10-K – 2026-02-10 – exel-20260102.htm

2025 Business Updates and Financial Highlights
Business Updates
• In January 2025, we presented preliminary results from a randomized expansion cohort of patients with metastatic CRC from STELLAR-001, and results from a subgroup analysis of patients in the epNET cohort with advanced gastrointestinal NET in CABINET, at the ASCO GI 2025.
• In February 2025, we announced final five-year follow-up results from the CheckMate -9ER trial at the ASCO Genitourinary Cancers Symposium.
• In March 2025, we announced FDA Approval of CABOMETYX for patients with previously treated advanced NET.
• In May 2025, we presented preliminary results from an expansion cohort of patients with previously untreated advanced ccRCC from STELLAR-002, along with data from multiple dose-escalation cohorts, at ASCO 2025.
• In June 2025, we announced positive top-line results from the STELLAR-303 phase 3 pivotal trial that the study met one of its dual primary endpoints, OS in the ITT population, with the OS benefit of the zanzalintinib and atezolizumab combination consistently observed across pre-specified subgroups.
• In June and July 2025, the USPTO declined to institute Azurity’s inter partes review of U.S. Patent Nos. 11,298,349 and 12,128,039, respectively.
• In July 2025, we entered into a settlement agreement with Biocon, which resolved patent litigation we brought in response to Biocon’s ANDA.
• In July 2025, we announced that our partner Ipsen received approval from the EC for CABOMETYX for adult patients with unresectable or metastatic, well-differentiated epNET and pNET who have progressed following at least one prior systemic therapy other than somatostatin analogues, following the positive opinion received from the EMA’s Committee for Medicinal Products for Human Use in June 2025. In July, Ipsen also received approval for CABOMETYX as a treatment for previously treated advanced NET by health regulatory authorities in both Brazil and Australia.
• In August 2025, we announced the appointment of Dana T. Aftab, Ph.D. as Executive Vice President, Research and Development.
• In October 2025, we presented results from a subgroup analysis of the CABINET phase 3 pivotal trial evaluating CABOMETYX in advanced lung and thymic neuroendocrine tumors, and detailed results from STELLAR-303, at ESMO 2025 and published the results concurrently in The Lancet .
• In October 2025, our Board of Directors authorized the October 2025 SRP for the repurchase of up to an additional $750 million of our common stock before December 31, 2026. This repurchase authorization is in addition to the two $500 million repurchase authorizations announced in August 2024 and February 2025. As of December 31, 2025, we have repurchased $1,159.7 million of our common stock, at an average price of $38.39 per share under these SRPs and have completed the SRPs authorized in August 2024 and February 2025.
• In December 2025, we submitted an NDA to the FDA for zanzalintinib in combination with atezolizumab for the treatment of previously treated metastatic colorectal cancer based on positive results from the STELLAR-303 phase 3 pivotal trial. In January 2026, we announced that the FDA had accepted our NDA and assigned a standard review, with a PDUFA target action date of December 3, 2026.
• In December 2025, we hosted our virtual 2025 R&D Day: Building Next-generation Oncology Franchises event to review the progress of Exelixis’ R&D activities and outline the company’s strategy to advance future oncology franchises.
• In January 2026, we announced a collaboration with Natera, on STELLAR-316, a planned phase 3 pivotal trial, which we anticipate will commence in mid-2026. STELLAR-316 will evaluate zanzalintinib, with and without an ICI, in patients with resected stage II/III CRC who, following completion of definitive therapy, have tested positive for MRD+ and have no radiographic evidence of disease. Natera will provide its Signatera™ assay to identify MRD+ for trial enrollment.
Financial Highlights
• Net product revenues for 2025 were $2,122.8 million, as compared to $1,809.4 million for 2024.
• Total revenues for 2025 were $2,320.1 million, as compared to $2,168.7 million for 2024.
• Research and development expenses for 2025 were $825.0 million, as compared to $910.4 million for 2024.
• Selling, general and administrative expenses for 2025 were $518.7 million, as compared to $492.1 million for 2024.
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• Provision for income taxes for 2025 was $158.6 million, as compared to $160.4 million for 2024.
• Net income for 2025 was $782.6 million, or $2.88 per share, basic, and $2.78 per share, diluted, as compared to $521.3 million, or $1.80 per share, basic, and $1.76 per share, diluted, for 2024.
See “Results of Operations” below for a discussion of the detailed components and analysis of the amounts above.
Outlook, Challenges and Risks
We will continue to face numerous challenges and risks that may impact our ability to execute on our business objectives. In particular, for the foreseeable future, we expect our ability to generate sufficient cash flow to fund our business operations and growth will depend upon the continued commercial success of CABOMETYX, both alone and in combination with other therapies, as a treatment for the highly competitive indications for which it is approved. In addition, CABOMETYX will only continue to be commercially successful if private third-party and government payers continue to provide coverage and reimbursement. As is the case for all innovative pharmaceutical therapies, obtaining and maintaining coverage and reimbursement for CABOMETYX is becoming increasingly difficult, both within the U.S. and in foreign markets. Further, healthcare policymakers in the U.S. continue to express concern over healthcare costs, and corresponding legislative and policy initiatives and activities have been launched aimed at increasing the healthcare cost burdens borne by pharmaceutical manufacturers, as well as expanding access to, and restricting the prices and growth in prices of, pharmaceuticals. Furthermore, the current U.S. administration has suggested that it may impose tariffs on imported pharmaceuticals.
Achievement of our business objectives will also depend on our ability to maintain a competitive position in the shifting landscape of therapeutic strategies for the treatment of cancer, which we may not be able to do. On an ongoing basis, we assess the constantly evolving landscape of other approved and investigational cancer therapies that could be competitive, or complementary in combination, with our products, and then we adapt our development strategies for the cabozantinib franchise and our pipeline product candidates accordingly, such as by modifying our clinical trials to include evaluation of our therapies with ICIs and other targeted agents. Even if our current and future clinical trials produce positive results sufficient to obtain marketing approval by the FDA and other global regulatory authorities, it is uncertain whether physicians will choose to prescribe regimens containing our products instead of competing products and product combinations in approved indications.
In the longer term, we may eventually face competition from potential manufacturers of generic or follow-on versions of our marketed products, including the proposed generic versions of CABOMETYX tablets that are the subject of ANDAs submitted to the FDA by MSN, Teva, Cipla, Biocon and Sun, as well as the 505(b)(2) for cabozantinib capsules submitted by Handa, or the 505(b)(2) for cabozantinib tablets submitted to the FDA by Azurity. The approval of any of these follow-on products and their subsequent launch could significantly decrease our revenues derived from the U.S. sales of CABOMETYX and thereby materially harm our business, financial condition and results of operations.
Separately, our research and development objectives may be impeded by the challenges of scaling our organization to meet the demands of expanded drug development, unanticipated delays in clinical testing and the inherent risks and uncertainties associated with drug discovery operations, especially on the global level. In connection with efforts to expand our product pipeline, we may be unsuccessful in discovering new potential cancer treatments or identifying appropriate candidates for in-licensing or acquisition.
Some of these challenges and risks are specific to our business, others are common to companies in the biopharmaceutical industry with development and commercial operations, and an additional category are macroeconomic, affecting all companies. For a more detailed discussion of challenges and risks we face, see “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K.

