EXELIXIS Q3 2026 FINANCIAL RESULTS CONFERENCE CALL - EXELIXIS INC

Financial Performance:

• Total revenue for Q3 2026 was approximately $659 million, with Cabo franchise U.S. net product revenues of $605 million (up 11% YoY) and global Cabo franchise revenues of $818 million (up 11% YoY).
• Cabo Medics net product revenue was $603 million, excluding clinical trial sales; gross-to-net ratio for the franchise was approximately 29% in Q3 2026, updated to an estimated 30% for the full year.
• Operating expenses reached $390 million in Q3 2026, driven by higher legal, marketing, and cost of goods sold expenses, offset by lower collaboration costs.
• GAAP net income was $218 million ($0.88 basic/$0.85 diluted per share); Non-GAAP net income was $240 million ($0.97 basic/$0.94 diluted per share).
• Cash and marketable securities totaled $1.4 billion as of September 30, 2026; the company repurchased $250 million of stock in Q3 (4.5 million shares), with $348 million remaining under the $750 million repurchase plan authorized in May 2026.
• Royalty revenue from partner sales of Cabo was approximately $52 million for the quarter.

Guidance and Future Outlook:

• Full-year 2026 financial guidance was maintained despite updated cost of goods sold and tax rate estimates.
• The PDUFA action date for the Zanzalitinib NDA based on STELLAR-303 is set for March 3, 2027.
• Top-line results for the STELLAR-304 non-clear cell renal cell carcinoma trial are expected in Q1 2027.
• Management projects Zanzalitinib to become a major franchise with potential to exceed the Cabo franchise in patient impact across multiple tumor types and settings through Wave 2 and future trials.
• Long-term tax rate expectations are projected to remain at the federal rate or thereabouts.

Business Segments and Product Lines:

• Cabo Franchise: Maintains leadership as the #1 TKI in RCC and #1 oral therapy in the second-line plus neuroendocrine tumor (NET) setting; NET new patient market share exceeds 50%.
• Zanzalitinib (ZANZA): Positioned as the second franchise molecule; currently advancing Wave 1 pivotal trials including STELLAR-316 (resected CRC), STELLAR-311 (NET), STELLAR-304 (non-clear cell RCC), and STELLAR-201 (meningioma).
• New Development Candidates: XL558, a selective somatostatin receptor 2 agonist, nominated with an IND submission planned later this year.
• Pipeline Expansion: Wave 2 trials are being initiated to explore combinations with immunotherapies (e.g., STELLAR-202 in lung cancer, STELLAR-002 in bladder cancer) and chemotherapies (e.g., docetaxel in prostate cancer).
• Commercial Readiness: Internal teams are in full launch preparation for Zanzalitinib, leveraging the existing CaboMedics commercial footprint which has a 70-90% prescriber overlap with the potential CRC patient population.

Market and Competitive Landscape:

• Cabo holds a 49% TRx share in the TKI market basket, up 3 percentage points YoY, outpacing the overall market growth of 6% with 13% volume growth.
• The third-line plus CRC setting for Zanzalitinib represents a ~$1.5 billion TAM with approximately 23,000 addressable patients in the U.S.
• STELLAR-311 positions Zanzalitinib as a potential first-in-class small molecule randomized against an active control in neuroendocrine tumors.
• Market feedback indicates strong excitement for Zanzalitinib in the CRC setting due to the unmet need for an immune checkpoint inhibitor (ICI) plus TKI combination in the broader population.
• The failure of Merck's LightSpark 12 study in first-line RCC is viewed as an opportunity for Zanzalitinib-based triplets to raise the standard of care beyond current doublets.

Risks and Challenges:

• Clinical trial sales for Cabo are described as "choppy" between quarters and expected to remain volatile.
• Regulatory uncertainty exists regarding PDUFA dates and labeling discussions for Zanzalitinib.
• Potential market competition in earlier-line CRC and RCC settings, including emerging ADCs and PD-1 agents.
• Dependence on collaboration partners (Ipsen, Takeda) for royalty income and ongoing external trials (e.g., LightSpark studies with Merck).
• Execution risks associated with expanding the Zanzalitinib pipeline into new indications and combination therapies.

Management Commentary and Tone:

• Management expressed strong confidence and enthusiasm, characterizing the quarter as "strong" and describing the period as "potentially transformational" with Zanzalitinib taking center stage.
• The tone was focused on discipline, prioritizing Zanzalitinib development while maintaining capital allocation flexibility through share repurchases.
• CEO Mike Morrissey highlighted the company's "unwavering" commitment to expense management and its strategy to build a "durable franchise" with stacking capabilities.
• Executives emphasized the success of the Cabo franchise as a foundation for the commercial launch of Zanzalitinib.

Analyst Questions and Answers:

• 340B Program: Management stated the 340B program has very little impact due to existing integrity agreements and effective tracking.
• Stellar-304 Enrollment: Confirmed enrollment is close to clinical cutoff, driving the Q1 2027 top-line expectation; no specific details on dropout rates provided.
• Zanzalitinib vs. CRC Competition: Management asserted the addressable patient population remains significant (~23,000) despite early-line activity, leveraging strong community-based sales capabilities.
• Adjuvant CRC Opportunity: STELLAR-316 targets a high-unmet-need population where disease recurrence is rapid, offering potential for prolonged disease-free survival.
• Tax Rate Guidance: The shift in guidance was attributed to the annual tax return filing cycle; long-term expectation is a federal-level rate.
• Zanzalitinib Dosing: Dose selection is indication and combination-specific; no specific doses revealed at this time.
• Bladder Cancer: STELLAR-002 enrolling extremely quickly in a "data-free zone" post-EV-Pembrolizumab, validating high unmet need.

Other Key Points:

• Cabo trade inventory was low at 1.8 weeks on hand at quarter-end.
• The STELLAR-316 trial in CRC utilizes the Ciona Terra test to select patients with molecular residual disease.
• Zanzalitinib is being positioned as a potential "TKI of choice" for combinations with various immune checkpoint inhibitors and novel bispecifics (e.g., XB628).
• The company plans to continue engaging with potential collaborators for Zanzalitinib combination studies in GU and GI indications.