Executive Summary / Key Takeaways

• Exelixis is strategically evolving from a successful single-product company, anchored by CABOMETYX, into a diversified oncology powerhouse, with a clear roadmap to build a multi-franchise business.
• The company's flagship product, CABOMETYX, continues to demonstrate robust commercial performance, particularly in Renal Cell Carcinoma (RCC) and with a strong early uptake in Neuroendocrine Tumors (NET), driving significant revenue growth and cash flow.
• Zanzalintinib, Exelixis' next-generation tyrosine kinase inhibitor (TKI), is rapidly advancing as a pivotal asset, with positive Phase 3 results in metastatic colorectal cancer (CRC) signaling its potential to become a second major oncology franchise.
• Exelixis maintains a strong financial position, characterized by substantial cash reserves and disciplined capital allocation, enabling aggressive investment in its pipeline, strategic business development, and consistent shareholder returns through share repurchases.
• While facing competitive pressures and regulatory complexities, Exelixis' technological differentiation in kinase inhibition and its strategic focus on high-unmet-need indications position it for sustained long-term growth.

The Foundation: Cabozantinib's Enduring Impact and Strategic Evolution

Exelixis, Inc. stands as a specialized oncology company, dedicated to the discovery, development, and commercialization of innovative medicines for difficult-to-treat cancers. The company's journey, rooted in its 1994 incorporation, has been marked by a disciplined approach to leveraging internal expertise and strategic partnerships. This strategy has culminated in the establishment of CABOMETYX (cabozantinib) as a cornerstone therapy across multiple advanced cancer indications, including renal cell carcinoma (RCC), hepatocellular carcinoma (HCC), differentiated thyroid cancer (DTC), and recently, pancreatic and extra-pancreatic neuroendocrine tumors (pNET and epNET).

Cabozantinib, a multi-targeted tyrosine kinase inhibitor (TKI), represents Exelixis' core technological differentiation. It inhibits key pathways such as MET, AXL, VEGF receptors, and RET, which are critically involved in tumor growth, angiogenesis, and metastasis. This broad mechanism of action has provided CABOMETYX with a versatile profile, enabling its approval and commercial success in diverse and challenging oncology settings. For instance, its efficacy in RCC, particularly in combination with nivolumab, has solidified its position as a leading TKI in this highly competitive space. The company’s strategic collaborations, notably with Ipsen (IPSN) for ex-U.S. and ex-Japan rights and Takeda (TAK) for Japan, have extended cabozantinib's global reach and further validated its clinical value.

The company's strategic vision extends beyond CABOMETYX, aiming to build a best-in-class multi-franchise oncology business with aspirational revenue goals of $3 billion for cabozantinib by 2030 and $5 billion for zanzalintinib by 2033. This ambition is underpinned by a robust pipeline and a commitment to innovation.

Technological Edge: Differentiated Kinase Inhibition and Next-Generation Therapies

Exelixis' competitive moat is significantly strengthened by its proprietary technology in kinase inhibition, exemplified by both cabozantinib and its next-generation asset, zanzalintinib. Cabozantinib's ability to simultaneously target multiple receptor tyrosine kinases provides a broad attack on cancer biology, offering tangible benefits over more narrowly focused therapies. This multi-targeted approach has translated into improved patient outcomes across various tumor types, contributing to its strong market adoption and pricing power.

Zanzalintinib, a novel oral kinase inhibitor, represents a strategic evolution of this core technology. While sharing a "cabo-like target profile" by inhibiting VEGF receptors, MET, and TAM kinases (TYRO3, AXL, MER), zanzalintinib boasts a "much shorter half-life." This characteristic is designed to enable "faster recovery from treatment-related adverse events with dose modifications and possibly favoring tumor accumulation over plasma concentration," potentially leading to an "improved therapeutic index." This technological refinement aims to deliver superior patient tolerability and efficacy, positioning zanzalintinib as a "best-in-class molecule" and the "TKI of choice for combinations with IO."