Results of Operations
Impact of the Duration of Our Fiscal Year
We have adopted a 52- or 53-week fiscal year policy that generally ends on the Friday closest to December 31st. Fiscal year 2025, which was a 52-week fiscal year, ended on January 2, 2026; and fiscal year 2024, which was a 53-week fiscal year, ended on January 3, 2025. The 52-week fiscal year 2025, as compared to the 53-week fiscal year 2024, contributed to the year-over-year decreases in certain revenues and expenses. For convenience, references in this report as of and for the fiscal years ended January 2, 2026 and January 3, 2025, are indicated as being as of and for the years ended
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December 31, 2025 and 2024, respectively. In fiscal year 2026, the annual period will end on January 1, 2027, and will be a 52-week fiscal year.
This discussion and analysis generally addresses 2025 and 2024 items and year-over-year comparisons between 2025 and 2024. Discussions of 2023 items and year-over-year comparisons between 2024 and 2023 that are not included in this Annual Report on Form 10-K can be found in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 11, 2025.
Revenues
Revenues by category were as follows (dollars in thousands):

Year Ended December 31, Percent Change

 
2025 2024
Net product revenues $ 2,122,804  $ 1,809,395  17 %
License revenues 214,375  349,244  -39 %
Collaboration services revenues (17,053) 10,062  -269 %
Total collaboration revenues
197,322  359,306  -45 %
Total revenues $ 2,320,126  $ 2,168,701  7 %

