Exelixis Inc 2026 Q3 Earnings Call

Please proceed. Thank you, Tawanda, and thank you all for joining us for the Exelixis Third Quarter 2026 financial results conference call.

Joining me on today's call are Mike Morrissey, our President and CEO, Chris Senner, our Chief Financial Officer, Dana Aftab, our Executive Vice President of Research and Development, and P.J. Haley, our Executive Vice President of Commercial, who will review our progress for the third quarter 2026, ended September 30, 2026. During the call today, we will refer to financial measures not calculated according to generally accepted accounting principles. Please refer to today's press release, which is posted on our website, for an explanation of our reasons for using such non-GAAP measures, as well as tables deriving these measures from our GAAP results. During the course of the presentation, we will be making forward-looking statements regarding future events and the future performance of the company.

This includes statements about possible developments regarding discovery, product development, regulatory, commercial, financial, and strategic matters, potential growth opportunities, and government drug pricing policies and initiatives. Actual events or results could, of course, differ materially. We refer you to the documents we file from time to time with the Securities and Exchange Commission, which under the heading "Risk Factors" identify important factors that could cause actual results to differ materially from those expressed by the company verbally and in writing today, including, without limitation, risks and uncertainties related to product commercial success, market competition, regulatory review and approval processes, conducting clinical trials, compliance with applicable regulatory requirements, our dependence on collaboration partners, and the level of costs associated with discovery, product development, business development, and commercialization activities. With that, I'll turn the call over to Mike.

All right. Thank you, Andrew, and thanks to everyone for joining us on the call today. Exelixis had a strong third quarter and continues to advance the key components of our business. The company is well-positioned to deliver on our strategic objectives and tactical goals for 2026 and beyond, as we aspire to become a company with a diverse pipeline of potential oncology franchise assets and opportunities. Most importantly, zanzalintinib is positioned to drive the next phase of growth for Exelixis as our second franchise molecule, potentially first with the third line plus CRC opportunity, followed by several waves of pivotal trials that we'll highlight today. CABOMETYX's strong third quarter performance reinforces our confidence in its long-term revenue growth trajectory.

We saw solid year-over-year growth in both the RCC and NET indications in Q3 and are excited with the potential of the CABOMETYX NET indication, which serves as the foundation of our future expanded NET franchise with zanzalintinib and other molecules in our pipeline. The bottom line today is that we remain laser-focused to advance Exelixis to the next level with numerous opportunities as we build new oncology franchises through discovery, development, commercial, and business development activities while we reinforce our existing CABOMETYX franchise. Key highlights for the third quarter 2026 include, first, zanzalintinib is in the spotlight as our next potential franchise opportunity. Zanzalintinib remains our number one R&D priority, and we are advancing key objectives across the program.

Beyond our current pivotal trials, we are actively advancing a second wave of potential pivotal trials that could further expand the scope, reach, and long-term value of zanzalintinib in GU, GI, and other indications. Our goal is to build a durable franchise with stacking capabilities that could drive growth for years to come. Second, we continue to see substantial growth from the CABOMETYX franchise. CABOMETYX remains the leading TKI for RCC and the market leader for the oral second-line-plus NET segment. Third quarter 2026 U.S. CABOMETYX franchise net product revenues grew approximately 11% year-over-year to $605 million. Continuing its role as the worldwide leading TKI, global CABOMETYX franchise net product revenues generated by Exelixis and its partners grew approximately 11% year-over-year to $818 million in the third quarter 2026.

Third, our commitment to rigorous expense management and capital allocation is unwavering as we invest in our mission-critical R&D priorities while returning cash to shareholders with our share repurchase program. We believe our expense management and capital allocation strategy is an important corporate differentiator and positions us to create both short-term and long-term shareholder value while maintaining strategic flexibility. Our third quarter and year-to-date progress underscores the strength of our oncology franchise strategy as we advance zanzalintinib towards becoming a major franchise, develop our broad portfolio, grow the CABOMETYX business, and maintain disciplined capital allocation. With that, please see our press release issued an hour ago for our quarterly financial results and a comprehensive summary of key corporate milestones achieved during the period. With that, I'll turn the call over to Chris.

