Executive Summary / Key Takeaways

• Exelixis delivered strong Q1 2025 financial results, driven by accelerating demand and market share gains for its flagship product, CABOMETYX, particularly in the competitive renal cell carcinoma market.
• The recent U.S. FDA approval of CABOMETYX for previously treated advanced neuroendocrine tumors (NET) represents a significant new commercial opportunity, leveraging existing infrastructure and positioning the company favorably against generic competitors in this underserved market.
• The company's pipeline, led by zanzalintinib, is advancing with multiple pivotal trial data readouts anticipated in the second half of 2025, positioning zanzalintinib as the next potential oncology franchise with aspirational peak sales targets.
• Exelixis maintains a strong balance sheet and is generating robust cash flow, enabling disciplined investment in its diverse pipeline, strategic business development opportunities, and continued return of capital to shareholders through significant stock repurchase programs.
• While facing risks from market competition, potential generic entry for CABOMETYX, and the evolving U.S. healthcare policy landscape (including the IRA), the company's strategic focus on clinical differentiation and operational execution underpins its increased 2025 revenue guidance and long-term growth narrative.

The Foundation: Building an Oncology Powerhouse

Exelixis, Inc. is an oncology-focused biotechnology company dedicated to discovering, developing, and commercializing innovative medicines for difficult-to-treat cancers. The company's journey has evolved from early discovery efforts and collaborations to establishing itself as a multi-compound, multi-franchise enterprise. Central to this evolution is cabozantinib, the molecule behind the company's flagship product, CABOMETYX. Initially approved for advanced renal cell carcinoma (RCC), CABOMETYX has expanded its label to include previously treated hepatocellular carcinoma (HCC), radioactive iodine-refractory differentiated thyroid cancer (DTC), and, most recently, previously treated advanced neuroendocrine tumors (NET). These approvals, coupled with strategic partnerships for ex-U.S. commercialization, have cemented CABOMETYX's position as a leading therapy in its approved indications and established a strong revenue base.

The company's strategy is built on a rational and disciplined approach to investment, leveraging internal expertise and external collaborations to explore various scientific modalities, including small molecules, biotherapeutics, and antibody-drug conjugates (ADCs). This approach aims to identify and advance clinically differentiated assets that can address significant unmet needs in the oncology landscape, primarily focusing on genitourinary (GU) and gastrointestinal (GI) cancers. Setting the scene for this competitive market, the oncology sector is characterized by intense innovation, high development costs, and increasing pressure on drug pricing, particularly in the U.S. due to initiatives like the Inflation Reduction Act (IRA).

Technological Edge and Pipeline Innovation

Exelixis' core technological strength lies in its expertise in developing targeted therapies, particularly tyrosine kinase inhibitors (TKIs). Cabozantinib, the active ingredient in CABOMETYX and COMETRIQ, is a potent inhibitor of multiple tyrosine kinases, including MET, AXL, VEGF receptors, and RET. This multi-targeted approach provides a differentiated mechanism of action that has demonstrated clinical efficacy across various tumor types. The company's experience with cabozantinib has informed the development of its next-generation lead asset, zanzalintinib. Zanzalintinib is a novel, potent, third-generation oral TKI that also targets VEGF receptors, MET, and the TAM kinases (TYRO3, AXL, and MER). Management highlights zanzalintinib's shorter half-life compared to cabozantinib as a potential differentiator, which could enable faster recovery from treatment-related adverse events and potentially improve the therapeutic index.

Beyond TKIs, Exelixis is actively expanding its technological footprint through its biotherapeutics pipeline. This includes the development of ADCs and bispecific antibodies. The recently cleared IND for XB628, a first-in-class bispecific antibody targeting PD-L1 and NKG2A, exemplifies this effort. Preclinical data for XB628 demonstrated tumor cell kill substantially higher than the combination of two monoclonals targeting these pathways separately, suggesting a potentially superior approach to engaging both innate and adaptive immunity. The company is also advancing other ADC candidates, such as XB371, a tissue factor-targeting ADC utilizing a topoisomerase inhibitor payload, which is expected to differentiate from existing ADCs like tisotumab vedotin (which uses a microtubule inhibitor payload) and potentially expand into indications like colorectal cancer. These technological advancements are critical to building a sustainable competitive moat, aiming to deliver therapies with improved efficacy, safety, or unique mechanisms of action that can command market share and drive future revenue growth. The strategic intent behind these R&D initiatives is to generate quantifiable improvements in clinical outcomes and operational efficiencies, such as potentially lower manufacturing costs for proprietary ADCs or improved response rates for novel combinations, although specific target metrics for all early-stage programs are not publicly detailed.

