Exelixis Inc 2026 Q2 Earnings Call

Please proceed. Thank you, Kathleen, and thank you all for joining us for the Exelixis second quarter 2026 financial results conference call.

Joining me on today's call are Mike Morrissey, our President and Chief Executive Officer, Chris J. Senner, our Chief Financial Officer, Dana T. 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 second quarter 2026, ended June 30th, 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 this 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 the 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 continues to execute across the key elements of our business, positioning the company to deliver on our strategic objectives for 2026 and beyond. We are in the early innings of our next phase of growth as we deliver on our strategy to evolve from a single compound company to one with a pipeline of potential oncology franchise opportunities. zanzalintinib is poised to transform Exelixis as our next franchise molecule, potentially first with a third-line plus CRC filing that's currently under review, followed by accelerating progress on the next six pivotal trials that we've highlighted recently. Importantly, a second wave of trials is lining up nicely to initiate potentially as early as 2027. Our confidence in CABO's long-term revenue growth trajectory remains unchanged.

The updated financial guidance reflects modestly slower growth in 2026 due to a more gradual ramp for the NET indication, which reflects the unique characteristics of the NET patient population and histology. We remain confident in the long-term potential of the CABO NET indication and view the NET franchise as an important growth driver for CABO, Xanza, and other molecules in our pipeline. We continue to see meaningful opportunities to expand our impact for patients, strengthen our commercial position, and create value for shareholders. Our strategy to build a multi-franchise oncology business contains five key elements, including first, execution. Xanza is leading the pack as our next potential franchise opportunity and our highest R&D priority. The Exelixis team continues to execute on key objectives across the program, including the STELLAR-303 regulatory review, pivotal trial data readouts, expediting clinical trial enrollments, and new study initiations. The second is expansion. We are building the foundation for the next wave of growth opportunities for Xanza.

Beyond our current pivotal trials, we are actively evaluating new development opportunities that could further expand the scope, reach, and long-term value of Xanza 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. Third key element is commercial performance. We continue to see substantial growth from the CABO zanzalintinib franchise. CABO remains the leading TKI for RCC, the market leader for the oral second line plus NET segment, and a key player in the treatment of patients with liver and thyroid cancers. Second quarter 2026 U.S. CABO franchise net product revenues grew approximately 10% year-over-year to $573 million.

Continuing its role as a worldwide leading TKI, global CABO franchise net product revenues generated by Exelixis and its partners grew approximately 13% year-over-year to $806 million in the second quarter 2026. Fourth is preparation. We continue to prioritize our commercial readiness for the potential launch of Xanza in third line plus CRC, pending a positive regulatory review later this year.

We believe the CRC opportunity represents an important first step towards establishing Xanza as our second oncology franchise and a significant driver of future growth. We see this element of our strategy as especially timely as we pursue new GU and GI indications, specifically in tandem early and late-stage opportunities in CRC with STELLAR-303 and STELLAR-316. Fifth and finally, discipline. We remain committed to rigorous expense management and capital allocation. This can be seen by trimming expense guidance while we invest in our mission-critical R&D priorities and keeping our projected free cash flow essentially unchanged. We believe this balanced approach remains an important differentiator and positions us to create long-term value while maintaining strategic flexibility. Taken together, these five strategic elements working in tandem underscore the strength of our strategy and the progress we are making across the business.

We believe we are well-positioned to advance Xanza towards becoming a major oncology franchise, expand our development portfolio, drive continued growth through the cabozantinib franchise, and deploy capital in a disciplined manner to maximize shareholder value. 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 second quarter of 2026, the company reported total revenues of approximately $629 million, which included cabozantinib franchise net product revenues of $573 million. CABOMETYX net product revenues were $571 million and included approximately $2.7 million in 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 cabozantinib franchise in the second quarter of 2026 was 29.5%, which is lower than the gross-to-net we experienced in the first quarter of 2026. This decrease in gross-to-net deductions in the second quarter of 2026 is primarily due to lower co-pay assistance for commercial patients, which is partially offset by a modest increase in 340B utilization when compared to the first quarter of 2026.

Additionally, we're updating our estimate for full year 2026 gross-to-net deductions, and we are now projecting that it'll be between 30%-31%. Our CABOMETYX trade inventory was flat at 2.1 weeks on hand at the end of the second quarter 2026 when compared to the first quarter of 2026. Total revenues in the second quarter of 2026 also includes approximately $53 million in royalties earned from our partners, Ipsen and Takeda, on their sales of cabozantinib. Our total operating expenses for the second quarter 2026 were approximately $380 million compared to $359 million in the first quarter of 2026. The sequential increase in these operating expenses was primarily driven by higher clinical trial costs, marketing expenses, and stock-based compensation. Provision for income taxes for the second quarter 2026 was approximately $50.6 million, compared to a provision for income taxes of approximately $57.2 million for the first quarter of 2026.

Company reported GAAP net income of approximately $212 million, or $0.85 per share basic, and $0.82 per share diluted for the second quarter of 2026. The company also reported GAAP net income of approximately $237 million, or $0.95 per share basic, and $0.91 per share fully diluted. Non-GAAP net income excludes the impact of approximately $25 million of stock-based compensation, net of the related income tax effect. Cash and marketable securities for the quarter ended June 30, 2026, were approximately $1.4 billion. During the second quarter of 2026, we repurchased approximately $312 million of the company's outstanding common stock, resulting in the retirement of approximately 6.5 million shares of the company's outstanding common stock at an average price per share of $47.85. During the second quarter, we completed the October 2025 stock repurchase program.

As of the end of the second quarter of 2026, we had approximately $598 million remaining under the $750 million stock repurchase plan authorized by the company's board in May of 2026. Finally, we're updating our full year 2026 financial guidance. We are lowering and narrowing our total revenues and net product revenue guidance, which lowers the midpoint by $50 million when compared to our previous guidance. This updated financial guidance reflects modestly slower growth in 2026 due to a more gradual ramp for the NET indication than the original projection. Additionally, we are reducing R&D expense guidance, lowering the midpoint of our R&D expense guidance range by $50 million when compared to the previous guidance. Details of our full-year guidance can be found on slide 14 of our earnings presentation. With that, I'll turn the call over to P.J.