Executive Summary / Key Takeaways

• Dual-Engine Growth Strategy: Exelixis is strategically transforming into a multi-franchise oncology powerhouse, leveraging the sustained strength of its flagship CABOMETYX while rapidly advancing zanzalintinib as its next potential blockbuster, targeting over $8 billion in combined U.S. peak sales by the early 2030s.
• CABOMETYX's Enduring Leadership & New Catalysts: The company's core asset, CABOMETYX, continues to dominate the renal cell carcinoma (RCC) market, demonstrating robust demand and market share gains. Its recent U.S. and European approvals in neuroendocrine tumors (NET) provide a significant new growth vector, capitalizing on a largely generic competitive landscape.
• Zanzalintinib's Pivotal Momentum: Zanzalintinib is rapidly progressing through an ambitious pivotal trial program, highlighted by positive overall survival data in metastatic colorectal cancer (STELLAR-303) and a strategic focus on high-potential, less competitive indications like post-adjuvant CRC and meningiomas, alongside key partnerships.
• Disciplined Capital Allocation & Innovation: Exelixis maintains a strong balance sheet ($1.40 billion in cash and equivalents as of Q2 2025) and robust operating cash flow, enabling aggressive investment in a differentiated early-stage pipeline, strategic business development for high-conviction assets, and substantial share repurchases, reflecting confidence in its undervalued equity.
• Competitive Edge Through Targeted Innovation: The company's expertise in multi-tyrosine kinase inhibitors and next-generation biologics (ADCs, bispecifics) provides a distinct technological moat, allowing it to carve out leadership in specific oncology niches against larger, more diversified pharmaceutical competitors.

The Evolution of an Oncology Innovator

Exelixis, Inc. stands at a pivotal juncture, transforming from a single-product success story into an ambitious multi-compound, multi-franchise oncology enterprise. Founded in 1994 as Exelixis Pharmaceuticals, the company's journey has been defined by a relentless pursuit of novel cancer treatments, culminating in the commercialization of its flagship molecule, cabozantinib. This foundational success, particularly with CABOMETYX in renal cell carcinoma (RCC), has provided the financial and operational bedrock for a bold expansion strategy aimed at establishing leadership in both Genitourinary (GU) and Gastrointestinal (GI) oncology.

The oncology market itself is dynamic and expanding. The global RCC market, for instance, surged from approximately $3.7 billion in 2016 to $10 billion in 2023, fueled by new therapies and extended treatment durations. Similarly, the global neuroendocrine tumor (NET) market is projected to nearly double from $2.5 billion in 2023 to $4.6 billion by 2030. Against this backdrop of growing unmet needs and evolving treatment paradigms, Exelixis's strategy is clear: leverage its proven expertise in targeted therapies to capture significant market share and improve patient outcomes.

Technological Moats and Pipeline Prowess

Exelixis's core competitive advantage is deeply rooted in its differentiated technological platforms, particularly its expertise in tyrosine kinase inhibitors (TKIs) and a burgeoning portfolio of next-generation biologics.

At the heart of its success is cabozantinib, a multi-tyrosine kinase inhibitor targeting MET, AXL, VEGF receptors, and RET. This broad inhibition profile offers tangible benefits, providing effective treatment across multiple advanced cancers. For instance, CABOMETYX's efficacy in RCC, both as a monotherapy and in combination with nivolumab, has cemented its position as a leading TKI. Its recent approval in NET further highlights its versatility and broad applicability.

Building on this foundation, zanzalintinib represents Exelixis's next-generation TKI. While sharing a similar target profile to cabozantinib (VEGF receptors, MET, TAM kinases), zanzalintinib boasts a shorter half-life. This characteristic is designed to enable faster recovery from treatment-related adverse events, potentially leading to an improved therapeutic index and better patient tolerability, a critical differentiator in long-term cancer management.

