKesson Corporation
Affiliates of McKesson CorporationAffiliates of McKesson Corporation22 %22 %
Affiliates of AmerisourceBergen CorporationAffiliates of AmerisourceBergen Corporation19 %18 %
Affiliates of AmerisourceBergen Corporation
Affiliates of AmerisourceBergen Corporation
Ipsen Pharma SAS
Ipsen Pharma SAS
Ipsen Pharma SASIpsen Pharma SAS18 %20 %
Affiliates of CVS Health CorporationAffiliates of CVS Health Corporation14 %18 %
Affiliates of CVS Health Corporation
Affiliates of CVS Health Corporation
Cardinal Health, Inc.Cardinal Health, Inc.%11 %
Cardinal Health, Inc.
Cardinal Health, Inc.
RevenuesTotal revenues by geographic region were as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
2024
U.S.
U.S.
U.S.U.S.$429,605 $369,480 $1,213,089 $1,033,160 
EuropeEurope36,021 34,818 106,286 131,585 
Europe
Europe
Japan
Japan
JapanJapan6,294 7,440 31,181 22,400 
Total revenuesTotal revenues$471,920 $411,738 $1,350,556 $1,187,145 
Total revenues
Total revenues
Total revenues include net product revenues attributed to geographic regions based on the ship-to location and license and collaboration services revenues attributed to geographic regions based on the location of our collaboration partners’ headquarters.
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Net product revenues and license revenues are recorded in accordance with Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers. License revenues include the recognition of the portion of milestone payments allocated to the transfer of intellectual property licenses for which it had become probable in the current period that the milestone would be achieved and a significant reversal of revenues would not occur, as well as royalty revenues and our share of profits under our collaboration agreement with Genentech. Collaboration services revenues are recorded in accordance with ASC Topic 808, Collaborative ArrangementsArrangements.. Collaboration services revenues include the recognition of deferred revenues for the portion of upfront and milestone payments allocated to our research and development services performance obligations, development cost reimbursements earned under our collaboration agreements, product supply revenues, net of product supply costs and the royalties we paypaid on sales of products containing cabozantinib by our collaboration partners.
Net product revenues by product were as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
2024
CABOMETYX
CABOMETYX
CABOMETYXCABOMETYX$422,155 $361,385 $1,187,220 $1,003,356 
COMETRIQCOMETRIQ4,342 5,097 12,323 20,468 
COMETRIQ
COMETRIQ
Net product revenuesNet product revenues$426,497 $366,482 $1,199,543 $1,023,824 
Net product revenues
Net product revenues
Product Sales Discounts and Allowances
The activities and ending reserve balances for each significant category of discounts and allowances which(which constitute variable consideration,consideration) were as follows (in thousands):
Chargebacks, Discounts for Prompt Payment and OtherOther Customer Credits/Fees and Co-pay AssistanceRebatesTotal
Balance at December 31, 2022$26,881 $14,924 $35,426 $77,231 
Chargebacks, Discounts for Prompt Payment and Other
Chargebacks, Discounts for Prompt Payment and Other
Chargebacks, Discounts for Prompt Payment and OtherOther Customer Credits/Fees and Co-pay AssistanceRebatesTotal
Balance at December 31, 2023
Provision related to sales made in:Provision related to sales made in:
Current period
Current period
Current periodCurrent period308,103 40,923 129,922 478,948 
Prior periodsPrior periods293 (1,168)(2,679)(3,554)
Payments and customer credits issuedPayments and customer credits issued(313,660)(38,497)(124,477)(476,634)
Balance at September 30, 2023$21,617 $16,182 $38,192 $75,991 
Balance at March 31, 2024
The allowance for chargebacks, discounts for prompt payment and other are recorded as a reduction of trade receivables, net, and the remaining reserves are recorded as rebates and fees due to customers in the accompanying Condensed Consolidated Balance Sheets.
Contract Assets and Liabilities
We receive payments from our collaboration partners based on billing schedules established in each contract. Amounts are recorded as accounts receivable when our right to consideration is unconditional. We may also recognize revenue in advance of the contractual billing schedule and such amounts are recorded as a contract asset when recognized. We may be required to defer recognition of revenue for upfront and milestone payments until we perform our obligations under these arrangements, and such amounts are recorded as deferred revenue upon receipt or when due. For those contracts that have multiple performance obligations, contract assets and liabilities are reported on a net basis at the contract level. Contract assets are primarily related to Ipsen Pharma SAS (Ipsen) and contract liabilities are primarily related to deferred revenues from Takeda Pharmaceutical Company Limited (Takeda).
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Contract assets and liabilities were as follows (in thousands):
September 30, 2023December 31, 2022
March 31, 2024March 31, 2024December 31, 2023
Contract assets (1)
Contract assets (1)
$635 $1,659 
Contract assets (1)
Contract assets (1)
Contract liabilities:Contract liabilities:
Contract liabilities:
Contract liabilities:
Current portion (2)
Current portion (2)
Current portion (2)
Current portion (2)
$6,974 $7,488 
Long-term portion (3)
Long-term portion (3)
6,371 6,582 
Total contract liabilitiesTotal contract liabilities$13,345 $14,070 
____________________
(1)     Presented in other long-term assets in the accompanying Condensed Consolidated Balance Sheets.
(2)     Presented in other current liabilities in the accompanying Condensed Consolidated Balance Sheets.
(3)     Presented in other long-term liabilities in the accompanying Condensed Consolidated Balance Sheets.
During the ninethree months ended September 30,March 31, 2024 and 2023, and 2022, we recognized $4.9$1.6 million and $6.6$2.0 million, respectively, in revenues that were included in the beginning deferred revenues balance for those periods.
During the three and nine months ended September 30,March 31, 2024 and 2023, we recognized $41.1$45.9 million and $133.0$37.9 million, respectively, in revenues for performance obligations satisfied in previous periods, as compared to $33.9 million and $125.0 million for the corresponding prior year periods. Such revenues were primarily related to royalty payments allocated to our license performance obligations for our collaborations with Ipsen, Takeda, Daiichi Sankyo and Genentech and the recognition of license revenues for the achievement of certain milestones allocated to the license performance obligations for our collaborations with Ipsen and Takeda.Genentech.
As of September 30, 2023, $63.8March 31, 2024, $52.8 million of the combined transaction prices for our Ipsen and Takeda collaborations were allocated to research and development services performance obligations that had not yet been satisfied. See “Note 3. Collaboration Agreements and Business Development Activities” of the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of our Fiscal 20222023 Form 10-K for additional information about the expected timing to satisfy these performance obligations.
NOTE 3. COLLABORATION AGREEMENTS AND BUSINESS DEVELOPMENT ACTIVITIES
We have established multiple collaborations with leading biopharmaceutical companies for the commercialization and further development of our cabozantinib franchise. Additionally, we have made considerable progress under our existing research collaboration and in-licensing arrangements to further enhance our early-stage pipeline and expand our ability to discover, develop and commercialize novel therapies with the goal of providing new treatment options for cancer patients and their physicians. Historically, we also entered into other collaborations with leading biopharmaceutical companies pursuant to which we out-licensed other compounds and programs in our portfolio.
See “Note 3. Collaboration Agreements and Business Development Activities” of the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of our Fiscal 20222023 Form 10-K, as further described below, for additional information on certain of our collaboration agreements and in-licensing arrangements.
Cabozantinib Commercial Collaborations
Ipsen Collaboration
In February 2016, we entered into a collaboration and license agreement with Ipsen, which was subsequently amended, for the commercialization and further development of cabozantinib. Under the collaboration and license agreement, as amended, Ipsen received exclusive commercialization rights for current and potential future cabozantinib indications outside of the U.S. and Japan. We have also agreed to collaborate with Ipsen on the development of cabozantinib for current and potential future indications. The parties’ efforts are governed through a joint steering committee and appropriate subcommittees established to guide and oversee the collaboration’s operation and strategic direction; provided, however, that we retain final decision-making authority with respect to cabozantinib’s ongoing development.
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Revenues under the collaboration and license agreement as amended, with Ipsen were as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
2024
License revenues
License revenues
License revenuesLicense revenues$34,777 $27,607 $98,607 $103,389 
Collaboration services revenuesCollaboration services revenues1,244 7,211 7,679 28,196 
Collaboration services revenues
Collaboration services revenues
Total collaboration revenuesTotal collaboration revenues$36,021 $34,818 $106,286 $131,585 
Total collaboration revenues
Total collaboration revenues
As of September 30, 2023, $32.2March 31, 2024, $28.4 million of the transaction price for this collaboration and license agreement, as amended, was allocated to our research and development services performance obligation that has not yet been satisfied.
Takeda Collaboration
In January 2017, we entered into a collaboration and license agreement with Takeda, which was subsequently amended, for the commercialization and further development of cabozantinib. Under the collaboration and license agreement, as amended, Takeda received exclusive commercialization rights for current and potential future cabozantinib indications in Japan, and the parties have agreed to collaborate on the clinical development of cabozantinib in Japan. The operation and strategic direction of the parties’ collaboration is governed through a joint executive committee and appropriate subcommittees.
Revenues under the collaboration and license agreement as amended, with Takeda were as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
License revenues$2,974 $2,690 $17,185 $7,755 
Collaboration services revenues1,812 3,661 9,928 11,148 
Total collaboration revenues$4,786 $6,351 $27,113 $18,903 
During the three and nine months ended September 30, 2023, we recognized $0.1 million and $9.9 million, respectively, in revenues in connection with a commercial milestone of $11.0 million from Takeda upon their achievement of $150.0 million of cumulative net sales of cabozantinib in Japan.
Three Months Ended March 31,
20242023
License revenues$2,710 $2,849 
Collaboration services revenues3,185 3,374 
Total collaboration revenues$5,895 $6,223 
As of September 30, 2023March 31, 2024, $31.6$24.4 million of the transaction price for this collaboration and license agreement, as amended, was allocated to our research and development services performance obligations that have not yet been satisfied.
Royalty Pharma
In October 2002, we established a product development and commercialization collaboration agreement with GlaxoSmithKline (GSK)(now GSK plc, or GSK), that required us to pay a 3% royalty to GSK on the worldwide net sales of any product incorporatingcontaining cabozantinib sold by us and our collaboration partners. Effective January 1, 2021, Royalty Pharma plc (Royalty Pharma) acquired from GSK all rights, title and interest in royalties on net product sales containing cabozantinib for non-U.S. markets for the full term of the royalty and for the U.S. market through September 2026, after which time U.S. royalties will revert back to GSK. Royalty fees earned by Royalty Pharma in connection with our sales of cabozantinib are included in cost of goods sold and as a reduction of collaboration services revenues for sales by our collaboration partners. Such royalty fees earned by Royalty Pharma were $17.5$16.7 million and $50.2$15.4 million during the three and nine months ended September 30,March 31, 2024 and 2023, respectively, as compared to $14.9 million and $42.6 million for the corresponding prior year periods.
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respectively.
Research Collaborations, In-Licensing Arrangements and Other Business Development Activities
We enter into collaborative arrangements with other pharmaceutical or biotechnology companies to develop and commercialize drug candidatesoncology assets or other intellectual property. Our research collaborations and in-licensing arrangements are intended to enhance our early-stage pipeline and expand our ability to discover, develop and commercialize novel therapies with the goal of providing new treatment options for cancer patients and their physicians. Our research collaborations, in-licensing arrangements and other strategic transactions generally include upfront payments for the purchase or in-licensing of intellectual property, development, regulatory and commercial milestone payments and royalty payments, in each case contingent upon the occurrence of certain future events linked to the success of the asset in development. Certain of our research collaborations provide us exclusive options that give us the right to license programs or acquire the intellectual property developed under the research collaborations for further discovery and development. When we decide to exercise the options, we are required to pay an exercise fee and then assume the responsibilities for all subsequent development, manufacturing and commercialization.
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As part of the 2024 Restructuring Plan (as defined below), we have terminated certain of our in-licensing collaboration arrangements including Aurigene, BioInvent International AB, Cybrexa Therapeutics LLC, NBE-Therapeutics AG and STORM Therapeutics LTD. The termination of these agreements will be effective in April 2024.
During the three and nine months ended September 30, 2023March 31, 2024, we recognized $103.5$22.8 million and $165.0 million, respectively, within research and development expenses on the Condensed Consolidated Statements of Income, primarily related to upfrontdevelopment milestone payments for the purchase or in-licensing of intellectual property and development milestone payments related to costs of intellectual property that have not yet achieved technological feasibility, research and development funding and other fees.
In September 2023, we entered into an exclusive global license agreement with Insilico Medicine US Inc. and its parent company, Insilico Medicine Hong Kong Limited, along with certain other affiliated entities (individually and collectively referred to as Insilico). Under the terms of the agreement, we made an upfront payment of $80.0 million to obtain an exclusive, worldwide license to develop and commercialize XL309 (formerly ISM3091), and other USP1-targeting compounds which was recognized as research and development expenses as noted above given the intellectual property has not yet achieved technological feasibility. Insilico is eligible to receive up to $100.0 million upon achievement of potential future development milestones and up to $775.0 million upon achievement of commercial milestones, as well as tiered royalties on future net sales of products.
As of September 30, 2023,March 31, 2024, in conjunction with thesethe active collaborative in-licensing arrangements and asset purchase agreements, we are subject to potential future development milestone payments of up to $774.0$509.6 million, regulatory milestone payments of up to $615.2$365.4 million and commercial milestone payments of up to $3.9$2.5 billion, each in the aggregate per product or target, as well as royalties on future net sales of products.
NOTE 4. CASH AND INVESTMENTS
Cash, Cash Equivalents and Investments
Cash, cash equivalents and investments consisted of the following (in thousands):
September 30, 2023
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
March 31, 2024March 31, 2024
Amortized CostAmortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Debt securities available-for-sale:Debt securities available-for-sale:
Commercial paper
Commercial paper
Commercial paperCommercial paper$386,363 $— $— $386,363 
Corporate bondsCorporate bonds832,075 123 (12,103)820,095 
U.S. Treasury and government-sponsored enterprisesU.S. Treasury and government-sponsored enterprises441,576 (5,754)435,826 
Municipal bondsMunicipal bonds6,000 — (85)5,915 
Total debt securities available-for-saleTotal debt securities available-for-sale1,666,014 127 (17,942)1,648,199 
Cash
Money market fundsMoney market funds182,464 — — 182,464 
Certificates of depositCertificates of deposit84,404 — — 84,404 
Total cash, cash equivalents and investmentsTotal cash, cash equivalents and investments$1,932,882 $127 $(17,942)$1,915,067 
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December 31, 2022
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Debt securities available-for-sale:
Commercial paper$722,018 $— $— $722,018 
Corporate bonds810,439 541 (13,132)797,848 
U.S. Treasury and government-sponsored enterprises338,218 48 (5,679)332,587 
Municipal bonds16,385 — (223)16,162 
Total debt securities available-for-sale1,887,060 589 (19,034)1,868,615 
Cash41 — — 41 
Money market funds94,344 — — 94,344 
Certificates of deposit103,681 — — 103,681 
Total cash, cash equivalents and investments$2,085,126 $589 $(19,034)$2,066,681 
As of September 30, 2023, there are no restrictions on cash, cash equivalents or investments. As of December 31, 2022, $1.5 million in certificates of deposit were used to collateralize letters of credit agreements and were classified as other long-term assets based upon the remaining term of the underlying restriction.