Net Product Revenues
Gross product revenues, discounts and allowances, and net product revenues were as follows (dollars in thousands):

 
Year Ended December 31, Percent Change

 
2025 2024
Gross product revenues $ 3,011,807  $ 2,518,246  20 %
Discounts and allowances (889,003) (708,851) 25 %
Net product revenues $ 2,122,804  $ 1,809,395  17 %

Net product revenues by product were as follows (dollars in thousands):

 
Year Ended December 31, Percent Change

 
2025 2024
CABOMETYX $ 2,113,369  $ 1,798,237  18 %
COMETRIQ 9,435  11,158  -15 %
Net product revenues $ 2,122,804  $ 1,809,395  17 %

The increase in net product revenues for the year ended December 31, 2025, as compared to 2024, was primarily related to a 16% increase in the number of CABOMETYX units sold reflecting continuing demand for CABOMETYX in combination with nivolumab as a first-line treatment of patients with advanced RCC, and demand for previously treated advanced NET and, to a lesser extent, a 1% increase in the average net selling price of CABOMETYX. The increase in sales volume was largely driven by refills, reflecting the longer duration of therapy for the combination of CABOMETYX with nivolumab, and an increase in related market share reflecting the continued evolution of the metastatic RCC and NET treatment landscapes.
We project our net product revenues may increase in fiscal year 2026, as compared to 2025, for similar reasons noted above.
We recognize product revenues net of discounts and allowances that are described in “Note 1. Organization and Summary of Significant Accounting Policies” of the “Notes to Consolidated Financial Statements” in Part II, Item 8 of this Annual Report on Form 10-K. Discounts and allowances have generally increased over time as the number of patients participating in government programs has increased and as the discounts given and rebates paid to government payers
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have also increased. The increase in the amount of discounts and allowances for the year ended December 31, 2025, as compared to 2024, was primarily the result of an increase in the volume of units sold, and the increase in utilization and dollar amount of chargebacks under the 340B Drug Pricing program.
We project our discounts and allowances may increase in fiscal year 2026, as compared to 2025, for similar reasons noted above.
License Revenues
License revenues primarily include: (a) the recognition of the portion of milestone payments allocated to the transfer of intellectual property licenses for which it had become probable, in the related period, that a milestone would be achieved and a significant reversal of revenues would not occur in future periods; and (b) royalty revenues.
See “Note 4. Collaborations and Business Development Activities—Cabozantinib Commercial Collaborations— Performance Obligations and Transaction Prices for our Ipsen and Takeda Collaborations ” of the “Notes to Consolidated Financial Statements” in Part II, Item 8 of this Annual Report on Form 10-K for a discussion on the allocation of transaction price which impacts the proportion of milestone revenues allocated to license revenues and collaboration services revenues.
Milestone revenues, which are allocated between license revenues and collaboration services revenues, were $14.3 million for the year ended December 31, 2025, as compared to $169.3 million for 2024. Milestone revenues achieved in the respective fiscal year included the following:
• For the year ended December 31, 2025, milestone revenues included $4.7 million in license revenues recognized in connection with a $5.0 million regulatory milestone payment from Ipsen, upon approval by the EC for the treatment of patients with either advanced pNET or advanced epNET.
• For the year ended December 31, 2024, milestone revenues included: (1) $150.0 million in license revenues recognized in connection with a commercial milestone payment from Ipsen upon its achievement of $600.0 million in cumulative net sales of cabozantinib over four consecutive quarters in its related Ipsen license territory; (2) $2.2 million in license revenues recognized in connection with a commercial milestone payment from Ipsen upon its achievement of CAD$30.0 million in cumulative net sales of cabozantinib over four consecutive quarters in Canada; and (3) $11.4 million in revenues related to a $12.5 million regulatory milestone payment from Ipsen upon submission of a variation application the EMA for evaluating cabozantinib versus placebo in patients with either advanced pNET or advanced epNET who experienced progression after prior systematic therapy.
Due to uncertainties surrounding the timing and achievement of development, regulatory and commercial milestones, it is difficult to predict the timing of future milestones revenues; consequently, milestones may vary significantly from period to period.
Royalty revenues increased primarily as a result of an increase in Ipsen’s net sales of cabozantinib outside of the U.S. and Japan. Ipsen royalties were $165.9 million for the year ended December 31, 2025, as compared to $154.0 million for 2024. Ipsen’s net sales of cabozantinib have continued to grow since the first commercial sale of CABOMETYX in the Ipsen territories in 2016, primarily due to regulatory approvals in new territories, including regulatory approval in the EU for the combination therapy of CABOMETYX and nivolumab received in March 2021. Royalty revenues for the year ended December 31, 2025 also included $13.2 million, as compared to $12.9 million for 2024, related to Takeda’s net sales of cabozantinib. As of December 31, 2025, CABOMETYX is approved and commercially available in 68 countries outside of the U.S.
Collaboration Services Revenues
Collaboration services revenues include: (a) the development cost reimbursements earned under our collaboration agreements and product supply revenues, net of product supply costs; (b) the recognition of deferred revenues for the portion of upfront and milestone payments that have been allocated to research and development services performance obligations; offset by (c) the royalties we pay to Royalty Pharma on sales by Ipsen and Takeda of products containing cabozantinib.
Development cost reimbursements were $3.7 million for the year ended December 31, 2025, as compared to $25.8 million for 2024. The decrease in development cost reimbursements during the year ended December 31, 2025 was primarily due to a decrease in spending on studies evaluating cabozantinib that are subject to reimbursement.
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Recognition of deferred revenues for the portion of upfront and milestone payments that have been allocated to research and development services performance obligations were not material for the year ended December 31, 2025 and 2024, respectively.
Collaboration services revenues were reduced by $22.8 million and $21.3 million for the years ended December 31, 2025 and 2024, respectively, to account for the 3% royalty we are required to pay Royalty Pharma on the net sales by Ipsen and Takeda of any product containing cabozantinib. As royalty generating sales of cabozantinib by Ipsen and Takeda have increased as described above, our royalty payments due to Royalty Pharma have also increased.
We project our collaboration services revenues may decrease in fiscal year 2026, as compared to 2025, primarily as a result of a decrease in development cost reimbursements and an increase in royalty payments on the sales of cabozantinib by Ipsen and Takeda.
Cost of Goods Sold
The cost of goods sold and our gross margins were as follows (dollars in thousands):