Beyond TKIs, Exelixis is actively diversifying its technological footprint. The early-stage pipeline includes promising assets like XL309, a small molecule inhibitor of USP1, a synthetic lethal target in BRCA-mutated tumors, positioning Exelixis as a front-runner in this emerging therapeutic area. XB010 is an antibody-drug conjugate (ADC) targeting the 5T4 tumor antigen, while XB628 is a first-in-class bispecific antibody simultaneously targeting PD-L1 and NKG2A, designed to enhance both innate and adaptive immune responses. A notable technological advancement is XB371, a next-generation tissue factor-targeting ADC. This molecule utilizes Catalent (CTLT)'s proprietary SMARTag technology for site-specific conjugation, which improves control over the drug-to-antibody ratio (DAR) during manufacturing. Furthermore, XB371 employs a dual tandem cleavage mechanism for payload release, ensuring precise delivery within tumor cells and minimizing off-target toxicity. These innovations are not merely scientific curiosities; they are strategic investments aimed at creating new competitive moats, driving higher efficacy, and potentially reducing side effects, thereby enhancing market positioning and long-term revenue potential.

Competitive Landscape: A Niche Leader's Ascent

Exelixis operates within a highly competitive oncology landscape, contending with pharmaceutical giants like Merck & Co., Inc. (MRK), Pfizer Inc. (PFE), AstraZeneca PLC (AZN), and Bristol-Myers Squibb Company (BMY). While these larger players boast diversified portfolios and greater scale, Exelixis has carved out a specialized niche through its focused expertise and targeted innovation.

In the RCC market, CABOMETYX stands as the #1 prescribed TKI and the leading TKI plus IO combination in first-line treatment. This leadership is a testament to its clinical efficacy and the commercial team's execution, allowing it to gain 4 share points in the TKI market basket from Q2 2024 to Q2 2025, with CABOMETYX TRx volume growing 18% and outpacing the market by 10 percentage points. In the newly approved NET indication, CABOMETYX has rapidly captured approximately 35% new patient share in the oral second-line plus segment, quickly establishing itself as the "best-in-class oral therapy." This rapid uptake is significantly aided by the fact that its primary oral competitors (Sunitinib, Everolimus) are generic, giving CABOMETYX a clear advantage in promotional voice and patient support services.

Compared to its larger rivals, Exelixis's financial metrics, such as gross profit margin (96.59% TTM), operating profit margin (31.38% TTM), and net profit margin (27.01% TTM), are robust, reflecting the high-margin nature of its proprietary products. While its overall revenue scale is smaller than that of Merck or Pfizer, Exelixis's agility in drug development and commercialization allows it to efficiently target and dominate specific oncology niches. For instance, the strategic decision to discontinue STELLAR-305 in head and neck cancer, despite some competitive pressures, underscores a disciplined capital allocation approach, prioritizing opportunities with higher commercial potential and less competition. This contrasts with the broader, sometimes less focused, R&D pipelines of larger competitors.

Exelixis's strategic partnerships, such as those with Ipsen (IPN) and Takeda (TAK) for ex-U.S. commercialization of cabozantinib, and the recent collaboration with Merck for zanzalintinib, further enhance its competitive standing. These collaborations provide access to global markets and shared development costs, mitigating the financial burden typically associated with extensive clinical programs. While Exelixis faces ongoing generic litigation for CABOMETYX, the favorable rulings extending patent protection until at least 2030 (with a Biocon (BIOCON) settlement allowing generic entry from 2031) provide a clear runway for continued revenue generation.

Financial Performance and Strategic Outlook

Exelixis delivered a strong financial performance in the second quarter of 2025, underscoring the robust demand for its lead product and the early success of its strategic expansions. Total revenues for Q2 2025 reached $568.26 million, with net product revenues from the cabozantinib franchise contributing $520.01 million. This represents a 19% increase in net product revenues compared to Q2 2024. For the first six months of 2025, net product revenues totaled $1.03 billion, a 27% increase over the corresponding period in 2024.

This growth was primarily driven by a 20-22% increase in CABOMETYX units sold, reflecting sustained demand in RCC and the initial impact of the NET launch.

Gross-to-net deductions for the cabozantinib franchise were 30.2% in Q2 2025, higher than the previous quarter, mainly due to an increase in 340B volume, which now constitutes over 24% of total volume. The company projects full-year 2025 gross-to-net to be closer to 30%. Collaboration revenues, while lower year-over-year due to a non-recurring milestone in Q2 2024, saw increased royalty payments from Ipsen and Takeda in Q2 2025.