December 31, 2023
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Debt securities available-for-sale:
Commercial paper$214,016 $— $— $214,016 
Corporate bonds870,870 1,652 (4,277)868,245 
U.S. Treasury and government-sponsored enterprises409,157 414 (2,250)407,321 
Municipal bonds7,880 10 (49)7,841 
Total debt securities available-for-sale1,501,923 2,076 (6,576)1,497,423 
Money market funds154,287 — — 154,287 
Certificates of deposit72,309 — — 72,309 
Total cash, cash equivalents and investments$1,728,519 $2,076 $(6,576)$1,724,019 
Interest receivable was $12.1$11.9 million and $7.3$13.1 million as of September 30, 2023March 31, 2024 and December 31, 2022,2023, respectively, and is included in prepaid expenses and other current assets in the accompanying Condensed Consolidated Balance Sheets.
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Realized gains and losses on the sales of investments were immaterial during the three and nine months ended September 30, 2023March 31, 2024 and 2022.2023.
We manage credit risk associated with our investment portfolio through our investment policy, which limits purchases to high-quality issuers and the amount of our portfolio that can be invested in a single issuer. The fair value and gross unrealized losses on debt securities available-for-sale in an unrealized loss position were as follows (in thousands):
September 30, 2023
March 31, 2024March 31, 2024
In an Unrealized Loss Position Less than 12 MonthsIn an Unrealized Loss Position Less than 12 MonthsIn an Unrealized Loss Position 12 Months or GreaterTotal
Fair ValueFair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
Fair ValueGross Unrealized Losses
Corporate bondsCorporate bonds$772,154 $(12,103)
Corporate bonds
Corporate bonds
U.S. Treasury and government-sponsored enterprisesU.S. Treasury and government-sponsored enterprises420,831 (5,754)
Municipal bondsMunicipal bonds5,915 (85)
TotalTotal$1,198,900 $(17,942)
December 31, 2022
Fair ValueGross Unrealized Losses
Corporate bonds$706,711 $(13,132)
U.S. Treasury and government-sponsored enterprises308,307 (5,679)
Municipal bonds15,792 (223)
Total$1,030,810 $(19,034)

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December 31, 2023
In an Unrealized Loss Position Less than 12 MonthsIn an Unrealized Loss Position 12 Months or GreaterTotal
Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
Corporate bonds$255,958 $(847)$281,837 $(3,430)$537,795 $(4,277)
U.S. Treasury and government-sponsored enterprises163,339 (406)155,452 (1,844)318,791 (2,250)
Municipal bonds— — 5,951 (49)5,951 (49)
Total$419,297 $(1,253)$443,240 $(5,323)$862,537 $(6,576)
There were 350263 and 285230 debt securities available-for-sale in an unrealized loss position as of September 30, 2023March 31, 2024 and December 31, 2022,2023, respectively. As of September 30, 2023, all securities had been in an unrealized loss position for less than twelve months except for 135 debt securities available-for-sale with an aggregate fair value of $468.0 million and an aggregate $10.6 million unrealized loss. As of December 31, 2022, all securities had been in an unrealized loss position for less than twelve months except for 81 debt securities available-for-sale with an aggregate fair value of $237.6 million and an aggregate $6.1 million unrealized loss. During the ninethree months ended September 30, 2023,March 31, 2024, we did not record an allowance for credit losses or other impairment charges on our investment securities. Based upon our quarterly impairment review, we determined that the unrealized losses were not attributed to credit risk but were primarily associated with changes in interest rates and market liquidity. Based on the scheduled maturities of our investments, we determined that it was more likely than not that we will hold these investments for a period of time sufficient for a recovery of our cost basis.
The fair values of debt securities available-for-sale by contractual maturity were as follows (in thousands):
September 30, 2023December 31, 2022 March 31, 2024December 31, 2023
Maturing in one year or lessMaturing in one year or less$836,519 $1,114,884 
Maturing after one year through five yearsMaturing after one year through five years811,680 753,731 
Total debt securities available-for-saleTotal debt securities available-for-sale$1,648,199 $1,868,615 
NOTE 5. FAIR VALUE MEASUREMENTS
Fair value reflects the amounts that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy has the following three levels:
Level 1 - quoted prices (unadjusted) in active markets for identical assets and liabilities;
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Level 2 - inputs other than level 1 that are observable either directly or indirectly, such as quoted prices in active markets for similar instruments or on industry models using data inputs, such as interest rates and prices that can be directly observed or corroborated in active markets; and
Level 3 - unobservable inputs that are supported by little or no market activity that are significant to the fair value measurement.
The classifications within the fair value hierarchy of our financial assets that were measured and recorded at fair value on a recurring basis were as follows (in thousands):
September 30, 2023
Level 1Level 2Total
March 31, 2024March 31, 2024
Level 1Level 1Level 2Total
Commercial paperCommercial paper$— $386,363 $386,363 
Corporate bondsCorporate bonds— 820,095 820,095 
U.S. Treasury and government-sponsored enterprisesU.S. Treasury and government-sponsored enterprises— 435,826 435,826 
Municipal bondsMunicipal bonds— 5,915 5,915 
Total debt securities available-for-saleTotal debt securities available-for-sale— 1,648,199 1,648,199 
Money market fundsMoney market funds182,464 — 182,464 
Certificates of depositCertificates of deposit— 84,404 84,404 
Total financial assets carried at fair valueTotal financial assets carried at fair value$182,464 $1,732,603 $1,915,067 
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December 31, 2022
Level 1Level 2Total
December 31, 2023December 31, 2023
Level 1Level 1Level 2Total
Commercial paperCommercial paper$— $722,018 $722,018 
Corporate bondsCorporate bonds— 797,848 797,848 
U.S. Treasury and government-sponsored enterprisesU.S. Treasury and government-sponsored enterprises— 332,587 332,587 
Municipal bondsMunicipal bonds— 16,162 16,162 
Total debt securities available-for-saleTotal debt securities available-for-sale— 1,868,615 1,868,615 
Money market fundsMoney market funds94,344 — 94,344 
Certificates of depositCertificates of deposit— 103,681 103,681 
Total financial assets carried at fair valueTotal financial assets carried at fair value$94,344 $1,972,296 $2,066,640 
When available, we value investments based on quoted prices for those financial instruments, which is a Level 1 input. Our remaining investments are valued using third-party pricing sources, which use observable market prices, interest rates and yield curves observable at commonly quoted intervals for similar assets as observable inputs for pricing, which is a Level 2 input.
When necessary, we record impairments of long-lived assets for the amount by which the fair value is less than the carrying value of these assets. When an impairment indicator exists, we calculate the undiscounted value of the projected cash flows for the asset, or asset group, and compare this estimated amount to the carrying amount. If the carrying amount is greater, we record an impairment loss for the excess of carrying value over fair value. In addition, in all cases of an impairment review, we reevaluate the remaining useful lives of the assets and modify them, as appropriate. In connection with the 2024 Restructuring Plan, we determined certain long-lived assets were impaired. The fair value was determined using an income approach where certain level 3 inputs were used, including estimates and assumptions on the timing and amount of discounted cash flows. See “Note 11. Restructuring” for additional information.
The carrying amount of our remaining financial assets and liabilities, which include receivables and payables, approximate their fair values due to their short-term nature.
Forward Foreign Currency Contracts
We have entered into forward foreign currency exchange contracts that are not designated as hedges for accounting purposes to hedge certain operational exposures for the changes in foreign currency exchange rates associated with assets or liabilities denominated in foreign currencies, primarily the Euro.
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As of September 30, 2023March 31, 2024, we had one forward contract outstanding to sell €3.9€3.6 million. The forward contract with a maturity of three months is recorded at fair value and is included in other current liabilities in the accompanying Condensed Consolidated Balance Sheets. The unrealized lossgain on the forward contract is immaterial as of September 30, 2023.March 31, 2024. The forward contract is considered a Level 2 in the fair value hierarchy of our fair value measurements. The net realized gains (losses) we recognized on the maturity of forward contracts were immaterial for each of the ninethree months ended September 30,March 31, 2024 and 2023 and $1.5 million for the corresponding prior year period. Realized and unrealized gains and losses on our forward contracts are included in other income (expense),expense, net on our Condensed Consolidated Statements of Income.
NOTE 6. INVENTORY
Inventory consisted of the following (in thousands):
September 30, 2023December 31, 2022 March 31, 2024December 31, 2023
Raw materialsRaw materials$8,014 $8,077 
Work in processWork in process51,668 43,564 
Finished goodsFinished goods17,940 10,635 
TotalTotal$77,622 $62,276 
Balance Sheet classification:Balance Sheet classification:
Balance Sheet classification:
Balance Sheet classification:
Current portion included in inventory
Current portion included in inventory
Current portion included in inventoryCurrent portion included in inventory$24,978 $33,299 
Long-term portion included in other long-term assetsLong-term portion included in other long-term assets52,644 28,977 
TotalTotal$77,622 $62,276 

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NOTE 7. STOCKHOLDERS’ EQUITY
Stock-based Compensation
We have several equity incentive plans under which we granted stock options and restricted stock units (RSUs), including performance-based restricted stock units (PSUs), to employees and directors. As of September 30, 2023, 28,107,770March 31, 2024, 22.5 million shares were available for grant under the Exelixis, Inc. 2017 Equity Incentive Plan (as amended and restated, the 2017 Plan). The share reserve is reduced by 1 share for each share issued pursuant to a stock option and 2 shares for full value awards, including RSUs and PSUs.
We allocated the stock-based compensation expense for our equity incentive plans and our 2000 Employee Stock Purchase Plan (ESPP) as follows (in thousands):
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
2024
Three Months Ended September 30,Nine Months Ended September 30,
Research and development
2023202220232022
Research and development
Research and developmentResearch and development$12,438 $16,438 $25,279 $34,886 
Selling, general and administrativeSelling, general and administrative28,040 20,899 56,760 46,832 
Selling, general and administrative
Selling, general and administrative
Total stock-based compensation expenseTotal stock-based compensation expense$40,478 $37,337 $82,039 $81,718 
Total stock-based compensation expense
Total stock-based compensation expense
Stock-based compensation expense for each type of award under our equity incentive plans and ESPP were as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Stock options$1,882 $3,299 $5,966 $10,470 
RSUs18,440 22,233 50,804 54,234 
PSUs19,463 11,331 22,129 14,621 
ESPP693 474 3,140 2,393 
Total stock-based compensation expense$40,478 $37,337 $82,039 $81,718 
Three Months Ended March 31,
20242023
Stock options$1,738 $2,207 
Restricted stock units15,434 12,607 
Performance stock units727 794 
Employee stock purchase plan1,214 1,053 
Total stock-based compensation expense$19,113 $16,661 
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During the ninethree months ended September 30, 2023,March 31, 2024, we granted 357,2330.1 million stock options with a weighted averageweighted-average exercise price of $20.41$23.24 per share and a weighted averageweighted-average grant date fair value of $9.45$10.08 per share. Stock options granted during the nine months ended September 30, 2023 have vesting conditions and contractual lives of a similar nature to those described in “Note 8. Employee Benefit Plans” of the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of our Fiscal 2022 Form 10-K. As of September 30, 2023March 31, 2024, there were 8,537,1737.7 million stock options outstanding and $11.8$8.1 million of related unrecognized compensation expense.
In April 2023,February 2024, we awarded to certain employees an aggregate of 849,8661.3 million RSUs (the target amount)number) that are subject to a total shareholder return (TSR) market condition (the 20232024 TSR-based RSUs). The TSR market condition is based on our relative TSR percentile rank compared to companies in the NASDAQNasdaq Biotechnology Index during the performance period, which is December 31, 202230, 2023 through January 2, 2026.1, 2027. Depending on the results relative to the TSR market condition, the holders of the 20232024 TSR-based RSUs may earn up to 175% of the target amountnumber of shares. 50% of the shares earned pursuant to the 20232024 TSR-based RSU awards will vest at the end of the performance period, and the remainder will vest approximately one year later, subject to an employee’s continuous service. These 20232024 TSR-based RSUs will be forfeited if the market condition at or above a threshold level is not achieved at the end of the performance period on January 2, 2026.
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1, 2027.
We used a Monte Carlo simulation model and the following weighted-average assumptions to determine the weighted-average grant date fair value of $26.05$20.19 per share for the 20232024 TSR-based RSUs:
Fair value of Exelixis common stock on grant date$19.4821.71 
Expected volatility40.2636.68 %
Risk-free interest rate3.754.42 %
Dividend yield— %
The Monte Carlo simulation model assumed correlations of returns of the stock prices of the Company’sExelixis common stock and the common stock of a peer group of companies and historical stock price volatility of the peer group of companies. The valuation model also used terms based on the length of the performance period and compound annual growth rate goals for TSR based on the provisions of the award.awards.
During the ninethree months ended September 30, 2023,March 31, 2024, we granted 2,879,1092.8 million service-based RSUs with a weightedweighted- average grant date fair value of $19.41$21.87 per share. As of September 30, 2023March 31, 2024, there were 12,229,65815.5 million RSUs outstanding, including RSUs that are subject to a TSR market condition, and $181.7$221.8 million of related unrecognized compensation expense. Service-based RSUs granted to employees during the ninethree months ended September 30, 2023March 31, 2024 have vesting conditions and contractual lives of a similar nature to those described in “Note 8. Employee Benefit Plans”Stockholders’ Equity” of the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of our Fiscal 20222023 Form 10-K.
As of September 30, 2023,March 31, 2024, there were 3,931,2312.5 million PSUs outstanding, of which 1,489,2090.9 million PSUs relate to awards that we either achieved the performance goal or determined that attainment of the performance goal was probable. Expense recognition for PSUs commences when it is determined that attainment of the performance goal is probable. During the three months ended September 30, 2023, we achieved certain performance conditions for 912,881 PSUs granted during 2020 (the 2020 PSUs) and recognized $18.1 million of stock-based compensation expense related to the 2020 PSUs. As of September 30, 2023,March 31, 2024, the remaining unrecognized stock-based compensation expense for the PSUs that were either achieved or deemed probable of achievement was $8.1$3.5 million. The total unrecognized compensation expense for the PSUs for which we have not yet determined that attainment of the performance goal is probable was $54.0$37.8 million. For more information about our PSUs, see “Note 8. Employee Benefit Plans”Stockholders’ Equity” of the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of our Fiscal 20222023 Form 10-K.
Common Stock Repurchases
In March 2023,January 2024, our Board of Directors authorized a stock repurchase program to acquire up to $550$450 million of our outstanding common stock before the end of 2023.2024. During the ninethree months ended September 30, 2023,March 31, 2024, we repurchased 16,943,2308.6 million shares of common stock under our stock repurchase program for an aggregate purchase price of $344.8$190.7 million. As of September 30, 2023,March 31, 2024, approximately $205.2$259.3 million remained available for future stock repurchases before the end of 2023,2024, pursuant to our stock repurchase program.
Stock repurchases under the program may be made from time to time through a variety of methods, which may include open market purchases, in block trades, 10b5-1 trading plans, accelerated share repurchase transactions, exchange transactions, or any combination of such methods. The timing and amount of any stock repurchases under the stock repurchase program will be based on a variety of factors, including ongoing assessments of the capital needs of the business, alternative investment opportunities, the market price of our common stock and general market conditions. Stock repurchases under the program may be made from time to time through a variety of methods, which may include open market purchases, in block trades, accelerated stock repurchase transactions, 10b5-1 trading plans, exchange transactions, or any combination of such methods. The 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.