Beyond these flagship TKIs, Exelixis is actively advancing a diverse early-stage pipeline. This includes:

• XL309 (USP1 inhibitor): A small molecule targeting USP1, identified as a synthetic lethal target in BRCA-mutated tumors. It holds potential for treating PARP inhibitor-resistant cancers and enhancing PARP inhibitor responses.
• XB628 (bispecific antibody): A first-in-class bispecific antibody targeting PD-L1 and NKG2A. Preclinical models have demonstrated that XB628 causes "tumor cells and NK cells to colocalize, resulting in tumor cell kill that is substantially higher than that seen with a combination of two monoclonals." This innovative mechanism aims to harness both innate and adaptive immunity.
• XB371 (tissue factor-targeting ADC): A next-generation antibody-drug conjugate (ADC) with a topoisomerase inhibitor payload. It utilizes Catalent's (CTLT) SMARTag technology for "site-specific conjugation" and a "dual tandem cleavage mechanism" for payload release, designed to prevent "inappropriate payload release outside of the tumor." Preclinical data showed "deep and durable regressions of human colorectal, lung and pancreatic xenograft tumors."
• ADU-1805 (SIRPα-targeting mAb): A clinical-stage human monoclonal antibody with "best-in-class potential."

These technological advancements are critical for Exelixis' long-term growth, enabling the company to address high-unmet-need indications, differentiate its offerings in competitive markets, and expand its oncology footprint. The strategic intent is to leverage these innovations to build new franchises that can "eclipse the size, scope and impact of our cabozantinib business."

Financial Performance and Operational Momentum

Exelixis has demonstrated robust financial performance, reflecting the successful commercialization of CABOMETYX and disciplined operational management. For the nine months ended September 30, 2025, total revenues reached $1.72 billion, a 7% increase over the prior year period. Net product revenues, primarily driven by CABOMETYX, surged to $1.58 billion, marking a substantial 22% year-over-year growth. This growth was fueled by a 21% increase in CABOMETYX units sold, reflecting sustained demand in RCC and strong early uptake in neuroendocrine tumors.

The gross margin remained consistently high at 96%, underscoring the profitability of its core product.

The launch of CABOMETYX in neuroendocrine tumors has been particularly successful, rapidly establishing market leadership in the oral second-line plus NET segment with over 40% new patient share by Q3 2025. This new indication is projected to exceed $100 million in revenue for 2025. To further capitalize on this, Exelixis is strategically expanding its GI sales team, a move expected to accelerate NET growth and prepare for zanzalintinib's potential entry into GI indications.

Operating expenses reflect a strategic reallocation of resources. Research and development (R&D) expenses for the nine months ended September 30, 2025, decreased by 8% to $611.75 million, primarily due to lower collaboration and manufacturing costs, even as clinical trial costs for zanzalintinib increased by 16% to $121.37 million. This indicates a focused investment in key pipeline assets. Selling, general and administrative (SG&A) expenses increased by 11% to $395.70 million, driven by marketing efforts for the NET launch and increased stock-based compensation.

Net income for the nine months ended September 30, 2025, saw a significant 41% increase to $538.04 million, demonstrating enhanced profitability. The company's liquidity remains strong, with $1.60 billion in cash, cash equivalents, and marketable securities as of September 30, 2025. Exelixis actively manages its capital, having repurchased $895.30 million in common stock under existing programs by Q3 2025, with an additional $750 million authorized in October 2025. This balanced approach to capital allocation supports both pipeline investment and shareholder returns.

Strategic Outlook and Competitive Positioning

Exelixis' forward-looking strategy is centered on maximizing the potential of its existing assets while aggressively advancing its pipeline to secure future growth. The company's 2025 financial guidance projects total revenue between $2.30 billion and $2.35 billion, and net product revenue between $2.10 billion and $2.15 billion, with R&D expenses expected to be between $850 million and $900 million. This guidance reflects confidence in the continued strength of CABOMETYX and the early success of the NET launch.

