Exelixis, Inc. (EXEL) Earnings

Management highlights

### Core Strategy Exelixis' strategy to build a multi-franchise oncology business has five core pillars: - Execution: Zanzalitinib (Zanza) is the highest R&D priority, with ongoing regulatory review of the STELR-303 trial, active pivotal trial enrollment, and new study initiations progressing well. - Expansion: The company is evaluating new development opportunities for Zanza across genitourinary (GU), gastrointestinal (GI), and additional solid tumor indications to build a durable long-term growth franchise. - Commercial Performance: The Cabo franchise maintains market leading positions: it is the top tyrosine kinase inhibitor (TKI) for renal cell carcinoma (RCC), the leading oral therapy in the second-line plus neuroendocrine tumor (NET) segment, and holds leading share in first-line RCC TKI+IO combinations. Cabo grew new patient market share to 47% in the oral TKI market basket, with TRX volume growing 12% year-over-year (outpacing the market's 6% growth). - Preparation: The company is fully prepared for a potential U.S. launch of Zanza for third-line plus colorectal cancer (CRC) pending regulatory approval expected in late 2026. - Discipline: Management maintains rigorous expense management and disciplined capital allocation, including active share repurchases. ### Operational & Pipeline Updates - Cabo's NET indication launched one year ago, with growth proceeding more gradually than initially projected due to the indolent nature of NETs, slower patient treatment initiation kinetics, and minor patient draw from the ongoing STELR-311 Zanza trial. Cabo achieved over 45% new patient market share in the second-line plus oral NET segment in Q2 2026. - Zanza's NDA for third-line plus CRC (based on STELR-303) is under FDA review with a PDUFA date in early December 2026. The U.S. third-line plus CRC market represents approximately 23,000 patients and a $1.5 billion revenue opportunity at current pricing. - Seven pivotal/imminent pivotal trials for Zanza are progressing: - STELR-316 (adjuvant CRC for MRD-positive patients): First site activation imminent, patient screening to begin in Q3 2026, with no competing Phase III trials for this patient population. - STELR-311 (NET vs Everolimus): Enrollment is months ahead of projections, with high investigator and patient enthusiasm. - STELR-304 (non-clear cell RCC): Enrollment completed, top-line results expected H2 2026. This is the first large randomized Phase III trial for this underserved indication, and positive results would lead to a second Zanza NDA. - Two Merck-run Phase III trials (LightSpark-033, LightSpark-034) for clear cell RCC are progressing. - Multiple expansion cohorts and additional Phase II trials for Zanza in bladder cancer, castration-resistant prostate cancer, recurrent meningioma, and frontline squamous non-small cell lung cancer are activated or opening for enrollment, all addressing high unmet need. - Early pipeline programs (XL309, XB010, XB628, XB371) continue progressing, with new small molecule programs advancing toward IND filings. - Capital return: Exelixis completed a prior share repurchase program in Q2 2026, repurchasing $312 million in shares, and has $598 million remaining under the current $750 million authorized repurchase program. As of Q2 end, the company held $1.4 billion in cash and marketable securities.

Guidance

- Full-year 2026 total revenue and net product revenue guidance was lowered, with the midpoint reduced by $50 million from prior guidance. The revision reflects slower-than-projected growth in Cabo's NET indication due to the more gradual patient ramp. - Full-year 2026 R&D expense guidance was also lowered, with the midpoint reduced by $50 million from prior guidance. - The projected 2026 full-year gross-to-net deduction for the Cabo franchise is updated to a range of 30% to 31%, down from the prior period's level driven by lower commercial copay assistance, partially offset by higher 340B utilization.

Segment performance

Exelixis reports only one core commercial product segment, the Cabozantinib (Cabo) franchise, for Q2 2026: - U.S. Cabo franchise net product revenue: $573 million, growing 10% year-over-year. This represents 91.1% of Exelixis' total Q2 2026 revenues. - Global Cabo franchise net product revenue (including partner sales): $806 million, growing 13% year-over-year. - Royalties from partner sales of Cabo contributed $53 million, or 8.4% of total Q2 2026 revenues. - Total company Q2 2026 revenues were $629 million. CaboMedics net product revenue (U.S. commercial, excluding royalties) was $571 million, including $2.7 million in clinical trial sales.

Risks & headwinds

- Cabo's NET indication growth is slower than initially projected, driven by the indolent nature of NETs, less frequent patient scanning, less urgent treatment initiation, and minor patient draw from the ongoing STELR-311 Zanza trial for NET, which could continue to pressure near-term growth. - Generic entry risk for Cabo exists following a tentative approval of a generic version, though management notes that the current scenario of generic conversion to full approval before the 2031 patent expiry is not expected per existing settlement agreements. - Zanza's regulatory label for CRC is still under FDA review, and potential limitations on labeling (e.g., subgroup restrictions for non-liver metastases) could constrain commercial uptake if the label includes unexpected restrictions. - Clinical trial enrollment and event accrual timelines can shift from initial projections, which could delay top-line data readouts for key Zanza trials. - Treatment persistency (retention on therapy) could be a confounding factor for data interpretation in Zanza's adjuvant and maintenance trials, though management notes they have optimized dosing to mitigate this risk.

Analyst Q&A

• Q: Can STELR-304 (Zanza in non-clear cell RCC) top-line data be presented at a major 2026 medical meeting, and is there updated timing for data release?

  A: Management reaffirms the trial is on track to reach the required event threshold and deliver top-line results in the second half of 2026. They declined to specify whether data will be ready for a major 2026 medical meeting, noting that timing details will be shared at the appropriate time.

• Q: Could patient recruitment for the STELR-311 Zanza NET trial be causing the slower-than-expected Cabo NET sales ramp, via cannibalization of commercial patients?

  A: Management confirms that STELR-311 enrollment has a small negative impact on near-term Cabo NET sales, as trial recruitment pulls patients from the commercial pool. They emphasize the primary driver of the slower ramp is the inherently indolent nature of NETs, which leads to slower treatment initiation kinetics. The long-term outlook for Cabo in NET remains unchanged, supported by the brand's over 45% new patient market share.

• Q: What is the latest update on the $5 billion 2033 revenue target for Zanza, and how has the opportunity evolved since the target was announced?

  A: Management notes that the $5 billion target was an aspirational goal for what success could look like for Zanza. Progress to date is on track: one pivotal trial is under regulatory review, with six additional pivotal trials ongoing or imminent, and multiple additional indications in the pipeline. Management remains committed to building Zanza into a large, valuable second franchise, but notes significant execution work remains.

• Q: Are you still considering partnering Zanza ex-U.S., similar to the Cabo partnership structure, or do you plan to commercialize Zanza globally on your own?

  A: Management confirms all options for ex-U.S. commercialization are still under active evaluation, with significant interest from potential partners. No decision has been made, and the company will continue to assess options as more Zanza pivotal trial data read out. Updates will be provided once a decision is reached.

• Q: Why did the non-liver metastases subgroup in the STELR-303 CRC trial fail to meet its primary endpoint, and was this discussed with regulators?

  A: Management explains the treatment effect for the non-liver metastases subgroup was consistent with earlier interim data, but the subgroup is small and the analysis was underpowered to reach statistical significance. The NDA submitted to regulators is based on the full intent-to-treat (ITT) population, which includes all patients regardless of metastatic status, and this is the primary data supporting approval.