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NOTE 8. PROVISION FOR INCOME TAXES
The effective tax ratesrate for the three and nine months ended September 30, 2023 were 82.1% and 20.9% respectively,March 31, 2024, was 24.3%, as compared to 20.5% and 20.1%17.1% for the corresponding periodsperiod in 2022.2023. The effective tax rate for the three months ended September 30, 2023,March 31, 2024, differed from the U.S. federal statutory tax rate of 21% primarily due to non-deductible executive compensationstate taxes and the branded prescription drug fee, partiallyinterest on uncertain tax positions, offset by the generation of federal tax credits. The effective tax rate for the nine months ended September 30, 2023, differed from the U.S. federal statutory tax rate of 21% primarily due to the generation of federal tax credits, partially offset by non-deductible executive compensation and state taxes. The effective tax rates for the three and nine months ended September 30, 2022,March 31, 2023, differed from the U.S. federal statutory tax rate of 21%, primarily due to excess tax benefits related to the exercise of certain stock options during the periodsperiod and the generation of federal tax credits, partially offset by state taxes.
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NOTE 9. NET INCOME PER SHARE
Net income per share — basic and diluted, were computed as follows (in thousands, except per share amounts):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
2024
Numerator:
Numerator:
Numerator:Numerator:
Net incomeNet income$1,041 $73,210 $122,247 $212,455 
Net income
Net income
Denominator:
Denominator:
Denominator:Denominator:
Weighted-average common shares outstanding — basicWeighted-average common shares outstanding — basic315,496 322,148 321,373 320,949 
Weighted-average common shares outstanding — basic
Weighted-average common shares outstanding — basic
Dilutive securitiesDilutive securities3,751 2,918 2,904 3,471 
Dilutive securities
Dilutive securities
Weighted-average common shares outstanding — diluted
Weighted-average common shares outstanding — diluted
Weighted-average common shares outstanding — dilutedWeighted-average common shares outstanding — diluted319,247 325,066 324,277 324,420 
Net income per share — basicNet income per share — basic$0.00 $0.23 $0.38 $0.66 
Net income per share — basic
Net income per share — basic
Net income per share — dilutedNet income per share — diluted$0.00 $0.23 $0.38 $0.65 
Net income per share — diluted
Net income per share — diluted
Basic net income per share is computed using the weighted-average number of common shares outstanding during the period. The diluted net income per share is computed using the weighted-average number of shares and dilutive potential common shares outstanding during the period. Dilutive securities includedshares outstanding stockincludes the dilutive effect of in-the-money options, unvested RSUs (including TSR-based RSUs), unvested PSUs when the performance condition is met and ESPP contributions. The dilutive effect of such equity awards is calculated based on the average share price for each fiscal period using the treasury stock method.
Certain potential common shares were excluded from our calculation of weighted-average common shares outstanding diluted because either they would have had an anti-dilutive effect on net income per share or they were related to shares from PSUs that were contingently issuable and the contingency had not been satisfied at the end of the reporting period.
The weighted-average potential common shares excluded from our calculation were as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Anti-dilutive securities and contingently issuable shares excluded10,144 15,059 13,164 15,311 
Three Months Ended March 31,
20242023
Anti-dilutive securities and contingently issuable shares excluded8,893 15,592 
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NOTE 10. COMMITMENTS AND CONTINGENCIES
Leases
In May 2023, in connection with the commencement of our lease of laboratory facilities located in Pennsylvania, we recognized a right-of-use asset and an operating lease liability of $13.2 million. We estimated the lease term to be 60 months taking into consideration our early termination rights.
For more information about our Leases, see “Note 11. Commitments and Contingencies – Leases” of the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of our Fiscal 2022 Form 10-K.
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Legal Proceedings
MSN I ANDA Litigation
In September 2019, we received a notice letter regarding an Abbreviated New Drug Application (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 Approved Drug Products with Therapeutic Equivalence Evaluations, also referred to as 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 October 29, 2019, we filed a complaint in the United States District Court for the District of Delaware (the 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 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 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 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).

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MSN II ANDA Litigation
On January 11, 2022, we received notice from MSN that it had further amended its 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 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 11,098,015 arising from 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. Patent No. 11,298,349 (pharmaceutical composition). On July 18, 2022, we filed a complaint in the Delaware District Court for patent infringement against MSN asserting infringement of 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 complaint, alleging that the asserted claims of U.S. Patent No. 11,298,349 are invalid and not infringed and amended its challenges to U.S. Patents No. 11,091,439, 11,091,440 and 11,098,015 to allege that these patents are not enforceable based on equitable grounds. The two lawsuits comprising this litigation (collectively referred to 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 those asserted in the MSN I litigation described above.
On June 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. On September 28, 2023, the Delaware District Court granted the parties’ stipulation of dismissal of MSN’s equitable defenses and counterclaims. A bench trial occurred in October 2023, and a judgment is expected during the first half of 2024.
Teva ANDA Litigation
In May 2021, we received notice letters fromregarding an ANDA Teva submitted to the FDA by Teva Pharmaceutical Industries Limited, Teva Pharmaceuticals Development, Inc. and Teva Pharmaceuticals USA, Inc. (individually and collectively referred to as 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,sought, 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 Teva from infringing these patents. On September 30, 2022, the parties filed a stipulation to consolidate the two lawsuits, numbered Civil Action Nos. 21-00871 and 22-01168, and to stay all proceedings, which was 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 respect to Civil Action No. 21-00871, this case remained administratively closed, and Civil Action No. 22-01168 was administratively closed on October 3, 2022. On July 18, 2023, we
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On July 18, 2023, we entered into a settlement and license agreement (the Teva Settlement Agreement) with Teva to end these litigations. Pursuant to the terms of the Teva Settlement Agreement, we will grant Teva a license to market its generic version of CABOMETYX in the U.S. beginning on January 1, 2031, if approved by the FDA and subject to conditions and exceptions common to agreements of this type. On September 15, 2023, the parties filed a joint stipulation of dismissal with the Delaware District Court, and on September 19, 2023, the Delaware District Court granted the parties’ stipulation and dismissed the case without prejudice.
Cipla ANDA Litigation
On February 6, 2023, we received a 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. Patents No. 8,877,776, 11,091,439, 11,091,440, 11,098,015 and 11,298,349 arising from Cipla’s ANDA filing with the FDA. Cipla’s ANDA requests approval to market a generic version of CABOMETYX tablets prior to the expiration of the aforementioned patents. We are seeking, among other relief, an order that the effective date of 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 stay all proceedings, and the Delaware District Court, in a sealed order on the same day, granted the proposed order and administratively closed the case. On May 5, 2023, the Delaware District Court issued a redacted version of the May 4, 2023 stipulation and proposed order.
On March 27, 2024, we received notice from Cipla that it had amended its ANDA to assert additional Paragraph IV certifications. The ANDA now requests approval to market generic versions of CABOMETYX tablets with 20 mg and 40 mg dosage strengths (in addition to the 60 mg dosage strength contemplated by Cipla’s original ANDA) prior to expiration of U.S. Patents No. 8,877,776, 9,724,342, 10,039,757, 11,091,439, 11,091,440, 11,098,015 and 11,298,349. We are evaluating Cipla’s additional Paragraph IV certifications.
The sale of any generic version of CABOMETYX earlier than its patent expiration could significantly decrease our revenues derived from the U.S. sales of CABOMETYX and thereby materially harm our business, financial condition and results of operations. It is not possible at this time to determine the likelihood of an unfavorable outcome or estimate of the amount or range of any potential loss.
We may also from time to time become a party or subject to various other legal proceedings 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.
NOTE 11. RESTRUCTURING
Our Board of Directors authorized, and we implemented, a corporate restructuring plan (the 2024 Restructuring Plan) to reduce our workforce and rebalance our cost structure in alignment with our strategic priorities. Restructuring expenses expected to be incurred under the 2024 Restructuring Plan include severance and employee-related costs; asset impairment; and contract termination and other exit costs. During the three months ended March 31, 2024, we recognized $32.8 million in expenses associated with the 2024 Restructuring Plan which are presented in restructuring in the accompanying Condensed Consolidated Statements of Income.
In connection with the 2024 Restructuring Plan, we exited two leases in the Greater Philadelphia area and the right-of-use assets, related leasehold improvements and certain other long-lived assets were remeasured and recorded at fair value, see “Note 5. Fair Value” for additional information.
We incurred the majority of the charges related to the 2024 Restructuring Plan in the three months ended March 31, 2024, and expect the 2024 Restructuring Plan to be substantially completed by the end of the second quarter of 2024.
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The expected pre-tax charges are estimates and are subject to a number of assumptions and actual results may vary from the estimates provided.
The restructuring activities and balances as of and for the three months ended March 31, 2024 were as follows (in thousands):
Three Months Ended March 31, 2024
Accrued at December 31, 2023Initial CostsNon-cash ChargesCash Payments
Accrued at March 31, 2024(2)
Total Costs Incurred to DateTotal Expected Plan Costs
Severance and employee-related costs$— $15,656 $— $(13,868)$1,788 $15,656 $15,656 
Contract termination and other exit costs(1)
— 4,861 — (18)4,843 4,861 5,044 
Asset impairment— 12,318 (12,318)— — 12,318 12,318 
Total restructuring$— $32,835 $(12,318)$(13,886)$6,631 $32,835 $33,018 
__________________
(1)     Contract termination costs consist of accruals for costs to be incurred without future economic benefit, and other exit costs expensed as incurred.
(2)     As of March 31, 2024, substantially all restructuring liabilities have been recorded in other current liabilities in the accompanying Condensed Consolidated Balance Sheets.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsOperations.
This Quarterly Report on Form 10-Q contains forward-looking statements. These statements are based on Exelixis, Inc.’s (Exelixis, we, our or us) current expectations, assumptions, estimates and projections about our business and our industry and involve known and unknown risks, uncertainties and other factors that may cause our company’s or our industry’s results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied in, or contemplated by, the forward-looking statements. Our actual results and the timing of events may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such a difference include those discussed in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2022,2023, filed with the Securities and Exchange Commission (SEC) on February 7,6, 2024 (Fiscal 2023 (Fiscal 2022 Form 10-K), as supplemented by Part II, Item 1A of this Quarterly Report on Form 10-Q as well as those discussed elsewhere in this report. These and many other factors could affect our future financial and operating results. We undertake no obligation to update any forward-looking statement to reflect events after the date of this report.
This discussion and analysis should be read in conjunction with our condensed consolidated financial statements and accompanying notes included in this report and the consolidated financial statements and accompanying notes thereto included in the Fiscal 20222023 Form 10-K.
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Overview
We are an oncology company innovating next-generation medicines and combination regimens at the forefront of cancer care. Through the commitment of our drug discovery, development and commercialization resources, we have produced four marketed pharmaceutical products, two of which are formulations of our flagship molecule, cabozantinib. We continue to evolve our product portfolio, leveraging our investments, expertise and strategic partnerships to target an expanding range of tumor types and indications with our clinically differentiated pipeline of small molecules and biotherapeutics, including antibody-drug conjugates (ADCs) and other biotherapeutics..
Sales related to cabozantinib account for the majority of our revenues. Cabozantinib is an inhibitor of multiple tyrosine kinases, including MET, AXL, VEGF receptors and RET and has been approved by the U.S. Food and Drug Administration (FDA) and in 6768 other countries as of the date of this Quarterly Report on Form 10-Q:countries: as CABOMETYX® (cabozantinib) tablets for advanced renal cell carcinoma (RCC) (both alone and in combination with Bristol-Myers Squibb Company’s (BMS) OPDIVO® (nivolumab)nivolumab (OPDIVO®)), for previously treated hepatocellular carcinoma (HCC) and for previously treated, radioactive iodine (RAI)-refractory differentiated thyroid cancer (DTC); and as COMETRIQ® (cabozantinib) capsules for progressive, metastatic medullary thyroid cancer. For physicians treating these types of cancer, cabozantinib has become or is becoming an important medicine in their selection of effective therapies.
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The other two products resulting from our discovery efforts are: COTELLIC® (cobimetinib), an inhibitor of MEK, approved as part of multiple combination regimens to treat specific forms of advanced melanoma and marketed under a collaboration with Genentech, Inc. (a member of the Roche Group) (Genentech); and MINNEBRO® (esaxerenone), an oral, non-steroidal, selective blocker of the mineralocorticoid receptor, approved for the treatment of hypertension in Japan and licensed to Daiichi Sankyo Company, Limited.
We plan to continue leveraging our operating cash flows to support the ongoing investigation of cabozantinib in phase 3 trials for new indications and the advancement ofadvance a broad array of diverse biotherapeutics and small molecule programs for the treatment of cancer, exploring multiple modalitiesas well as to support ongoing company-sponsored and mechanisms of action. Of the clinical-stage assets that have emerged from our drug discovery and preclinical activities thus far, theexternally sponsored trials evaluating cabozantinib. The product candidates furthest along arein our pipeline are: zanzalintinib, a next-generationnovel, potent, third-generation oral tyrosine kinase inhibitor (TKI) that targets VEGF receptors, MET and the TAM kinases (TYRO3, AXL and MER), and XB002, an ADC that targetsa next-generation tissue factor (TF). Both-targeting ADC, administered via intravenous infusion and composed of thesea human monoclonal antibody (mAb) against TF that is conjugated to a microtubulin inhibitor (MTI) payload. Our internal drug discovery efforts are supplemented through in-licensing investigational oncology assets are next-generation approaches that build on prior clinical experience, which we believe reduces program risk. We are also focused on conserving capital and managing risks of clinical failure by in-licensing or securingobtaining options to acquire other investigational drug candidatesoncology assets from third parties if those assetsthey demonstrate evidence of clinical success. Recent examples of this approachExamples are: CBX-12 (alphalexTM exatecan),XL309, a clinical-stage first-in-class peptide-drug conjugate (PDC) invented by Cybrexa Therapeutics (Cybrexa) that utilizes Cybrexa’s proprietary alphalex technology to enhance the delivery of exatecan, a highly potent, second-generation topoisomerase I inhibitor, to tumor cells; ADU-1805, a clinical-stage and potentially best-in-class monoclonal antibody developed by Sairopa B.V. (Sairopa) that targets SIRPα; and XL309 (formerly ISM3091), a potentially best-in-class small molecule inhibitor of USP1, in-licensed from Insilico (as defined below)which has emerged as a synthetic lethal target in the context of BRCA-mutated tumors; and ADU-1805, a clinical-stage and potentially best-in-class mAb that has potentially broad applicability in BRCA-mutant tumors.targets SIRPα.
Cabozantinib Franchise
The FDA first approved CABOMETYX in the U.S. as a monotherapy for previously treated patients with advanced RCC in April 2016, and then for previously untreated patients with advanced RCC in December 2017. In January 2021, the CABOMETYX label was expanded to include first-line advanced RCC in combination with OPDIVO,nivolumab, which was the first CABOMETYX regimen approved for treatment in combination with an immune checkpoint inhibitor (ICI). In addition to RCC, in January 2019, the FDA approved CABOMETYX for the treatment of patients with HCC previously treated with sorafenib, and then in September 2021, the FDA approved CABOMETYX for the treatment of adult and pediatric patients 12 years of age and older with locally advanced or metastatic DTC that has progressed following prior VEGF receptor-targeted therapy and who are RAI-refractory or ineligible.