The CABOMETYX Engine: Driving Current Performance

The commercial performance of the cabozantinib franchise continues to be the primary engine of Exelixis' financial results. In the first quarter of 2025, the company reported net product revenues of $513.3 million, representing a significant 36% increase compared to the first quarter of 2024. This growth was predominantly driven by CABOMETYX sales, which also grew 36% year-over-year to $510.9 million. The increase reflects a 25% rise in the number of CABOMETYX units sold and a 9% increase in the average net selling price. This performance underscores the continued strong demand for CABOMETYX, particularly in combination with nivolumab for first-line advanced RCC, and reflects ongoing market share gains. CABOMETYX has maintained its position as the number one prescribed TKI and the number one TKI plus IO combination in first-line RCC, outpacing the growth rate of the overall TKI market basket.

The recent U.S. FDA approval of CABOMETYX for previously treated advanced NET in March 2025 represents a critical operational achievement and a significant new commercial opportunity. The company's commercial team was prepared and launched quickly following the approval. Market research indicates a substantial patient population in the second and third-line NET settings, with a forecasted oral market opportunity of approximately $1 billion in the U.S. in 2025. The CABINET study data, which supported this approval, uniquely positions CABOMETYX across various NET patient and tumor characteristics, including site of origin (pancreatic and extra-pancreatic), tumor grade, functional status, and prior Lutathera treatment. This broad applicability, reflected in favorable NCCN guideline recommendations, makes CABOMETYX the first and only systemic treatment approved for previously treated NET regardless of site of origin or functional status. The competitive landscape in the oral NET market primarily consists of generic therapies, providing CABOMETYX with a significant advantage through a dedicated commercial organization and comprehensive patient support services. This new indication is expected to contribute to continued net product revenue growth throughout 2025 and beyond.

Building the Future: The Zanzalintinib Opportunity

Looking ahead, zanzalintinib is positioned as the next potential oncology franchise for Exelixis, designed to build upon the success and learnings from cabozantinib. The zanzalintinib program is currently the focus of an extensive late-stage clinical development program, including multiple pivotal trials targeting indications with high unmet medical need. Key anticipated data milestones in the second half of 2025 include top-line results from the STELLAR-303 trial in metastatic, refractory non-MSI-high colorectal cancer and the STELLAR-304 trial in previously untreated advanced non-clear cell RCC. A decision to advance the Phase 3 portion of the STELLAR-305 trial in previously untreated PD-L1-positive recurrent or metastatic squamous cell carcinoma of the head and neck is also expected, pending event rates.

These pivotal trials are designed to evaluate zanzalintinib or its combinations against contemporary standards of care, such as regorafenib in CRC, sunitinib in non-clear cell RCC, and pembrolizumab in SCCHN. The company expects to initiate the STELLAR-311 pivotal trial evaluating zanzalintinib versus everolimus as a first oral therapy in advanced NET in the first half of 2025. Strategic collaborations, such as the one with Merck (MRK) to evaluate zanzalintinib in combination with belzutifan in RCC and KEYTRUDA in SCCHN, further support the broad development strategy and leverage external expertise and resources while Exelixis retains global commercial rights for zanzalintinib. Management has articulated an aspirational goal for zanzalintinib to achieve greater than $5 billion in U.S. net product sales by 2033, nearly equally split between GU and GI indications, underscoring the significant long-term growth potential envisioned for this asset.

Financial Strength and Disciplined Capital Allocation

Exelixis maintains a strong financial position, providing the flexibility to fund its ambitious pipeline and pursue strategic opportunities. As of March 31, 2025, the company held $1.65 billion in cash, cash equivalents, and marketable securities. The business is generating robust operating cash flow, with net cash provided by operating activities increasing significantly to $211.4 million in the first quarter of 2025, compared to $68.8 million in the corresponding prior year period. This increase was primarily driven by higher cash receipts from product sales and lower cash paid for certain operating expenses.

The company's capital allocation strategy is balanced, focusing on investing in the internal pipeline, pursuing business development opportunities, and returning value to shareholders. Research and development expenses are projected to increase for the remainder of 2025, driven by higher costs associated with advancing key pipeline programs like zanzalintinib, XL309, and XB628. Selling, general, and administrative expenses are also expected to increase, partly due to ongoing marketing activities supporting the NET launch. Despite these investments, the company's strong cash generation supports its operations and growth initiatives.