Thanks, Mike. For the third quarter 2026, the company reported total revenues of approximately $659 million, which included CABOMETYX franchise U.S. net product revenues of $605 million. CABOMETYX net product revenues were $603 million and included no clinical trial sales. As a continued reminder, clinical trial sales have historically been choppy between quarters, and we expect this to continue into the future. Gross-to-net for the CABOMETYX franchise in the third quarter was approximately 29%, which is lower than the gross-to-net we experienced in the second quarter. This decrease in gross-to-net deductions in the third quarter is primarily due to lower 340B discounts when compared to the second quarter. Additionally, we're updating our estimate for full year 2026 gross-to-net deductions, and we're now projecting that'll be approximately 30%.

Our CABOMETYX trade inventory was down at 1.8 weeks on hand at the end of the third quarter when compared to the second quarter. Total revenues in the third quarter also include approximately $52 million in royalties earned from our partners, Ipsen and Takeda, on their sales of CABOMETYX. Our total operating expenses for the third quarter of 2026 were approximately $390 million, compared to $380 million in the second quarter. The sequential increase in these operating expenses was primarily driven by higher legal and advisory fees, marketing expenses, and higher cost of goods sold, which were offset by lower license and other collaboration costs. Provision for income taxes for the third quarter 2026 was approximately $64.7 million, compared to approximately $50.6 million for the second quarter of 2026.

The company reported GAAP net income of approximately $218 million, or $0.88 per share basic, and $0.85 per share diluted for the third quarter 2026. Company also reported non-GAAP net income of approximately $240 million, or $0.97 per share basic, and $0.94 per share diluted. Non-GAAP net income excludes the impact of approximately $22 million of stock-based compensation expense net of the related income tax effect. Cash and marketable securities for the quarter ended September 30, 2026, were approximately $1.4 billion. During the third quarter 2026, we repurchased approximately $250 million of the company's outstanding common stock, resulting in the retirement of approximately 4.5 million shares of the company's outstanding common stock at an average price per share of $55.77.

As of the end of the third quarter 2026, we had approximately $348 million remaining under the $750 million stock repurchase plan authorized by the company's board in May 2026. Finally, we are updating the full year 2026 financial guidance, reflecting changes to our cost of goods sold and our tax rate estimates, which are detailed on slide 13 of our earnings presentation. With that, I will turn the call over to Dana.

Thanks, Chris. Our unified strategy in R&D is focused on developing multiple franchise molecules in oncology. Therefore, we continue to be focused on maximizing our productivity with disciplined investment in high-value opportunities for zanza, as well as the rest of our portfolio. Our strategy is based on our experience with CABO, where 14 completed pivotal trials and eight approvals firmly cemented its franchise status and brought tremendous value to patients across a spectrum of different cancers. We are taking a similar approach with zanza, where we now have seven ongoing trials that are potentially label-enabling, which we refer to as Wave 1. Those trials address just a subset of the potential opportunities for zanza, and we are now well underway on planning and executing our Wave 2 pivotal studies for zanza.

All of these activities are aligned with our strategy, which prioritizes development of zanza as a multidimensional solid tumor oncology franchise molecule. The STELLAR-316 trial is a key component of this strategy and is designed to entrench zanza in the GI franchise. This is a pivotal phase III trial investigating zanza with and without subcutaneous pembro in patients with resected stage 2 or 3 colorectal cancer who, following definitive therapy, have tested positive for molecular residual disease and have no radiographic evidence of disease. I'm happy to say that sites in this trial are now activated and enrolling participants. We are particularly excited about this trial, not only because of its potential to improve outcomes in CRC patients at an earlier stage of disease than was addressed in the STELLAR-303 trial, but also because it utilizes the Signatera test to select patients with the greatest need.