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To develop and commercialize CABOMETYX and COMETRIQcabozantinib outside the U.S., we have entered into license agreements with Ipsen Pharma SAS (Ipsen) and Takeda Pharmaceutical Company Limited (Takeda). To Ipsen, we granted the rights to develop and commercialize cabozantinib outside of the U.S. and Japan, and to Takeda we granted such rights in Japan. Both Ipsen and Takeda also contribute financially and operationally to the further global development and commercialization of the cabozantinib franchise in other potential indications, and we work closely with them on these activities. Utilizing its regulatory expertise and established international oncology marketing network, Ipsen has continued to execute on its commercialization plans for CABOMETYX, having received regulatory approvals and launched in multiple territories outside of the U.S., including in the European Union (EU), the United Kingdom and Canada, as a treatment for advanced RCC (both as a monotherapy and for HCC in adults who have previously been treated with sorafenib. In addition, in March 2021, Ipsen and BMS received regulatory approval from the European Commission (EC) for CABOMETYX in combination with OPDIVO as a first-line treatmentnivolumab) and for patients with advanced RCC, followed by additional regulatory approvals for the combination in other territories beyond the EU. In May 2022, we announced that Ipsen received regulatory approval from the EC for CABOMETYX as a monotherapy for the treatment of adult patients with locally advanced or metastatic, RAI-refractory or ineligiblepreviously treated HCC and DTC and who have progressed during or after prior systemic therapy, which followed an approval from Health Canada in April 2022 for a similar DTC indication.indications. With respect to the Japanese market, Takeda received Manufacturing and Marketing Approvals in 2020 from the Japanese Ministry of Health, Labour and Welfare (MHLW) offor monotherapy CABOMETYX as a treatment of patients with curatively unresectable or metastatic RCC and as a treatment of patients with unresectable HCC whothat has progressed after cancer chemotherapy. In August 2021, Takeda and Ono Pharmaceutical Co., Ltd., BMS’ development and commercialization partner in Japan, received Manufacturing and Marketing Approval from the MHLW ofchemotherapy, as well as for CABOMETYX in combination with OPDIVOnivolumab as a treatment for unresectable or metastatic RCC.
We are also pursuing other indications for cabozantinib that have the potential to increase the number of cancer patients who could potentially benefit from this medicine. Building on preclinical and clinical observations that cabozantinib in combination with ICIs may promote a more immune-permissive tumor environment, we initiated several pivotal studies to further explore these combination regimens. The first of these studies to deliver results was CheckMate -9ER, a phase 3 pivotal trial evaluating the combination of CABOMETYX and OPDIVOnivolumab compared to sunitinib in patients with previously untreated, advanced or metastatic RCC. Positive results from CheckMate -9ER served as the basis for the FDA’s, EC’sFDA, European Commission (EC) and MHLW’sMHLW approvals of CABOMETYX in combination with OPDIVOnivolumab as a first-line treatment of patients with advanced RCC in January 2021, March 2021 and August 2021, respectively. We are also collaborating with BMS on COSMIC-313, a phase 3 pivotal trial evaluating the triplet combination of cabozantinib, nivolumab and BMS’ CTLA-4 ICI, ipilimumab, versus the combination of nivolumab and ipilimumab in patients with previously untreated advanced intermediate- or poor-risk RCC. We announced top-line results from COSMIC-313 inIn July 2022, and in September 2022 we presentedannounced that the data at the Presidential Symposium III at the 2022 European Society for Medical Oncology (ESMO) Congress. The trial met its primary endpoint, demonstrating significant improvement in blinded independent radiology committee (BIRC)-assessedcommittee-assessed progression-free survival (PFS) at the primary analysis for the triplet combination. At two prespecified interim analyses for the secondary endpoint
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Table of overall survival (OS), conducted most recently during the third quarter of 2023, the data did not meet the threshold for statistical significance; therefore, the trial will continue to the next planned analysis of OS, anticipated in 2024. The safety profile observed in the trial was reflective of the known safety profiles for each single agent, as well as the combination regimens used in this study. We plan to discuss a potential regulatory submission with the FDA when the results of the next OS analysis are available, provided such results are supportive.Contents
To further expand our exploration of combinations with ICIs, we also initiated multiple trials evaluating cabozantinib in combination with F. Hoffmann-La Roche Ltd.’s (Roche)’s ICI, atezolizumab, beginning in 2017 with COSMIC-021, a broad phase 1b study evaluating the safety and tolerability of cabozantinib in combination with atezolizumab in patients with a wide variety of locally advanced or metastatic solid tumors. The encouraging efficacy and safety data that emerged from COSMIC-021 have been instrumental in guiding our clinical development strategy for cabozantinib in combination with ICIs. In August 2023, we announced positive top-line results from CONTACT-02, a phase 3 pivotal trial sponsored by us and co-funded by Roche, evaluating the cabozantinib and atezolizumab combination versus a second novel hormonal therapy (NHT) in patients with metastatic castration-resistant prostate cancer (mCRPC) and soft-tissue disease who have been previously treatedprogressed after treatment with one novel hormonal therapy (NHT).prior NHT, and detailed findings from CONTACT-02 were presented at the American Society of Clinical Oncology (ASCO) Genitourinary Cancers Symposium in January 2024. The trial met one of two primary endpoints, demonstrating a statistically significant improvement in PFS.PFS. At a prespecified interim analysis for the primary endpoint of OS,overall survival (OS), a trend toward improvement of OS was observed; however, the data were immature and did not meet the threshold for statistical significance. Therefore, the trial will continuecontinues to the next planned OS analysis, as planned. anticipated later in 2024. The safety profile observed in the trial was reflective of the known safety profiles for each single agent, as well as the combination regimen used in this study. Based on feedback from the FDA, we will discussWe are discussing a potential regulatory submission whenwith the results of the next OS analysis are available. Detailed findings will be presented at a future medical meeting.FDA.
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Beyond clinical trials that we or our collaboration partners sponsor, independentIndependent investigators also conduct clinical trials evaluating cabozantinib through our Cooperative Research and Development Agreement (CRADA) with the National Cancer Institute’s Cancer Therapy Evaluation Program (NCI-CTEP) or our investigator-sponsored trial (IST) program. Over time,As reflected by the data we have obtainedresults from these externally sponsoredcompleted trials and ongoing clinical trials, have helped advancewe believe our development program forCRADA with NCI-CTEP has facilitated and may continue to facilitate the expansion of the cabozantinib franchise by informing subsequent label-enabling trials, including COSMIC-311, our phase 3 pivotal trial evaluating cabozantinib in previously treated patients with RAI-refractory DTC, from which positive results served as the basis for the FDA’s and EC’s approvals of CABOMETYX for DTC. Most recently,a cost-efficient manner. In August 2023, we announced positive results from the CABINET phase 3 pivotal study which is sponsored by the National Cancer Institute under our CRADA and conducted by the Alliance for Clinical Trials in Oncology (The Alliance). In this study, the independent Data and Safety Monitoring Board (DSMB) unanimously recommended stopping enrollment and unblinding all patients due to dramatic improvements in PFS observed at an interim analysis. CABINETthat evaluated cabozantinib versus placebo in patients who experienced progression after prior systemic therapy in two independently powered cohorts: one for patients with advanced pancreatic neuroendocrine tumors (pNET); and another for patients with extra-pancreatic neuroendocrine tumors (epNET;(epNET, historically referred to as carcinoid tumors). Data from CABINET demonstrated that cabozantinib substantially prolonged the time withoutto disease progression or death in both pNET and epNET cohorts, and that the safety profile of cabozantinib observed in the trial was consistent with its known safety profile. Detailed findings from CABINET were accepted as a late-breaker abstract and presented during a Proffered Paper Session at the ESMOEuropean Society for Medical Oncology Congress onin October 22, 2023. The median PFS based on local review for patients who received cabozantinib was 11.4 months for pNET and 8.3 months for epNET, compared to 3.0 months and 3.2 months, respectively, for patients who received placebo, and we plan to discussWe are discussing these results with the FDA.FDA to support a potential regulatory submission later in 2024. In addition to facilitating label expansion for the cabozantinib franchise, data sets from these externally sponsored clinical trials may also prove valuable by informing our development plans for zanzalintinib.
Pipeline Activities
Zanzalintinib
TheZanzalintinib is a novel, potent, third-generation oral TKI that targets VEGF receptors, MET and the TAM kinases (TYRO3, AXL and MER) implicated in cancer’s growth and spread, and is our first in-house compound to enter the clinic following our re-initiation of drug discovery activities in 2017 was2017. We are evaluating zanzalintinib in a next-generation oral TKIgrowing development program that targets VEGF receptors, MET, AXL, MER and other kinases implicated in cancer’s growth and spread. In designing zanzalintinib, we sought to build uponbuilds on our prior experience with cabozantinib retaining a similar target profile while improving key characteristics, including the pharmacokinetic half-life.and targets indications with high unmet need, and we have also established collaborations and will continue to explore additional opportunities for novel combinations with zanzalintinib. To date, we have initiated two large phase 1b/2 clinical trials studying zanzalintinib as a monotherapy and in combination with ICIs (STELLAR-001 and STELLAR-002), as well as twoone targeted phase 1b/2 trial studying zanzalintinib in combination with AB521, an inhibitor of the transcription factor HIF-2a developed by Arcus Biosciences, Inc. (STELLAR-009), and three phase 3 or phase 2/3 pivotal trials evaluating zanzalintinib in combination with ICIs (STELLAR-303, STELLAR-304 and STELLAR-304)STELLAR-305).
STELLAR-001 is a phase 1b1b/2 clinical trial evaluating zanzalintinib, both as a monotherapy and in combination with atezolizumab. We have established the recommended dose of 100 mg for both single-agentmonotherapy zanzalintinib and zanzalintinib in combination with atezolizumab, and we have completed enrollment in expansion cohorts forcohorts. In November 2023, we presented promising initial results evaluating monotherapy zanzalintinib in patients with previously treated clear cell RCC non-clear cell RCC, mCRPC, colorectal cancer (CRC) and hormone-receptor positive breast cancer. We previously presented data from STELLAR-001 during poster sessions at the 2022 ESMO Congress in September 2022, which showed preliminary clinical activity similar to that observed with cabozantinib in phase 1 across a range of solid tumors and dose levels, with a manageable safety profile. In addition, data from the clear cell RCC expansion cohort of 32 previously treated patients will be presentedOral Abstracts session at the International Kidney Cancer SymposiumSymposium. Follow-up continues in November 2023. Wethis cohort as well as the other completed cohorts, and we continue to be encouraged by zanzalintinib’s emerging safety and efficacy profile.profile, both as a monotherapy and in combination with ICIs. STELLAR-002 is a phase 1b1b/2 clinical trial evaluating zanzalintinib in combination with either nivolumab, nivolumab and ipilimumab, or a fixed-dose combination of nivolumab and BMS’ relatlimab.
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We have established a recommended dosesdose of zanzalintinib for these zanzalintinib combination regimens for useand are exploring these combinations in a diverse array of solid tumor expansion cohorts, that may includeincluding clear cell andRCC, non-clear cell RCC, HCC, NSCLC, squamous cell carcinoma of head and neck (SCCHN), urothelial carcinoma, mCRPC and CRC, andcolorectal cancer (CRC); patient enrollment into these expansion cohorts is ongoing. To better understand the individualMonotherapy zanzalintinib is also being evaluated to support regulatory requirements for dosing and contribution of the therapies, treatment armscomponents. Most recently, in the expansion cohorts may include zanzalintinib as a single agent in addition to the ICI combination regimens.
WeDecember 2023, we initiated twoSTELLAR-009, an open-label phase 3 pivotal trials1b/2 trial evaluating zanzalintinib in combination with ICIsAB521 in 2022. Thepatients with advanced solid tumors, including clear cell RCC. STELLAR-009 is divided into dose-escalation and expansion phases, and patient enrollment into dose-escalation cohorts is ongoing.
Our first zanzalintinib pivotal trial, STELLAR-303, was initiated in June 2022 and is evaluating zanzalintinib in combination with atezolizumab versus regorafenib in patients with metastatic non-microsatellite instability-high or non-mismatch repair-deficient CRC who have progressed after or are intolerant to the current standard of care. The trial aims to enroll approximately 874 patients worldwide, regardless of RAS status, with approximately 350 of these patients showing no evidence of liver metastases. Under the amended trial protocol, the primary efficacy endpoint of STELLAR-303 is OS in those patients without liver metastases, and the key secondary efficacy endpoint is OS in the full intent-to-treat population. Additional secondary endpoints include PFS and ORR per Response Evaluation Criteria in Solid Tumors (RECIST) v. 1.1, in each case as assessed by the investigator. The second pivotal trial, STELLAR-304, was initiated in December 2022 and is evaluating zanzalintinib in combination with nivolumab versus sunitinib in previously untreated patients with advanced non-clear cell RCC. TheMost recently, in December 2023, we initiated STELLAR-305, a phase 2/3 pivotal trial aims to enroll approximately
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evaluating zanzalintinib in combination with TableMerck & Co., Inc.’s pembrolizumab versus monotherapy pembrolizumab in patients with previously untreated PD-L1-positive recurrent or metastatic Squamous Cell Cancers of Contents
291 patients at approximately 173 sites globally. The primary efficacy endpoints of STELLAR-304 are PFSthe head and ORR per RECIST v 1.1, in each case as assessed by BIRC. The secondary efficacy endpoint is OS.neck (SCCHN). Beyond STELLAR-303, STELLAR-304 and STELLAR-304,STELLAR-305, we intend to initiate additional phase 3 trials and explore a series of early-stage and pivotal trials evaluating zanzalintinib in novel combination regimens across a broad array of future potential indications, including STELLAR-305, a planned phase 3 pivotal trial evaluating zanzalintinib in combination with Merck & Co., Inc.’s ICI, pembrolizumab, in patients with previously untreated, PD-L1 positive, recurrent or metastatic SCCHN.indications.
Biotherapeutics
Much of our drug discovery activity focuses on discovering and advancing various biotherapeutics that have the potential to become anti-cancer therapies, such as bispecific antibodies, ADCs and other innovative treatments. ADCs in particular present a unique opportunity for new cancer treatments, given their capabilities to deliver anti-cancer drug payloads to targets with increased precision while minimizing impact on healthy tissues. This approach has been validated by multiple regulatory approvals for the commercial sale of ADCs in the past several years. To facilitate the growth of our various biotherapeutics programs, we have established multiple research collaborations and in-licensing arrangements and entered into other strategic transactions, aimed at conserving capital and managing risks, that provide us with access to antibodies, binders, payloads and conjugation technologies, which are the components employed to generate next-generation ADCs or multispecific antibodies.antibodies.