Operating expenses saw a sequential decline in Q2 2025, primarily due to lower manufacturing and clinical trial costs. However, research and development (R&D) expenses are projected to increase for the remainder of 2025, driven by escalating clinical trial costs for zanzalintinib and other pipeline assets like XL309, XB371, and XB628. Selling, general, and administrative (SG&A) expenses are also expected to rise due to increased personnel costs and marketing efforts for the NET launch.

Exelixis maintains a healthy liquidity position, with $1.40 billion in cash, cash equivalents, and marketable securities as of June 30, 2025. The company's strong operating cash flow, which increased for the first six months of 2025, provides ample resources to fund its ambitious pipeline.

The "One Big Beautiful Bill Act," signed in July 2025, is expected to provide a federal cash tax benefit of $147 million by repealing the capitalization requirement for domestic R&D expenditures.

The company reiterated its full-year 2025 financial guidance, with total revenues projected between $2.25 billion and $2.35 billion. This guidance reflects confidence in the continued growth of the CABOMETYX franchise and the early momentum from the NET launch.

Looking ahead, Exelixis's strategic outlook is anchored by its dual-engine growth strategy:

• Cabozantinib Franchise: Aims for nearly $3 billion in U.S. peak sales by 2030, driven by continued RCC leadership and significant penetration into the oral NET therapy market.
• Zanzalintinib Franchise: Positioned to eclipse CABOMETYX in scope and scale, with a projected greater than $5 billion in U.S. top-line sales by 2033. Key catalysts include:
  • STELLAR-303 (CRC): Positive overall survival data in metastatic colorectal cancer, with plans for a New Drug Application (NDA) filing. This marks the first IO/TKI combination to show a statistically significant survival benefit against an active standard of care in a broad population.
  • STELLAR-304 (Non-Clear Cell RCC): Top-line results expected in the first half of 2026, a pivotal study in a high-unmet-need population.
  • STELLAR-311 (NET): Initiated in June 2025, this Phase 3 trial compares zanzalintinib to everolimus, aiming to establish a superior oral therapy in NET.
  • New Indications: Exploration of zanzalintinib in the post-adjuvant colorectal cancer setting and meningiomas, representing opportunities with high commercial value and low competition.
  • Merck Collaboration: Partnership with Merck to evaluate zanzalintinib in combination with WELIREG and KEYTRUDA in RCC and SCCHN, validating zanzalintinib's potential and expanding its development footprint.

Risks and Challenges

Despite its strong position and ambitious plans, Exelixis faces inherent risks. The continued commercial success of CABOMETYX is paramount, especially in highly competitive indications like RCC, where maintaining market share against evolving therapies is an ongoing challenge. Regulatory approval for new indications, while promising, is never guaranteed, and even with approvals, successful commercialization requires effective market penetration and favorable reimbursement policies, which are increasingly difficult to secure.

The company's extensive R&D pipeline, while a source of future growth, carries significant execution risks, including potential clinical trial delays, unexpected toxicities (as seen with XL495's discontinuation), and the inherent uncertainties of drug discovery. Generic competition for CABOMETYX, despite favorable patent rulings, remains a long-term threat that could impact U.S. revenues post-2030. Furthermore, broader healthcare policy changes, such as those from the Inflation Reduction Act, could increase cost burdens on pharmaceutical manufacturers.

Conclusion

Exelixis is executing a compelling narrative of growth and transformation, strategically building a multi-franchise oncology business on the robust foundation of its CABOMETYX franchise. The company's disciplined approach to capital allocation, coupled with its deep expertise in targeted therapies and a burgeoning pipeline of differentiated assets, positions it for sustained long-term value creation. The recent success of CABOMETYX in NET and the positive STELLAR-303 data for zanzalintinib underscore the company's ability to deliver on its strategic objectives.

While the competitive landscape remains intense and R&D carries inherent risks, Exelixis's technological leadership and strategic focus on high-potential, underserved oncology markets provide a clear path forward. For discerning investors, Exelixis represents an opportunity to participate in the growth of a focused oncology innovator, poised to expand its impact on cancer patients and deliver significant shareholder returns through a combination of established commercial strength and promising pipeline catalysts.