 
Year Ended December 31, Percent Change

 
2025 2024
Cost of goods sold $ 83,697  $ 76,216  10 %
Gross margin % 96 % 96 %

Cost of goods sold is related to our product revenues and consists of a 3% royalty payable on U.S. net sales of any product containing cabozantinib, as well as the cost of inventory sold, indirect labor costs, write-downs related to expiring, excess and obsolete inventory, and other third-party logistics costs. The increase in cost of goods sold for the year ended December 31, 2025, as compared to 2024, was primarily due to the increase in royalties as a result of increased U.S. CABOMETYX sales, partially offset by a decrease in certain period costs. We project our gross margin in 2026 will remain consistent with fiscal year 2025.
Research and Development Expenses
We do not track fully burdened research and development expenses on a project-by-project basis. We group our research and development expenses into three categories: (1) development; (2) drug discovery; and (3) other research and development. Our development group leads the development and implementation of our clinical and regulatory strategies and prioritizes disease indications in which our compounds are being or may be studied in clinical trials. Development expenses include license and other collaboration costs, primarily composed of upfront license fees, development milestones and other payments associated with our clinical-stage in-licensing collaboration programs, clinical trial costs, personnel expenses, consulting and outside services and other development costs, including manufacturing costs of our drug development candidates. Our drug discovery group utilizes a variety of technologies, including in-licensed technologies, to enable the rapid discovery, optimization and extensive characterization of lead compounds and biotherapeutics such that we are able to select development candidates with the best potential for further evaluation and advancement into clinical development. Drug discovery expenses include license and other collaboration costs primarily composed of upfront license fees, research funding commitments, option exercise fees, development milestones and other payments associated with our in-licensing collaboration programs in preclinical development stage. Other drug discovery costs include personnel expenses, consulting and outside services and laboratory supplies. Other research and development expenses include the allocation of general corporate costs to research and development services and development cost reimbursements in connection with certain of our collaboration arrangements.
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Research and development expenses by category were as follows (dollars in thousands):