Furthest along amongst our biotherapeutics programs is XB002, our lead TF-targeting ADC program, in-licensed from Iconic Therapeutics, Inc. (Iconic), nowprogram. XB002 is a wholly owned subsidiarynext-generation ADC composed of Endpoint Health, Inc. a human mAb against TF that is conjugated to an MTI payload.We are evaluating XB002, both as a single agent and in combination with either nivolumab, or Roche’s bevacizumab, in JEWEL-101, a phase 1 study in patients with advanced solid tumors. In October 2022, we announced promising initial dose-escalation results from JEWEL-101 during the Antibody-drug Conjugates Poster Session at the 34th EORTC-NCI-AACR Symposium. The early clinical data has demonstrated that XB002 wasis generally well-tolerated at multiple dose levels, and a pharmacokinetic analysis confirmed that XB002 was stable with low levels of free payload. We have initiated the cohort-expansion phase of JEWEL-101 for single-agentmonotherapy XB002, which is designed to further explore two doses of XB002 in individual tumor cohorts, including NSCLC,non-small cell lung cancer, SCCHN, cervical cancer and ovarian cancer.Additional cohorts being evaluated with a single dose of XB002 include endometrial cancer, SCCHN, pancreatic cancer, esophageal cancer, mCRPC, triple negative breast cancer and hormone-receptor positive breast cancer, as well as a TF-expressing tumor-agnostic cohort. We are continuing to enroll patients in combination dose-escalation cohorts to determine recommended dosing for XB002 inwith nivolumab and will explore the combination potential with either nivolumab or bevacizumab, with additionalzanzalintinib. Additional expansion cohorts are planned for evaluating these various combinations as part of our goal to accelerateadvance XB002 into full development. We also intend to evaluate the potential of XB002 as monotherapy and in combination with other targeted therapies (including our other product candidates) across a wide range of tumor types, including indications other than those currently addressed by commercially available TF-targetedTF-targeting therapies.
In November 2022, we executed two option deals that exemplifyAs part of our strategy to access clinical- or near-clinical-stage assets:assets, we executed an exclusive collaborationoption and license agreement with Cybrexa providing us with the right to acquire CBX-12; and an exclusive clinical development and option agreementcollaboration with Sairopa B.V. (Sairopa) to develop ADU-1805. Both CBX-12 and ADU-1805 areis currently being evaluated in a phase 1 clinical trials to explore each compound’s pharmacokinetics, safety, tolerability and preliminary anti-tumor activitytrial in patients with advanced or metastatic refractory solid tumors. The ADU-1805 study includestumors, and enrollment is ongoing; future plans to investigatefor ADU-1805 include investigating the compound’s potential in combination with approved ICIs.
ICIs. In addition to the option dealsdeal with Cybrexa and Sairopa, some of our active research collaborations for biotherapeutics programs include collaborations with:
Adagene Inc. (Adagene)(Adagene), which is focused on using Adagene’s SAFEbodyTM technology to develop novel masked ADCs or other innovative biotherapeutics with potential for improved therapeutic index;
BioInvent International AB (BioInvent), which is intended to expand our portfolio of antibody-based therapies and utilizes BioInvent’s proprietary n-CoDeR antibody library and patient-centric F.I.R.S.T screening platform, which together are designed to allow for parallel target and antibody discovery;
Catalent, Inc. (Catalent), which is focused on the discovery and development of multiple ADCs using Catalent’s proprietary SMARTag® site-specific bioconjugation technology; and
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Invenra, Inc. (Invenra), which is focused on the discovery and development of novel binders and multispecific antibodies for the treatment of cancer; andcancer.
NBE-Therapeutics AG (NBE), which is focused on the discovery and development of multiple ADCs by leveraging NBE’s unique expertise and proprietary platforms in ADC discovery, including NBE’s SMAC-Technology and novel payloads.
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We have already made significant progress under these and other research collaborations and in-licensing arrangements and believe we will continue to do so forduring the remainder of 2023.2024 and in future years. For example, as a direct result of these arrangements, we are advancing fourfive biotherapeutics development candidates:candidates toward potential Investigational New Drug (IND) filings in 2024, 2025 and 2026: XB010, XB014, XB628, XB371, XB064, and XB371.XB033. XB010, our first ADC advanced internally, targets the tumor antigen 5T4. It5T4 and incorporates an antibody sourced from Invenra and was constructed using Catalent’s SMARTag site-specific bioconjugation platform. XB014 and XB628 areis a bispecific antibodies: XB014 combines a PD-L1 targeting arm with a CD47 targeting arm to block a macrophage checkpoint and XB628antibody that targets PD-L1 and NKG2A, identified as key regulators of natural killer cell activity. Both XB014adaptive and XB628 were developed,innate immunity, and was discovered, in part, in collaboration with Invenra. XB371 is a next-generation TF-targeting ADC that is differentiated from XB002 by its topoisomerase inhibitor payload, and was developed,discovered, in part, in collaboration with Catalent. XB064 is a high-affinity mAb that targets ILT2, which is associated with resistance to PD-1 pathway inhibitors, with potential to combine broadly with our internal pipeline and approved immunotherapy agents, and was discovered, in part, in collaboration with Invenra. XB033 is an ADC targeting the tumor antigen IL13Ra2, and was discovered, in part, in collaboration with Invenra and Catalent.
Other Small Molecules
Since its formation in 2000, our drug discovery group has advanced over 25 compounds to the Investigational New Drug (IND)IND stage, either independently or with collaboration partners, and today we deploy our drug discovery expertise to advance small molecule drug candidatesprograms toward and through preclinical development. These efforts are led byThe knowledge and experience gained through our experienced scientists, including some of the same scientists who led the efforts to discover cabozantinib, cobimetinib and esaxerenone, each of which were approved by regulatory authorities and are now commercially distributed, drug products. For example, as discussed above, zanzalintinib,informs our current strategy for discovering and developing additional small molecules with the potential to treat cancer. Zanzalintinib, which was discovered at Exelixis, is furthest along in its clinical development and is now being evaluated in three phase 3 clinical trials. We augment our small molecule discovery activities through research collaborations and in-licensing arrangements with other companies engaged in small molecule discovery. Most recently, in September 2023, we entered into an exclusive global license agreement with Insilico Medicine US, Inc. and its parent company, Insilico Medicine Hong Kong Limited, along with certain other affiliated entities (individually and collectively referred to as Insilico). The agreement with Insilico grants us global rights to develop and commercialize XL309, a potentially best-in-class small molecule inhibitor of USP1, which has emerged as a synthetic lethal target in the context of BRCA-mutated tumors. In April 2023, the FDA cleared the initial INDtumors, is currently being evaluated in a phase 1 clinical trial in patients with advanced solid tumors with enrollment ongoing. Our priorities for XL309 include accelerating its development as a potential therapy for tumors that have become refractory to PARP inhibitors (PARPi), including forms of ovarian, breast and prostate cancers, pursuing potential PARPi combination regimens, and potentially moving beyond the treatment of patients with solid tumors. Examples ofPARPi market into new patient populations. We are also advancing our small molecule development candidate, XL495, toward a potential IND filing later in 2024. XL495 is an inhibitor of PKMYT1 with best-in-class potential to treat solid tumors due to its improved selectivity and pharmacokinetics. Moreover, we continue to make progress on multiple lead optimization programs for inhibitors of a variety of targets that we believe play significant roles in tumor growth, and we anticipate that some of these other programs could reach development candidate status later in 2024 and beyond.
Future Expansion of our Pipeline
Increasing the number of novel anti-cancer agents in our pipeline is essential to our overall strategy and business goals. We are working to expand our oncology product pipeline through drug discovery efforts, which encompass our diverse biotherapeutics and small molecule programs exploring multiple modalities and mechanisms of action. This approach provides a high degree of flexibility with respect to target selection and allows us to prioritize those targets that we believe have the greatest chance of yielding impactful therapeutics. As part of our strategy, our drug discovery activities have included and continue to include research collaborations, and in-licensing arrangements include:
STORM Therapeutics LTD (STORM), which is focused on the discovery and developmentother strategic transactions that collectively incorporate a wide range of inhibitorstechnology platforms and assets and increase our probability of novel RNA modifying enzymes, including ADAR1; and
Aurigene Oncology, Ltd. (Aurigene), which is focused on the discovery and development of novel small molecules as therapies for cancer.
The most advanced compounds to emerge from these arrangements is XL102, our lead program targeting CDK7, in-licensed from Aurigene. We are evaluating XL102, both as a single agent and in combination with other anti-cancer therapies, in QUARTZ-101, a phase 1 study in patients with inoperable, locally advanced or metastatic solid tumors. In December 2022, we announced initial dose-escalation results from QUARTZ-101 during the Poster Session at the 2022 San Antonio Breast Cancer Symposium. The data demonstrated that XL102 was well-tolerated at multiple dose levels, and a pharmacokinetic analysis supported adding investigation of twice-daily oral dosing, as well as introduction to a new formulation; dose escalation is ongoing.
success. As of the date of this Quarterly Report on Form 10-Q, we are currently working on more than 20 discovery programs and, pending data warranting further exploration, we anticipate advancing upexpect to fiveprogress two new development candidates into preclinical development during the remainder of 2023. In addition, welater in 2024. We will continue to engage in business developmentpipeline expansion initiatives with the goal of acquiring and in-licensing promising investigational oncology platforms and assets and then further characterize and develop them utilizing our established preclinical and clinical development infrastructure.
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ThirdFirst Quarter 20232024 Business Updates and Financial Highlights
During the thirdfirst quarter of 20232024, we continued to execute on our business objectives, generating significant revenues from operations and enabling us to continue seekingto seek to maximize the clinical and commercial potential of our products and expand our product pipeline. Significant business updates and financial highlights for the quarter and subsequent to quarter-end include:
Business Updates
In July 2023,January 2024, we appointed Mary C. Beckerle, Ph.D. and S. Gail Eckhardt, M.D. to our Board of Directors. Dr. Beckerle currently serves as Chief Executive Officer of the Huntsman Cancer Institute and Distinguished Professor of Biological and Oncological Sciences at the University of Utah. Dr. Eckhardt currently serves as Associate Dean of Experimental Therapeutics at Baylor College of Medicine and Associate Director of Translational Research at the College’s Dan L. Duncan Comprehensive Cancer Center.
In January 2024, we presented detailed results from CONTACT-02 and four-year follow-up results from CheckMate -9ER at the 2024 ASCO Genitourinary Cancers Symposium.
In January 2024, we announced entry intothat our Board of Directors had authorized a settlementcorporate restructuring plan (the 2024 Restructuring Plan) to reduce our workforce and rebalance our cost structure in alignment with our strategic priorities, including reducing real estate commitments and costs, and terminating certain licensing partnerships. The 2024 Restructuring Plan was initiated in the first quarter of 2024, and we anticipate the plan will be substantially complete in the second quarter of 2024.
agreement with Teva Pharmaceuticals Development, Inc.On March 27, 2024, we received a notice letter from Cipla Ltd. and Teva PharmaceuticalsCipla USA, Inc. (individually and collectively referred to as Teva). This settlement resolves patent litigation we brought in response to Teva’sCipla) asserting additional Paragraph IV Certifications arising from Cipla’s amendment of its Abbreviated New Drug Application (ANDA) seeking approval to market a generic version of CABOMETYX prior to, originally filed with the expiration of certain of our patents.FDA more than one year ago. For a more detailed discussion of this litigationthe Cipla matter, involving Teva, as well as those litigation matters involving MSN and Cipla (each as defined below), see “Legal Proceedings” in Part II, Item 1 of this Quarterly Report on Form 10-Q.
In August 2023, we announced positive results from CONTACT-02, the phase 3 pivotal trial evaluating cabozantinib in combination with atezolizumab versus a second NHT in patients with mCRPC who have been previously treated with an NHT. The combination met one of the primary endpoints, demonstrating a statistically significant improvement in PFS at the primary analysis. At a prespecified interim analysis for the other primary endpoint of OS, a trend toward improvement of OS was observed; however, the data were immature and did not meet the threshold for statistical significance. Therefore, the trial will continue to the next OS analysis as planned. We intend to discuss these findings with the FDA, and detailed findings will be presented at a future medical meeting.
In August 2023, we appointed Amy Peterson, M.D., as our new Executive Vice President, Product Development & Medical Affairs, and Chief Medical Officer of the Company.
In August 2023, we announced the early unblinding and halting of The Alliance’s phase 3 CABINET trial, as unanimously recommended by The Alliance’s independent DSMB due to significant improvements in efficacy observed during an interim analysis. We plan to discuss these results with the FDA.
In September 2023, we entered into an exclusive license agreement with Insilico, which grants us global rights to develop and commercialize XL309.10-Q
As of September 30, 2023,March 31, 2024, we have repurchased $344.8$190.7 million of our common stock. In March 2023,January 2024, we announced that our Board of Directors had authorized the repurchase of up to $550$450 million of our common stock before the end of 2023.
In October 2023, detailed findings from the phase 3 CABINET trial were presented during a Proffered Paper Session at the 2023 ESMO Congress.
In November 2023, we expect to present data from the clear cell RCC expansion cohort of STELLAR-001 at the 2023 International Kidney Cancer Symposium.2024.
Financial Highlights
Net product revenues for the thirdfirst quarter of 20232024 were $426.5$378.5 million, as compared to $366.5$363.4 million for the thirdfirst quarter of 2022.2023.
Total revenues for the thirdfirst quarter of 20232024 were $471.9$425.2 million, as compared to $411.7$408.8 million for the thirdfirst quarter of 2022.2023.
Research and development expenses for the thirdfirst quarter of 20232024 were $332.6$227.7 million, as compared to $198.8$234.2 million for the thirdfirst quarter of 2022.2023.
Selling, general and administrative expenses for the thirdfirst quarter of 20232024 were $138.1$114.0 million, as compared to $115.0$131.4 million for the thirdfirst quarter of 2022.2023.
Provision for income taxes for the thirdfirst quarter of 20232024 was $4.8$12.0 million, as compared to $18.8$8.3 million for the thirdfirst quarter of 2022.2023.
Net income for the thirdfirst quarter of 20232024 was $1.0$37.3 million, or $0.00$0.12 per share, basic and diluted, as compared to net income of $73.2$40.0 million, or $0.23$0.12 per share, basic and diluted, for the thirdfirst quarter of 2022.2023.
See “Results of Operations” below for a discussion of the detailed components and analysis of the amounts above.
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Outlook, Challenges and Risks
We will continue to face numerous challenges and risks that may impact our ability to execute on our business objectives. In particular, for the foreseeable future, we expect our ability to generate sufficient cash flow to fund our business operations and growth will depend upon the continued commercial success of CABOMETYX, both alone and in combination with other therapies, as a treatment for the highly competitive indications for which it is approved, and possibly for other indications for which cabozantinib is currently being evaluated in potentially label-enabling clinical trials, if warranted by the data generated from these trials. However, we cannot be certain that the clinical trials we and our collaboration partners are conducting will demonstrate adequate safety and efficacy in these additional indications to receive regulatory approval in the major commercial markets where CABOMETYX is approved.
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Even if the required regulatory approvals to market CABOMETYX for additional indications are achieved, we and our collaboration partners may not be able to commercialize CABOMETYX effectively and successfully in these additional indications. In addition, CABOMETYX will only continue to be commercially successful if private third-party and government payers continue to provide coverage and reimbursement. As is the case for all innovative pharmaceutical therapies, obtaining and maintaining coverage and reimbursement for CABOMETYX is becoming increasingly difficult, both within the U.S. and in foreign markets. In addition, healthcare policymakers in the U.S. are increasingly expressing concern over healthcare costs, and corresponding legislative and policy initiatives and activities have been launched aimed at increasing the healthcare cost burdens borne by pharmaceutical manufacturers, as well as expanding access to, and restricting the prices and growth in prices of, pharmaceuticals.