Exelixis has demonstrated a commitment to returning capital to shareholders through significant stock repurchase programs, authorizing $1 billion in repurchases since August 2024, with approximately $505.5 million remaining available as of March 31, 2025. This reflects management's view that the shares have been undervalued and represents a strategic use of capital alongside pipeline investment and potential business development.

Competitive Landscape and Strategic Positioning

Exelixis operates in highly competitive oncology markets, facing established players with broad portfolios and extensive resources. In RCC, CABOMETYX competes directly with therapies from companies like Bristol-Myers Squibb (BMY) (Opdivo), Pfizer (PFE) (Inlyta), and Merck (Keytruda). While larger competitors leverage scale and broad combination strategies, Exelixis' focus on the differentiated multi-TKI mechanism of cabozantinib and strong clinical data, particularly in combination with nivolumab, has allowed it to capture and maintain market leadership in key segments. The 5-year CheckMate-9ER data continues to support this positioning.

In the newly approved NET indication, CABOMETYX competes primarily with existing oral therapies like sunitinib and everolimus, which are now generic. Exelixis' advantage here lies in CABOMETYX's branded status, broad label supported by the CABINET study, and the company's established commercial infrastructure and physician relationships, particularly among oncologists who already prescribe CABOMETYX for other indications. This positions Exelixis favorably to rapidly penetrate the oral NET market.

The pipeline, especially zanzalintinib, is being developed with a clear eye on the competitive landscape. Pivotal trials are designed to compare zanzalintinib or its combinations against current standards of care in CRC, non-clear cell RCC, SCCHN, and NET, aiming to demonstrate clinical differentiation. While larger competitors like BMY, PFE, AZN, and MRK have extensive R&D capabilities and pipelines, Exelixis' strategy focuses on identifying and advancing potentially best-in-class molecules and leveraging strategic collaborations to enhance its competitive standing and accelerate development in specific areas. The discontinuation of programs like XB002 highlights a disciplined approach to portfolio management, reallocating resources to assets deemed more likely to be competitive and improve upon existing or emerging therapies. The threat of generic competition for CABOMETYX in the longer term remains a significant risk, as evidenced by ongoing patent litigation, which could impact future revenue streams. Furthermore, the evolving U.S. healthcare policy landscape, including the IRA, poses risks to pricing and reimbursement across the industry, potentially impacting Exelixis' ability to maintain profitability.

Risks and Challenges

Despite strong performance and pipeline momentum, Exelixis faces several key risks. The highly competitive nature of the oncology market means that the continued commercial success of CABOMETYX depends on maintaining its clinical differentiation and market share against both existing and emerging therapies. The outcome of ongoing patent litigation against generic manufacturers seeking to market versions of CABOMETYX is uncertain, and an unfavorable result could lead to significant revenue erosion in the U.S. market. Regulatory risks persist, including potential impacts from the IRA on pricing and reimbursement, as well as the inherent uncertainties and potential delays in obtaining regulatory approvals for pipeline candidates. Clinical trial outcomes are never guaranteed, and failure to demonstrate sufficient efficacy or safety in ongoing or planned pivotal trials for zanzalintinib or other pipeline assets would negatively impact future growth prospects. The company's ability to successfully launch and commercialize new indications, such as NET, and future pipeline products is also subject to market acceptance and payer coverage.

Conclusion

Exelixis has demonstrated robust execution, leveraging the continued commercial strength of its flagship product, CABOMETYX, to drive significant revenue growth and fund its expanding pipeline. The recent U.S. approval of CABOMETYX for previously treated advanced neuroendocrine tumors opens a meaningful new market opportunity where the company is strategically positioned to compete effectively against generic alternatives. Looking ahead, the investment narrative is increasingly tied to the potential of zanzalintinib, with multiple pivotal trial readouts anticipated in 2025 poised to define its path as the next potential oncology franchise.

Supported by a strong balance sheet and disciplined capital allocation, Exelixis is actively investing in its diverse pipeline of small molecules and biotherapeutics while returning value to shareholders. While challenges from market competition, potential generic entry, and the evolving regulatory and reimbursement landscape remain pertinent risks, the company's focus on developing clinically differentiated therapies and its operational momentum underpin its increased 2025 financial guidance and long-term growth aspirations. The ability to translate pipeline potential into approved products and successfully commercialize them will be key to realizing the company's vision of becoming a multi-franchise oncology leader.