Year Ended December 31, Percent Change

 
2025 2024
Development:
Clinical trial costs $ 243,221  $ 284,335  -14 %
Personnel expenses 181,134  183,951  -2 %
License and other collaboration costs 9,500  45,000  -79 %
Consulting and outside services 57,410  46,086  25 %
Other development costs 76,578  106,475  -28 %
Total development 567,843  665,847  -15 %
Drug discovery:
License and other collaboration costs 16,157  24,172  -33 %
Other drug discovery costs 73,774  70,670  4 %
Total drug discovery 89,931  94,842  -5 %
Stock-based compensation 40,792  30,670  33 %
Other research and development 126,435  119,049  6 %
Total research and development expenses $ 825,001  $ 910,408  -9 %

In addition, we track our external clinical trial costs by product and product candidate and by scientific modalities, which are categorized as small molecule and biotherapeutics programs. Small molecule clinical development for the reported periods was primarily composed of zanzalintinib and cabozantinib. Biotherapeutics clinical development for the reported periods was primarily composed of XB010, XB371, XB628 and XB002.
Clinical trial costs by scientific modalities, by product and by product candidate were as follows (dollars in thousands):

 
Year Ended December 31,  Percent Change
 
2025 2024
Small molecules:
Zanzalintinib $ 159,773  $ 148,808  7  %
Cabozantinib 35,889  70,755  -49  %
Other small molecules 19,090  20,232  -6  %
Total small molecules 214,752  239,795  -10  %
Biotherapeutics 28,469  44,540  -36  %
Total clinical trial costs $ 243,221  $ 284,335  -14  %

The decrease in research and development expenses for the year ended December 31, 2025, as compared to 2024, was primarily related to decreases in license and other collaboration costs, clinical trial costs and manufacturing costs to support our development candidates (presented as part of other development costs), partially offset by increases in consulting and outside services and stock-based compensation.
Development-related license and other collaboration costs and Drug discovery-related license and other collaboration costs decreased for the year ended December 31, 2025, as compared to 2024, primarily due to lower development milestone achievement in our clinical-stage and discovery-stage in-licensing collaboration programs. Clinical trial costs, which include services performed by third-party contract research organizations and other vendors who support our clinical trials, decreased for the year ended December 31, 2025, as compared to 2024, primarily due to lower costs associated with studies evaluating cabozantinib and XB002, partially offset by higher costs associated with zanzalintinib, XB628, XL309 and XB010 studies.
In addition to reviewing the three categories of research and development expenses described above, we principally consider qualitative factors in making decisions regarding our research and development programs. These
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factors include enrollment in clinical trials for our product candidates, preliminary data and final results from clinical trials, the potential market indications and overall clinical and commercial potential for our product candidates, and competitive dynamics. We also make our research and development decisions in the context of our overall business strategy.
We project that clinical trial costs may increase with higher costs associated with various studies evaluating zanzalintinib, XB628, XB371 and XB010, partially offset by decreases in costs associated with cabozantinib.
To continue growing our pipeline, we are prioritizing investment in new molecules that are clinically differentiated with the potential to improve the standard of care for our cancer patients, including current progressing and planned clinical trial programs evaluating zanzalintinib, XB628, XB371, XL309, and XB010. We are working to expand our oncology product pipeline through drug discovery efforts, which encompass our diverse biotherapeutics and small molecule programs exploring multiple modalities and mechanisms of action. This approach provides a high degree of flexibility with respect to target selection and allows us to prioritize those targets that we believe have the greatest chance of yielding impactful therapeutics. As part of our strategy, our drug discovery activities have included and continue to include internal research, as well as external research collaborations, in-licensing arrangements and other strategic transactions that collectively incorporate a wide range of technology platforms and assets and increase our probability of success. As of the date of this Annual Report on Form 10-K, we expect to progress up to two new development candidates into preclinical development in 2026. We will continue to engage in pipeline expansion initiatives with the goal of acquiring and in-licensing promising investigational oncology assets and then further characterize and develop them utilizing our established preclinical and clinical development infrastructure.
We project our research and development expenses may increase for fiscal year 2026, as compared to 2025, primarily driven by increases in clinical trial costs, including the current and planned trials evaluating zanzalintinib, XB628, XB371 and XB010, and personnel expenses.
A discussion of the risks and uncertainties with respect to our research and development activities, and the consequences to our business, financial position, and growth prospects can be found in “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were as follows (dollars in thousands):

 
Year Ended December 31, Percent Change

 
2025 2024
Selling, general and administrative expenses (1)
$ 446,536  $ 428,962  4 %
Stock-based compensation 72,191  63,166  14 %
Total selling, general and administrative expenses $ 518,727  $ 492,128  5 %