Achievement of our business objectives will also depend on our ability to maintain a competitive position in the shifting landscape of therapeutic strategies for the treatment of cancer, which we may not be able to do. On an ongoing basis, we assess the constantly evolving landscape of other approved and investigational cancer therapies that could be competitive, or complementary in combination, with our products, and then we adapt our development strategies for the cabozantinib franchise and our pipeline product candidates accordingly, such as by modifying our clinical trials to include evaluation of our therapies with ICIs and other targeted agents. Even if our current and future clinical trials including those evaluating cabozantinib in combination with an ICI in mCRPC or evaluating zanzalintinib in combination with an ICI in CRC and RCC, produce positive results sufficient to obtain marketing approval by the FDA and other global regulatory authorities, it is uncertain whether physicians will choose to prescribe regimens containing our products instead of competing products and product combinations in approved indications.
In the longer term, we may eventually face competition from potential manufacturers of generic versions of our marketed products, including the proposed generic versions of CABOMETYX tablets that are the subject of ANDAs submitted to the FDA by MSN, Teva (as defined below) and Cipla. The approval of any of these ANDAs and subsequent launch of any generic version of CABOMETYX could significantly decrease our revenues derived from the U.S. sales of CABOMETYX and thereby materially harm our business, financial condition and results of operations.
Separately, our research and development objectives may be impeded by the challenges of scaling our organization to meet the demands of expanded drug development, unanticipated delays in clinical testing and the inherent risks and uncertainties associated with drug discovery operations, especially on the global level. In particular, political tensions and outbreaks of hostilities in various regions of the world, most recently the conflict between Israel and Hamas, have had modest impacts on our clinical development operations and may continue to affect our ability to enroll patients and adhere to trial protocols and other procedures. Moreover,connection with respect to our efforts to expand our product pipeline, we may be unsuccessful in discovering new drug candidatespotential cancer treatments or identifying appropriate candidates for in-licensing or acquisition.
Some of these challenges and risks are specific to our business, others are common to companies in the biopharmaceutical industry with development and commercial operations, and an additional category are macroeconomic, affecting all companies. For a more detailed discussion of challenges and risks we face, see “Risk Factors” in Part I, Item 1A of our 2023 Form 10-K, as supplemented and, to the extent inconsistent, superseded below (if applicable) in Part II, Item 1A of this Quarterly Report on Form 10-Q.
Fiscal Year Convention
We have adopted a 52- or 53-week fiscal year policy that generally ends on the Friday closest to December 31st. Fiscal year 2023,2024, which is a 52-week53-week fiscal year, will end on December 29, 2023January 3, 2025 and fiscal year 2022,2023, which was a 52-week fiscal year, ended on December 30, 2022.29, 2023. For convenience, references in this report as of and for the fiscal periodsperiod ended SeptemberMarch 29, 2023,2024, and as of and for the fiscal years ending December 29, 2023January 3, 2025 and ended December 30, 202229, 2023 are indicated as being as of and for the periodsperiod ended September 30, 2023,March 31, 2024, and the years ending December 31, 20232024 and ended December 31, 2022,2023, respectively.
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Results of Operations
Revenues
Revenues by category were as follows (dollars in thousands):
Three Months Ended September 30,Percent ChangeNine Months Ended September 30,Percent ChangeThree Months Ended March 31,Percent Change
2023202220232022
Net product revenuesNet product revenues$426,497 $366,482 16 %$1,199,543 $1,023,824 17 %
Net product revenues
Net product revenues$378,523 $363,400 %
License revenuesLicense revenues42,367 34,384 23 %133,406 123,977 %License revenues44,676 38,292 38,292 17 17 %
Collaboration services revenuesCollaboration services revenues3,056 10,872 -72 %17,607 39,344 -55 %Collaboration services revenues2,027 7,096 7,096 -71 -71 %
Total revenuesTotal revenues$471,920 $411,738 15 %$1,350,556 $1,187,145 14 %Total revenues$425,226 $$408,788 %
Net Product Revenues
Gross product revenues, discounts and allowances and net product revenues were as follows (dollars in thousands):
Three Months Ended September 30,Percent ChangeNine Months Ended September 30,Percent ChangeThree Months Ended March 31,Percent Change
2023202220232022
Gross product revenuesGross product revenues$590,442 $496,141 19 %$1,674,937 $1,427,451 17 %
Gross product revenues
Gross product revenues$563,785 $521,322 %
Discounts and allowancesDiscounts and allowances(163,945)(129,659)26 %(475,394)(403,627)18 %Discounts and allowances(185,262)(157,922)(157,922)17 17 %
Net product revenuesNet product revenues$426,497 $366,482 16 %$1,199,543 $1,023,824 17 %Net product revenues$378,523 $$363,400 %
Net product revenues by product were as follows (dollars in thousands):
Three Months Ended September 30,Percent ChangeNine Months Ended September 30,Percent ChangeThree Months Ended March 31,Percent Change
2023202220232022
CABOMETYXCABOMETYX$422,155 $361,385 17 %$1,187,220 $1,003,356 18 %
CABOMETYX
CABOMETYX$376,417 $361,773 %
COMETRIQCOMETRIQ4,342 5,097 -15 %12,323 20,468 -40 %COMETRIQ2,106 1,627 1,627 29 29 %
Net product revenuesNet product revenues$426,497 $366,482 16 %$1,199,543 $1,023,824 17 %Net product revenues$378,523 $$363,400 %
The increasesincrease in net product revenues for the three and nine months ended September 30, 2023,March 31, 2024, as compared to the corresponding prior year periods, wereperiod, was primarily related to increases of 11% and 10%, respectively, for each perioda 5% increase in the number of CABOMETYX units sold as a result of the FDA’s approval of CABOMETYX in combination with OPDIVOnivolumab as a first-line treatment of patients with advanced RCC. These increasesRCC, partially offset by a 1% decrease in the average net selling price of CABOMETYX. The increase in sales volume are in part due tois largely driven by refills, reflecting the longer duration of therapy for this combination, and increasesan increase in related market share reflecting the continued evolution of the metastatic RCC, HCC and DTC treatment landscapes, and, to a lesser extent, increases of 5% and 7% in the average net selling price of CABOMETYX for the three and nine months ended September 30, 2023, respectively, as compared to the corresponding prior year periods.landscapes.
We project our net product revenues may increase for the remainder of 2023,2024, as compared to the corresponding prior year period, for similar reasons noted above.
We recognize product revenues net of discounts and allowances that are described in “Note 1. Organization and Summary of Significant Accounting Policies” of the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of our Fiscal 20222023 Form 10-K.
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Discounts and allowances as a percentage of gross revenues have generally increased over time as the number of patients participating in government programs has increased and as the discounts given and rebates paid to government payers have also increased. The increasesincrease in the amount of discounts and allowances for the three and nine months ended September 30, 2023March 31, 2024, as compared to the corresponding prior year periods, wereperiod, was primarily the result of increases in volume of units sold and higher utilization by covered entities in the 340B Drug Pricing Program.
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We project our discounts and allowances as a percentage of gross revenues may increase for the remainder of 2023,2024, as compared to the corresponding prior year period, for similar reasons noted above.
License Revenues
License revenues include: (a) the recognition of the portion of milestone payments allocated to the transfer of intellectual property licenses for which it had become probable, in the related period, that a milestone would be achieved and a significant reversal of revenues would not occur in future periods; (b) royalty revenues; and (c) the profit on the U.S. commercialization of COTELLIC from Genentech.
Milestone revenues, which are allocated betweenThere were no milestone payments recognized in license revenues andor collaboration services revenues were $0.9 million and $13.1 million forduring the three and nine months ended September 30, 2023, respectively, as compared to $1.7 millionMarch 31, 2024 and $28.5 million for the corresponding prior year periods. Milestone revenues by period included the following:
For the nine months ended September 30, 2023, $9.9 million in revenues recognized in connection with a commercial milestone of $11.0 million from Takeda upon their achievement of $150.0 million of cumulative net sales of cabozantinib in Japan.
For the nine months ended September 30, 2022, $25.8 million in revenues recognized in connection with two regulatory milestones totaling $27.0 million upon the approval by the European Commission and Health Canada of cabozantinib as a monotherapy for the treatment of adult patients with locally advanced or metastatic DTC, refractory or not eligible to radioactive iodine who have progressed during or after prior systemic therapy.
2023. Royalty revenues increased primarily as a result of increasesan increase in Ipsen’s net sales of cabozantinib outside of the U.S. and Japan. Ipsen royalties were $34.8 million and $98.6$36.9 million for the three and nine months ended September 30, 2023, respectively,March 31, 2024, as compared to $27.6 million and $79.7$29.8 million for the corresponding prior year periods. period.
Ipsen’s net sales of cabozantinib have continued to grow since Ipsen’sthe first commercial sale of CABOMETYX in the fourth quarter ofIpsen territories in 2016, primarily due to regulatory approvals in new territories, including regulatory approval in the EU for the combination therapy of CABOMETYX and OPDIVOnivolumab received in March 2021. Royalty revenues for the three and nine months ended September 30, 2023 also included $3.0 million and $9.2 million, respectively,March 31, 2024 related to Takeda’s net sales of cabozantinib were $2.7 million, as compared to $2.7 million and $7.8$2.9 million for the corresponding prior year periods. Takeda royalty revenuesperiod, and were unfavorably impacted by foreign currency rate fluctuations. Takeda’s net sales of cabozantinib have continued to grow since Takeda’s first commercial sale of CABOMETYX in Japan in 2020. CABOMETYX is approved and is commercially available in 6768 countries outside the U.S. as of the date of this Quarterly Report on Form 10-Q.
Our share of profits on the U.S. commercialization of COTELLIC under our collaboration agreement with Genentech were $2.1 million and $10.5was $2.6 million for the three and nine months ended September 30, 2023, respectively,March 31, 2024, as compared to $1.5 million and $5.3$2.9 million for the corresponding prior year periods.period. We also earned royalties on ex-U.S. net sales of COTELLIC by Genentech of $1.0 million and $3.0$0.8 million for the three and nine months ended September 30, 2023, respectively,March 31, 2024, as compared to $1.5 million and $4.0$1.1 million for the corresponding prior year periods.period.
Due to uncertainties surrounding the timing and achievement of regulatory and development milestones, it is difficult to predict future milestone revenues and milestones can vary significantly from period to period.
Collaboration Services Revenues
Collaboration services revenues include the recognition of deferred revenues for the portion of upfront and milestone payments that have been allocated to research and development services performance obligations, development cost reimbursements earned under our collaboration agreements and product supply revenues, which are net of product supply costs and the royalties we pay to Royalty Pharma on sales by Ipsen and Takeda of products containing cabozantinib.
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Development cost reimbursements were $7.3 million and $27.5$6.3 million for the three and nine months ended September 30, 2023, respectively,March 31, 2024, as compared to $13.1 million and $47.7$10.5 million for the corresponding prior year periods.period. The decreasesdecrease in development cost reimbursements for the three and nine months ended September 30, 2023, as compared to the corresponding prior year periods, werewas primarily attributable to decreases in spending on the COSMIC-312, CONTACT-02 and COSMIC-311COSMIC-021 studies.
Collaboration services revenues were reduced by $4.8 million and $14.2$5.4 million for the three and nine months ended September 30, 2023, respectively,March 31, 2024, as compared to $3.9 million and $11.9$4.5 million for the corresponding prior year periods,period, to account for the 3% royalty we are required to pay on the net sales by Ipsen and Takeda of any product incorporatingcontaining cabozantinib. As royalty generating sales of cabozantinib by Ipsen and Takeda have increased as described above, our royalty payments have also increased.
We project our collaboration services revenues may decrease for the remainder of 2023,2024, as compared to the corresponding prior year period, primarily as a result of a decrease in development cost reimbursement revenues and uncertainties regarding the timing and achievement of milestone revenues.
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Cost of Goods Sold
The cost of goods sold and our gross marginmargins were as follows (dollars in thousands):
Three Months Ended September 30,Percent ChangeNine Months Ended September 30,Percent ChangeThree Months Ended March 31,Percent Change
2023202220232022
Cost of goods soldCost of goods sold$18,774 $15,305 23 %$50,794$41,98921 %
Cost of goods sold
Cost of goods sold$21,256$14,31548 %
Gross margin %Gross margin %96 %96 %96 %96 %
Gross margin %
Gross margin %
Cost of goods sold is related to our product revenues and consists of a 3% royalty payable on U.S. net sales of any product incorporatingcontaining cabozantinib, as well as the cost of inventory sold, indirect labor costs, write-downs related to expiring, excess and obsolete inventory and other third-party logistics costs. The increasesincrease in cost of goods sold for the three and nine months ended September 30, 2023,March 31, 2024, as compared to the corresponding prior year periods, wereperiod, was primarily due to increasesan increase inroyalties as a result of increased U.S. CABOMETYX sales and certain period costs.costs, including an increase in write-downs for excess inventory. We project our gross margin will not change significantly during the remainder of 2023.2024.
Research and Development Expenses
We do not track fully burdened research and development expenses on a project-by-project basis. We group our research and development expenses into three categories: (1) development; (2) drug discovery; and (3) other research and development. Our development group leads the development and implementation of our clinical and regulatory strategies and prioritizes disease indications in which our compounds are being or may be studied in clinical trials.
Development expenses include license and other collaboration costs, primarily comprised of upfront license fees, development milestones and other payments associated with our clinical-stage in-licensing collaboration programs, clinical trial costs, personnel expenses, consulting and outside services and other development costs, including manufacturing costs of our drug development candidates. Our drug discovery group utilizes a variety of technologies, including in-licensed technologies, to enable the rapid discovery, optimization and extensive characterization of lead compounds and biotherapeutics such that we are able to select development candidates with the best potential for further evaluation and advancement into clinical development. Drug discovery expenses include license and other collaboration costs primarily comprised of upfront license fees, research funding commitments, development milestones and other payments associated with our in-licensing collaboration programs in preclinical development stage. Other drug discovery costs include personnel expenses, consulting and outside services and laboratory supplies. Other research and development expenses include the allocation of general corporate costs to research and development services and development cost reimbursements in connection with certain of our collaboration arrangements.