The most significant near-term catalyst is zanzalintinib. Following positive Phase 3 STELLAR-303 results in metastatic colorectal cancer, demonstrating a "20% reduction in the risk of death with the combination in the ITT population", Exelixis intends to submit a New Drug Application (NDA) by the end of 2025, pending government services availability. This marks a critical milestone, as STELLAR-303 is the "first and only Phase III trial to show an overall survival benefit compared to a standard of care in these patients" in non-MSI-high CRC with an immunotherapy-containing regimen. Further pivotal data from STELLAR-304 (non-clear cell RCC) is anticipated in mid-2026, and new trials for zanzalintinib in recurrent meningioma and adjuvant CRC are slated for 2026. These initiatives are crucial for achieving the ambitious $5 billion revenue target for zanzalintinib by 2033.

In the competitive landscape, Exelixis operates alongside pharmaceutical giants such as Bristol-Myers Squibb (BMY), Merck & Co., Inc. , Pfizer Inc. (PFE), and AstraZeneca PLC (AZN). While these larger players possess broader portfolios and greater scale, Exelixis carves out its niche through specialized expertise in kinase inhibitors and precision oncology. CABOMETYX's established leadership in RCC, evidenced by its position as the "#1 prescribed TKI in renal cell carcinoma as well as the #1 TKI plus IO combination in first-line RCC", showcases Exelixis' ability to compete effectively. In NET, CABOMETYX's rapid market penetration, achieving "greater than 40% new patient share for oral therapies" in the second-line plus segment, highlights its agility and strong commercial execution against generic competitors.

Exelixis differentiates itself by focusing on innovative mechanisms of action and addressing high-unmet-need indications. Zanzalintinib's unique target profile and improved therapeutic index aim to provide a competitive edge, particularly in "cold tumors" like CRC where other TKI plus ICI combinations have failed. The company's strategic partnerships, such as with Merck (MRK) for zanzalintinib in RCC, further enhance its development capabilities and market reach.

However, Exelixis faces pertinent risks. The potential for generic competition to CABOMETYX, as evidenced by ongoing ANDA litigations, could significantly impact future revenues. The settlement with Biocon (BIOCON), allowing a generic launch in the U.S. by January 1, 2031, underscores this long-term threat. Furthermore, the evolving landscape of drug pricing and reimbursement policies in the U.S., including the Inflation Reduction Act and proposals for Most Favored Nation (MFN) pricing, could exert downward pressure on profitability. Clinical trial failures or delays, as seen with the discontinuation of XL495 and the decision not to advance STELLAR-305, remain inherent risks in drug development. Despite these challenges, Exelixis' proactive management of its pipeline and disciplined financial strategy are designed to mitigate these risks.

Conclusion

Exelixis is at a pivotal juncture, successfully leveraging the robust performance of its flagship CABOMETYX franchise while aggressively building its next wave of oncology innovation. The company's deep expertise in kinase inhibition, coupled with a strategic focus on differentiated next-generation therapies like zanzalintinib and a diverse early-stage pipeline, underpins a compelling investment thesis. The positive Phase 3 results for zanzalintinib in metastatic colorectal cancer represent a significant validation of its technological prowess and a clear path to a second major oncology franchise.

While the competitive landscape is intense and regulatory hurdles persist, Exelixis' strong financial health, disciplined capital allocation, and proven commercial execution position it to capture substantial market opportunities. The company's ability to translate scientific innovation into tangible patient benefits and commercial success, as demonstrated by CABOMETYX's enduring strength and zanzalintinib's emerging potential, suggests a trajectory toward sustained growth and value creation for shareholders. The ongoing expansion of its pipeline and strategic partnerships further solidify its long-term outlook in the dynamic oncology market.