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Research and development expenses by category were as follows (dollars in thousands):
Three Months Ended September 30,Percent ChangeNine Months Ended September 30,Percent Change
2023202220232022
Development:Development:
Development:
Development:
Clinical trial costs
Clinical trial costs
Clinical trial costsClinical trial costs$76,845 $71,210 %$197,647 $190,996 %
Personnel expensesPersonnel expenses43,786 33,262 32 %127,846 104,841 22 %
Personnel expenses
Personnel expenses
License and other collaboration costs
License and other collaboration costs
License and other collaboration costsLicense and other collaboration costs80,013 (12,500)n/a80,022 (12,500)n/a
Consulting and outside servicesConsulting and outside services9,835 8,954 10 %30,803 24,300 27 %
Consulting and outside services
Consulting and outside services
Other development costs
Other development costs
Other development costsOther development costs24,286 10,890 123 %65,150 31,962 104 %
Total developmentTotal development234,765 111,816 110 %501,468 339,599 48 %
Total development
Total development
Drug discovery:
Drug discovery:
Drug discovery:Drug discovery:
License and other collaboration costsLicense and other collaboration costs23,437 24,268 -3 %85,014 67,077 27 %
License and other collaboration costs
License and other collaboration costs
Other drug discovery costs
Other drug discovery costs
Other drug discovery costsOther drug discovery costs31,265 24,806 26 %93,333 64,246 45 %
Total drug discoveryTotal drug discovery54,702 49,074 11 %178,347 131,323 36 %
Total drug discovery
Total drug discovery
Stock-based compensation
Stock-based compensation
Stock-based compensationStock-based compensation12,438 16,438 -24 %25,279 34,886 -28 %
Other research and developmentOther research and development30,680 21,509 43 %94,307 49,181 92 %
Other research and development
Other research and development
Total research and development expensesTotal research and development expenses$332,585 $198,837 67 %$799,401 $554,989 44 %
Total research and development expenses
Total research and development expenses
The increases decrease in research and development expenses for the three and nine months ended September 30, 2023,March 31, 2024, as compared to the corresponding prior year periods, wereperiod, was primarily related to increasesdecreases in license and other collaboration costs personnel expenses,and other drug discovery costs, partially offset by increases in clinical trial costs and manufacturing costs to support Exelixis’ development candidates (presented as part of other development costs), other research and development expenses and clinical trial costs, partially offset by a decrease in stock-based compensation expense..
Development-related licenseLicense and other collaboration costs increaseddecreased primarily due to an $80.0lower drug-discovery development milestone achievement related to a $35.0 million upfront payment mademilestone achieved by Sairopa upon the execution of the exclusive license agreement with Insilico in September 2023 and the reversal of a development milestoneIND effective date for ADU-1805 in the third quarter of 2022. Personnel expenses increasedprior year, partially offset by higher development-related milestone achievement in our clinical-stage in-licensing collaboration programs. Other drug discovery costs decreased primarily due to an increasedecreases in headcount to support our expanding discoverylaboratory supplies and development organization. Other development costs increased primarily due to manufacturing costs to support our development candidates. Other researchconsulting and development expenses increased primarily related to technology costs, including our investments in business technology initiatives to support productivity and efficiency in our organization, and increases in facility expenses.outside services. Clinical trial costs, which include services performed by third-party contract research organizations and other vendors who support our clinical trials, increased primarily due to higher costs associated with various studies evaluating zanzalintinib and XB002, partially offset by decreases in costs associated with cabozantinib studies. Drug discovery-related license and other collaboration costs decreased for the three months ended September 30, 2023 primarily due to lower research and development funding, as compared to the corresponding prior year period.Drug discovery-related license and other collaboration costs increased for the nine months ended September 30, 2023, primarily due to a $35.0 million milestone payment to Sairopa upon the IND effective date for ADU-1805, partially offset by lower new upfront license fees. Stock-based compensation expense decreased, as compared to the corresponding prior year periods, primarily due to higher forfeitures.
In addition to reviewing the three categories of research and development expenses described above, we principally consider qualitative factors in making decisions regarding our research and development programs. These factors include enrollment in clinical trials for our drugproduct candidates, preliminary data and final results from clinical trials, the potential market indications and overall clinical and commercial potential for our drugproduct candidates, and competitive dynamics. We also make our research and development decisions in the context of our overall business strategy.
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TableWe project that clinical trial costs may increase for the remainder of Contents
2024, as compared to the corresponding prior year period, primarily driven by higher costs associated with various studies evaluating zanzalintinib, XB002 and XL309, partially offset by decreases in costs associated with cabozantinib studies. We continue to focus our development efforts onwith cabozantinib to maximize the therapeutic and commercial potential of this compound. Notable ongoing company-sponsored cabozantinib studies resulting from this program include: CONTACT-02, for which Roche is sharing the development costs and providing atezolizumab free of charge; and COSMIC-313, for which BMS is providing nivolumab and ipilimumab free of charge. In addition,
To continue growing our pipeline, we projectare prioritizing investment in new molecules that a substantial portionare clinically differentiated with the potential to improve the standard of care for our researchcancer patients, including current and development expenses will relate to theplanned clinical development of our small molecule product candidate,trial programs evaluating zanzalintinib, XB002 and our first biotherapeutics product candidate, XB002.
XL309. We are expandingworking to expand our oncology product pipeline through drug discovery efforts, which encompass bothour diverse biotherapeutics and small molecule programs withexploring multiple modalities and mechanisms of action,action. This approach provides a high degree of flexibility with respect to target selection and allows us to prioritize those targets that we believe have the greatest chance of yielding impactful therapeutics. As part of our strategy, our drug discovery activities have included and continue to include research collaborations, in-licensing arrangements and other strategic transactions that collectively incorporate a wide range of technology platforms and assets
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and increase our probability of success. As of the date of this Quarterly Report on Form 10-Q, we expect to progress two new development candidates into preclinical development later in 2024. We will continue to engage in pipeline expansion initiatives with the goal of identifying new product candidates to advance into clinical trials. We also continue to engage in business development initiatives aimed at acquiring and in-licensing promising investigational oncology platformsassets and assets, with the goal ofthen further characterize and develop them utilizing our established preclinical and clinical development infrastructure to further characterize and develop such platforms and assets.infrastructure.
We project our research and development expenses may decrease for the remainder of 2023,2024, as compared to the corresponding prior year period, primarily driven by decreases in license and collaboration upfront fees,expenses and consulting and outside services that result from the implementation of the 2024 Restructuring Plan to prioritize the advancement of clinical and near-clinical programs, partially offset by increases in personnel expenseshigher manufacturing costs to support our expanding discovery and development organizationcandidates and clinical trial costs, including the current and planned trials evaluating zanzalintinib, XB002 and XB002.XL309.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were as follows (dollars in thousands):
Three Months Ended September 30,Percent ChangeNine Months Ended September 30,Percent ChangeThree Months Ended March 31,Percent Change
2023202220232022
Selling, general and administrative expenses(1)
Selling, general and administrative expenses(1)
$110,104 $94,084 17 %$354,504 $293,773 21 %
Selling, general and administrative expenses(1)
Selling, general and administrative expenses(1)
$98,763 $117,988 -16 %
Stock-based compensationStock-based compensation28,040 20,899 34 %56,760 46,832 21 %
Stock-based compensation
Stock-based compensation15,221 13,409 14 %
Total selling, general and administrative expensesTotal selling, general and administrative expenses$138,144 $114,983 20 %$411,264 $340,605 21 %Total selling, general and administrative expenses$113,984 $$131,397 -13 -13 %
______________________________________
(1) Excludes stock-based compensation allocated to selling, general and administrative expenses.
Selling, general and administrative expenses consist primarily of personnel expenses, stock-based compensation, marketing costs and certain other administrative costs.
The increasesdecrease in selling, general and administrative expenses for the three and nine months ended September 30, 2023,March 31, 2024, as compared to the corresponding prior year periods, wereperiod, was primarily related to increasesdecreases in personnel expenses, stock-based compensation expense, technology costs, facility expenses andcorporate giving, legal and advisory fees, related to litigationthe Branded Prescription Drug Fee and the proxy contest. Personnelpersonnel expenses, increasedpartially offset by an increase in marketing and stock-based compensation expenses. Legal and advisory fees decreased primarily due to increasesa reduction in administrative headcountactivities related to support our commercial and research and development organizations.litigation. Personnel expenses decreased primarily due to the implementation of the 2024 Restructuring Plan. Stock-based compensation expense increased primarily due to higher expense associated with the achievement of a performance condition for PSUs. The increases in technology costs include our investments in business technology initiatives to support productivity and efficiency in our organization. The increase in facility expenses was primarily due to the commencement of new leases in 2022.RSUs, partially offset by higher forfeitures.
We project our selling, general and administrative expenses may increasedecrease for the remainder of 2023,2024, as compared to the corresponding prior year period, due to increases in personnel expenses forprimarily driven by our cost-saving initiatives, including the impact of the 2024 Restructuring Plan, and similar reasons noted above.
Restructuring Expenses
Restructuring expenses resulted from the execution of the 2024 Restructuring Plan to reduce our workforce and rebalance our cost structure in alignment with our strategic priorities. Restructuring expenses consist of severance and employee-related costs, asset impairment, and contract termination costs. We incurred the majority of the charges related to the 2024 Restructuring Plan in the three months ended March 31, 2024, and expect the plan to be substantially completed in the second quarter of 2024. See “Note 11. Restructuring” of the “Notes to Condensed Consolidated Financial Statements” included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.
Restructuring expenses were as follows (dollars in thousands):
 Three Months Ended March 31,Percent Change
 20242023
Restructuring expenses$32,835 $— n/a
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Non-Operating Income
Non-operating income was as follows (dollars in thousands):
Three Months Ended September 30,Percent ChangeNine Months Ended September 30,Percent ChangeThree Months Ended March 31,Percent Change
2023202220232022
Interest incomeInterest income$23,112 $9,498 143 %$65,155 $16,077 305 %
Other income (expense), net289 (69)n/a230 140 64 %
Interest income
Interest income$19,894 $19,502 %
Other expense, netOther expense, net(89)(54)65 %
Non-operating incomeNon-operating income$23,401 $9,429 148 %$65,385 $16,217 303 %Non-operating income$19,805 $$19,448 %
The increasesincrease in non-operating income for the three and nine months ended September 30, 2023,March 31, 2024, as compared to the corresponding prior year periods, wereperiod, was primarily the result of an increase in interest income due to higher interest rates.rates, partially offset by lower average interest-bearing 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 September 30,Percent ChangeNine Months Ended September 30,Percent ChangeThree Months Ended March 31,Percent Change
2023202220232022
Provision for income taxesProvision for income taxes$4,777 $18,832 -75 %$32,235 $53,324 -40 %
Provision for income taxes
Provision for income taxes$11,950 $8,250 45 %
Effective tax rateEffective tax rate82.1 %20.5 %20.9 %20.1 %Effective tax rate24.3 %17.1 %42 %
The effective tax rate for the three months ended September 30, 2023,March 31, 2024, differed from the U.S. federal statutory tax rate of 21%, primarily due to non-deductible executive compensationstate taxes and the branded prescription drug fee, partiallyinterest on uncertain tax positions, offset by the generation of federal tax credits. The effective tax rate for the ninethree months ended September 30,March 31, 2023, differed from the U.S. federal statutory tax rate of 21%, primarily due to the generation of federal tax credits, partially offset by non-deductible executive compensation and state taxes. The effective tax rates for the three and nine months ended September 30, 2022, differed from the U.S. federal statutory tax rate of 21%, primarily due to excess tax benefits related to the exercise of certain stock options during the periodsperiod and the generation of federal tax credits, partially offset by state taxes.
Liquidity and Capital Resources
As of September 30, 2023,March 31, 2024, we had $1.9$1.6 billion in cash, cash equivalents and investments, as compared to $2.1$1.7 billion as of December 31, 2022.2023. We anticipate that the aggregate of our current cash and cash equivalents, short-term investments available for operations, net product revenues and collaboration revenues will enable us to maintain our operations for at least 12 months and thereafter for the foreseeable future.
We project our cash requirements for operating activities may decrease for the remainder of 2024, as compared to the corresponding period in 2023, in part due to the implementation of the 2024 Restructuring Plan to reduce our workforce and rebalance our cost structure in alignment with our strategic priorities.
Our primary cash requirements for operating activities which we project will increase for the remainder of 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; income tax payments; royalty payments on our net product sales; cash payments for inventory; rent payments for our leased facilities; and contract manufacturing payments.payments; and restructuring cash payments related to the 2024 Restructuring Plan.
The Tax Cuts and Jobs Act, signed into law on December 22, 2017, modified the tax treatment of research and development expenditures beginning in fiscal year 2022. Research and development expenditures are no longer currently deductible but instead must be amortized ratably over five years for domestic expenditures or 15 years for foreign expenditures. As a result, we anticipate a higher federal income tax liability in 2023 and expect to payfiscal year 2024, which will require higher estimated federal taxestax payments by the end of 2023.2024. We will realize a reduction of our federal income tax liability in future years as the capitalized research and development expenditures are amortized for tax purposes.
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Our primary sources of operating cash are: cash collections from customers related to net product sales,revenues, which we project willmay increase for the remainder of 2023,2024, as compared to the corresponding period in 2022;2023; cash collections related to milestones achieved and royalties earned from our commercial collaboration arrangements with Ipsen, Takeda and others; and cash collections for cost reimbursements under certain of our development programs with Ipsen and Takeda which we project may decrease for the remainder of 2023,2024, as compared to the corresponding period in 2022.2023. 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 to fund the development and commercialization of cabozantinib and the development of other product candidates in our pipeline, including zanzalintinib, XB002 and XB002.XL309, and the development and commercialization of cabozantinib. In addition, we intend tomay 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,January 2024, our Board of Directors authorized the repurchase of up to $550$450 million of our common stock before the end of 2023.2024. As of September 30, 2023,March 31, 2024, approximately $205.2$259.3 million remained available for future stock repurchases before the end of 2023,2024, pursuant to our stock repurchase program. The timing and amount of anyany 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, we may choose to incur debt or raise additional funds through the issuance of equity based on market conditions or strategic considerations.
Sources and Uses of Cash (dollars in thousands):
September 30, 2023December 31, 2022Percent Change
Working capitalWorking capital$1,066,553 $1,294,403 -18 %
Working capital
Working capital
Cash, cash equivalents and investmentsCash, cash equivalents and investments$1,915,067 $2,066,681 -7 %
Cash, cash equivalents and investments
Cash, cash equivalents and investments
Working capital:Capital
The modest decrease in working capital as of September 30, 2023,March 31, 2024, as compared to December 31, 2022,2023, was primarily due to repurchases of our common stock, and purchases of long-term investments, 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.
Cash, cash equivalentsCash Equivalents and investments:Investments
Cash and cash equivalents primarily consist of cash deposits held at major banks, commercial paper, money market funds, commercial paper 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,” of the “Notes to Condensed Consolidated Financial Statements” included in Part I, Item 1 of this Quarterly Report on Form 10-Q. The decrease in cash, cash equivalents and investments as of September 30, 2023,March 31, 2024, as compared to December 31, 2022,2023, was primarily due to cash payments to repurchase our common stock, payments to support our development and discovery programs, including acquisition of acquired in-process research and development technology, such as the upfront payment made upon execution of the exclusive license agreement with Insilico and operating cash payments for employee-related expenditures and restructuring, partially offset by cash inflows generated by our operations from sales of our products and our commercial collaboration arrangements.
Cash flow activities were as follows (in thousands):
 Nine Months Ended September 30,
 20232022
Net cash provided by operating activities$322,753 $288,920 
Net cash used in investing activities$(88,692)$(278,632)
Net cash provided by (used in) financing activities$(339,879)$2,589 
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Cash flow activities were as follows (dollars in thousands):
 Three Months Ended March 31,
 20242023
Net cash provided by operating activities$68,822 $84,408 
Net cash provided by (used in) investing activities$111,793 $(49,592)
Net cash provided by (used in) financing activities$(184,048)$4,586 
Operating Activities
Cash provided by operating activities is derived by adjusting our net income for non-cash operating items such as deferred taxes, stock-based compensation, depreciation, non-cash lease expense and long-lived assets impairment and changes in operating assets and liabilities, which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in our Condensed Consolidated Statements of Income.
Net cash provided by operating activities for the ninethree months ended September 30, 2023 increased,March 31, 2024 decreased, as compared to the corresponding prior year period, primarily due to an increase in cash received on sales of our products and a decreaincrease in cash paid for certain operating expenses, primarily from collaborationincluding cash payments related research and development payments, to the 2024 Restructuring Plan, partially offset by the collectionan increase in cash received on sales of a $100.0 million milestone payment from Ipsen in the three months ended March 31, 2022.our products.
Investing Activities
The changes in cash flows from investing activities primarily relates to the timing of marketable securities investment activity, acquisition of acquired in-process research and development technology and capital expenditures. Our capital expenditures primarily consist of investments to expand our operations and acquire assets that further support our research and development activities.activities.
Net cash was provided by investing activities for the three months ended March 31, 2024, as compared to net cash used in investing activities for the nine months ended September 30, 2023 decreased, as compared toin the corresponding prior year period,period. The increase in cash provided by investing activities was primarily due to a decrease in purchases of investments and increase in cash proceeds from maturities and sales of investments, partially offset by an increase in purchases of in-process research and development technology related to certain of our in-licensing collaboration arrangements.arrangements, partially offset by a decrease in cash proceeds from maturities and sales of investments.
Financing Activities
The changes in cash flows from financing activities primarily relate to payments for repurchases of common stock, proceeds from employee stock programs and taxes paid related to net share settlement of equity awards, and payments for repurchases of common stock.awards.
Net cash was used in financing activities for the ninethree months ended September 30, 2023,March 31, 2024, as compared to cash provided by financing operationsactivities in the corresponding prior year period, period. During the three months ended March 31, 2024,cash used in financing activities was primarily duerelated to payments for repurchases of common stock.
stock, which were $185.4 million. During the ninethree months ended September 30,March 31, 2023, payments for repurchasescash provided by financing activities was primarily related to proceeds from employee stock programs that were offset by withholding taxes remitted to the government related to net share settlements of common stock were $341.1 million.equity awards.
Contractual Obligations
In May 2023,The 2024 Restructuring Plan was initiated in connection with the commencementfirst quarter of 2024, and we anticipate the plan will be substantially complete in the second quarter of 2024. As part of our lease of laboratory facilities located in Pennsylvania,2024 Restructuring Plan, we recognizedhave terminated certain in-licensing collaboration arrangements, and as a right-of-use assetresult our contingent payments for potential future development, regulatory and an operating lease liability of $13.2 million. We estimated the lease term to be 60 months taking into consideration our early termination rights.commercial milestones have decreased.
There were no material changes outside of the ordinary course of business in our contractual obligations as of September 30, 2023 from those disclosed in our Fiscal 2022 Form 10-K. For more information about our leases,See “Note 3. Collaboration Agreements and our other contractual obligations, see “Note 10. Commitments and Contingencies”Business Development Activities” of the “Notes to Condensed Consolidated Financial Statements” included in Part I, Item I of this Quarterly Report on Form 10-Q10-Q. For more information about the 2024 Restructuring Plan impact to our leases and other contractual obligations, see “Note 11. Restructuring” of the “Notes to Condensed Consolidated Financial Statements” included in Part I, Item I of this Quarterly Report on Form 10-Q.
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There were no other material changes outside of the ordinary course of business in our contractual obligations as of March 31, 2024 from those disclosed in our Fiscal 2023 Form 10-K. For more information about our leases and our other contractual obligations, see “Note 11. Commitments and Contingencies” of the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of our Fiscal 20222023 Form 10-K.
Critical Accounting Policies and Estimates
The preparation of our Condensed Consolidated Financial Statements conforms to accounting principles generally accepted in the U.S. which requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosures. An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our Condensed Consolidated Financial Statements. On an ongoing basis, management evaluates its estimates, including, but not limited to: those related to revenue recognition, including determining the nature and timing of satisfaction of performance obligations, and determining the standalone selling price of performance obligations, and variable consideration such as rebates,
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chargebacks, sales returns and sales allowances as well as milestones included in collaboration arrangements; the amounts of revenues and expenses under our profit and loss sharing agreement; recoverability of inventory; the accrual for certain liabilities, including accrued clinical trial liabilities; and valuations of equity awards used to determine stock-based compensation, including certain awards with vesting subject to market and/or performance conditions; and the amounts of deferred tax assets and liabilities, including the related valuation allowance. We base our estimates on historical experience and on various other market-specific and other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our senior management has discussed the development, selection and disclosure of these estimates with the Audit Committee of our Board of Directors. Actual results could differ materially from those estimates.
We believe our critical accounting policies relating to revenue recognition, inventory, clinical trial and collaboration accruals, stock-based compensation and income taxes reflect the mostmore 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 ninethree months ended September 30, 2023,March 31, 2024, as compared to the critical accounting policies and estimates disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part II, Item 7 of our Fiscal 20222023 Form 10-K.
Recent Accounting Pronouncements
For a description of the expected impact of recent accounting pronouncements, see “Note 1. Organization and Summary of Significant Accounting Policies” of the “Notes to Condensed Consolidated Financial Statements” included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures About Market RiskRisk.
Our market risks as of September 30, 2023March 31, 2024 have not changed significantly from those described in Part II, Item 7A of our Fiscal 20222023 Form 10-K.
Item 4. Controls and ProceduresProcedures.
Evaluation of disclosure controlsDisclosure Controls and procedures.Procedures
Based on the evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)) required by Rules 13a-15(b) or 15d-15(b) of the Exchange Act, our Chief Executive Officer and Chief Financial Officer have concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective at the reasonable assurance level.
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Limitations on the effectivenessEffectiveness of controls.Controls
A control system, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within an organization have been detected. Accordingly, our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met and, as set forth above, our principal executive officer and principal financial officer have concluded, based on their evaluation as of the end of the period covered by this report, that our disclosure controls and procedures were effective to provide reasonable assurance that the objectives of our disclosure control system were met.
Changes in internal controlInternal Control over financial reporting. 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. IIOTHER INFORMATION
Item 1. Legal ProceedingsProceedings.
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 Approved Drug Products with Therapeutic Equivalence Evaluations, also referred to as 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 Approved Drug Products with Therapeutic Equivalence Evaluations, also referred to as the Orange Book.Book, for CABOMETYX. On October 29, 2019, we filed a complaint in the United StatesDelaware District Court for the District of Delaware (the 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 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 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 thisthe MSN I 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 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).

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MSN II ANDA Litigation
On January 11, 2022, we received notice from MSN that it had further amended its 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 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 11,098,015 arising from 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. Patent No. 11,298,349 (pharmaceutical composition). On July 18, 2022, we filed a complaint in the Delaware District Court for patent infringement against MSN asserting infringement of 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 complaint, alleging that the asserted claims of U.S. Patent No. 11,298,349 are invalid and not infringed and amended its challenges to U.S. Patents No. 11,091,439, 11,091,440 and 11,098,015 to allege that these patents are not enforceable based on equitable grounds. The two lawsuits comprising thisthe MSN II litigation, (collectively referred to 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 those asserted in the MSN I litigation described above.
On June 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. On September 28, 2023, the Delaware District Court granted the parties’ stipulation of dismissal of MSN’s equitable defenses and counterclaims. A bench trial occurred in October 2023, and a judgment is expected during the first half of 2024.
Teva ANDA Litigation
In May 2021, we received notice letters from Teva regarding an ANDA Teva submitted to the FDA by Teva Pharmaceutical Industries Limited, Teva Pharmaceuticals Development, Inc. and Teva Pharmaceuticals USA, Inc. (individually and collectively referred to as Teva), 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(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,sought, 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 filed a stipulation to consolidate the two lawsuits, numbered Civil Action Nos. 21-00871 and 22-01168, and to stay all proceedings, which was 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 respect to Civil Action No. 21-00871, this case remained administratively closed, and Civil Action No. 22-01168 was administratively closed on October 3, 2022.
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On July 18, 2023, we entered into a settlement and license agreement (thethe Teva Settlement Agreement) with TevaAgreement to end these litigations. Pursuant to the terms of the Teva
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Settlement Agreement, we will grant Teva a license to market its generic version of CABOMETYX in the U.S. beginning on January 1, 2031, if approved by the FDA and subject to conditions and exceptions common to agreements of this type. On September 15, 2023, the parties filed a joint stipulation of dismissal with the Delaware District Court, and on September 19, 2023, the Delaware District Court granted the parties’ stipulation and dismissed the case without prejudice.
Cipla ANDA Litigation
On February 6, 2023, we received a 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. Patents No. 8,877,776, 11,091,439, 11,091,440, 11,098,015 and 11,298,349 arising from Cipla’s ANDA filing with the FDA. Cipla’s ANDA requests approval to market a generic version of CABOMETYX tablets prior to the expiration of the aforementioned patents. We are seeking, among other relief, an order that the effective date of 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 stay all proceedings, and the Delaware District Court, in a sealed order on the same day, granted the proposed order and administratively closed the case. On May 5, 2023, the Delaware District Court issued a redacted version of the May 4, 2023 stipulation and proposed order.
On March 27, 2024, we received notice from Cipla that it had amended its ANDA to assert additional Paragraph IV certifications. The ANDA now requests approval to market generic versions of CABOMETYX tablets with 20 mg and 40 mg dosage strengths (in addition to the 60 mg dosage strength contemplated by Cipla’s original ANDA) prior to expiration of U.S. Patents No. 8,877,776, 9,724,342, 10,039,757, 11,091,439, 11,091,440, 11,098,015 and 11,298,349. We are evaluating Cipla’s additional Paragraph IV certifications.
We may also from time to time become a party or subject to various other legal proceedings 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 FactorsFactors.
In addition to the information discussed elsewhere in this Quarterly Report on Form 10-Q, you should carefully review and consider the risk factors previously disclosed in Part I, Item 1A of our Fiscal 20222023 Form 10-K and in Part II, Item 1A of our10-K. Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2023 and June 30, 2023. These risks could materially and adversely affect our business, financial condition and results of operations. The risks and uncertainties described therein are not the only ones we face. Additional risks and uncertainties not currently known to us or that we deem immaterial also may impair our business operations. As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors described in our Fiscal 20222023 Form 10-K, as supplemented by our Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2023 and June 30, 2023.10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds, and Issuer Purchases of Equity SecuritiesProceeds.
In March 2023,January 2024, our Board of Directors authorized a stock repurchase program to acquire up to $550$450 million of our outstanding common stock before the end of 2023.2024. As of September 30, 2023,March 31, 2024, approximately $205.2$259.3 million remained available for future stock repurchases before the end of 2023,2024, pursuant to our stock repurchase program.
Stock repurchases under the 2024 program may be made from time to time through a variety of methods, which may include open market purchases, in block trades, 10b5-1 trading plans, accelerated share repurchase transactions, exchange transactions, or any combination of such methods. The timing and amount of any stock repurchases under the stock repurchase program will be based on a variety of factors, including ongoing assessments of the capital needs of the business, alternative investment opportunities, the market price of our common stock and general market conditions. Stock repurchases under the program may be made from time to time through a variety of 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 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.
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The following table summarizes the stock repurchase activity for the three months ended September 30, 2023March 31, 2024 and the approximate dollar value of shares that may yet be purchased pursuant to our stock repurchase program (in thousands, except per share data):
Total Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced ProgramApproximate Dollar Value of Shares That May Yet Be Purchased Under the Program
July 1, 2023 - July 28, 20232,434 $19.49 2,434 $375,589 
July 29, 2023 - August 25, 20234,652 $21.16 4,652 $277,152 
August 26, 2023 - September 29, 20233,249 $22.15 3,249 $205,170 
Total10,335 10,335 
Total Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced ProgramApproximate Dollar Value of Shares That May Yet Be Purchased Under the Program
December 30, 2023 – January 26, 2024— $— — $450,000 
January 27, 2024 – February 23, 20242,902 $20.59 2,902 $390,254 
February 24, 2024 – March 29, 20245,736 $22.83 5,736 $259,296 
Total8,638 8,638 
Item 3. Defaults Upon Senior SecuritiesSecurities.
Not applicable.
Item 4. Mine Safety DisclosuresDisclosures.
Not applicable.
Item 5. Other InformationInformation.
Patrick J. Haley,Dana T. Aftab, our Executive Vice President, Commercial,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 August 7, 2023. Mr. Haley’sMay 25, 2023, which was subsequently modified on February 27, 2024. As modified, Dr. Aftab’s trading plan provides for the sale of up to 120,149194,656 shares of our common stock (including shares obtained from the exercise of vested stock options covered by the trading plan) between November 6, 2023May 30, 2024 and August 7,September 30, 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.
Jeffrey J. Hessekiel, our Executive Vice President, General Counsel and Secretary, an officer for purposes of Section 16 of the Exchange Act, entered into a pre-arranged stock trading plan on February 28, 2024. Mr. Hessekiel’s trading plan provides for the sale of up to 200,000 shares of our common stock (including shares obtained from the exercise of vested stock options covered by the trading plan) between May 29, 2024 and December 31, 2024. 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.
Jack L Wyszomierski, a member of our Board of Directors, entered into a pre-arranged stock trading plan on February 12, 2024. Mr. Wyszomierski’s trading plan provides for the sale of up to 19,973 shares of our common stock (including shares obtained from the exercise of vested stock options covered by the trading plan) between May 13, 2024 and June 12, 2024. 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 September 30, 2023,March 31, 2024, no other directors or Section 16 officers of the Company adopted, modified 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.


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Item 6. ExhibitsExhibits.
Exhibit
Number
Exhibit DescriptionIncorporation by Reference
Filed
Herewith
FormFile Number
Exhibit/
Appendix
Reference
Filing Date
3.110-Q000-302353.18/5/2021
3.28-K000-302353.13/3/2021
10.1*X
10.2†X
10.3†X
31.1X
31.2X
32.1‡X
101.INSXBRL Instance DocumentThe XBRL instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHInline XBRL Taxonomy Extension Schema DocumentX
101.CALInline XBRL Taxonomy Extension Calculation Linkbase DocumentX
101.DEFInline XBRL Taxonomy Extension Definition Linkbase DocumentX
101.LABInline XBRL Taxonomy Extension Labels Linkbase DocumentX
101.PREInline XBRL Taxonomy Extension Presentation Linkbase DocumentX
*Portions of this exhibit have been omitted as being immaterial and would be competitively harmful if publicly disclosed.
Management contract or compensatory plan
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 DescriptionIncorporation by Reference
Filed
Herewith
FormFile Number
Exhibit/
Appendix
Reference
Filing Date
3.110-Q000-302353.18/5/2021
3.2X
3.38-K000-302353.112/20/2023
31.1X
31.2X
32.1‡X
101.INSXBRL Instance DocumentThe XBRL instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHInline XBRL Taxonomy Extension Schema DocumentX
101.CALInline XBRL Taxonomy Extension Calculation Linkbase DocumentX
101.DEFInline XBRL Taxonomy Extension Definition Linkbase DocumentX
101.LABInline XBRL Taxonomy Extension Labels Linkbase DocumentX
101.PREInline XBRL Taxonomy Extension Presentation Linkbase DocumentX
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.
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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.
November 1, 2023April 30, 2024By:/s/ Christopher J. Senner
DateChristopher J. Senner
Executive Vice President and Chief Financial Officer
(Duly Authorized Officer and Principal Financial and Accounting Officer)
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