____________________
(1)     Excludes stock-based compensation allocated to selling, general and administrative expenses.
Selling, general and administrative expenses consist primarily of personnel expenses, stock-based compensation, marketing costs and certain other administrative costs.
The increase in selling, general and administrative expenses for the year ended December 31, 2025, as compared to 2024, was primarily due to increases in marketing activities in support of the commercial launch of CABOMETYX for the treatment of patients with previously treated advanced NET and pre-launch activities for zanzalintinib, stock-based compensation, and personnel expenses, partially offset by a decrease in corporate giving.
We project our selling, general and administrative expenses may increase in fiscal year 2026, as compared to 2025, as a result of increases in personnel expenses for the salesforce expansion in support for the commercial sale of CABOMETYX for the treatment of patients with previously treated advanced NET, marketing activities in support of the anticipated commercial launch of zanzalintinib and legal and advisory fees.
Impairment of Long-Lived Assets
Impairment of long-lived assets for the year ended December 31, 2024, was related to certain leased facilities at our Alameda campus. During fiscal year 2024, we listed certain buildings for sublease. As a result, we assessed the impacted
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asset groups for impairment and concluded that the related right-of-use assets and leasehold improvements were not fully recoverable and recognized a $51.7 million non-cash impairment charge. See “Note 12. Commitments and Contingencies” of the “Notes to Consolidated Financial Statements” in Part II, Item 8 of this Annual Report on Form 10-K for additional information.
Impairment of long-lived assets were as follows (dollars in thousands):

Year Ended December 31, Percent Change
2025 2024
Impairment of long-lived assets $ —  $ 51,672  n/a

Restructuring Expenses
Restructuring expenses resulted from the execution of the 2025 corporate reorganization plan (2025 Plan) and 2024 corporate restructuring plan (2024 Plan), consisting primarily of severance and employee-related costs, asset impairment, and contract termination costs. See “Note 13. Restructuring” of the “Notes to Consolidated Financial Statements” in Part II, Item 8 of this Annual Report on Form 10-K for additional information.
Restructuring expenses were as follows (dollars in thousands):

Year Ended December 31, Percent Change

2025 2024
Restructuring expenses
$ 20,510  $ 33,660  -39 %

Non-Operating Income
Non-operating income was as follows (dollars in thousands):

 
Year Ended December 31, Percent Change

 
2025 2024
Interest income $ 69,213  $ 77,156  -10 %
Other expenses, net
(198) (133) 49 %
Non-operating income $ 69,015  $ 77,023  -10 %

The decrease in non-operating income for the year ended December 31, 2025, as compared to 2024, was primarily the result of a decrease in interest income due to lower average interest-bearing investment balances, and lower average interest rates.
Provision for Income Taxes
The provision for income taxes and the effective tax rates were as follows (dollars in thousands):

 
Year Ended December 31, Percent Change

 
2025 2024
Provision for income taxes $ 158,636  $ 160,373  -1 %
Effective tax rate 16.9 % 23.5 %

The decrease in provision for income taxes for the year ended December 31, 2025, as compared to 2024, was primarily due to the Foreign-Derived Intangible Income (FDII) deduction and excess tax benefits related to certain stock grants, offset by an increase in income before income taxes. The effective tax rate for the year ended December 31, 2025 differed from the U.S. federal statutory rate of 21%, primarily due to the FDII deduction, the generation of federal tax credits, and excess tax benefits related to certain stock grants. The effective tax rate for the year ended December 31, 2024 differed from the U.S. federal statutory rate of 21%, primarily due to state taxes, partially offset by the generation of federal tax credits. We project that our effective tax rate may be between 21% and 23% in fiscal year 2026.
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Liquidity and Capital Resources
As of December 31, 2025, we had $1.66 billion in cash, cash equivalents and marketable securities, as compared to $1.75 billion as of December 31, 2024. We anticipate that the aggregate of our current cash and cash equivalents, marketable securities available for operations, net product revenues and collaboration revenues will enable us to maintain our operations for at least 12 months and thereafter for the foreseeable future.
Our primary cash requirements for operating activities, which we project will increase in fiscal 2026 as compared to fiscal year 2025, are for: employee related expenditures; payments related to our collaboration and development programs; income tax payments; royalty payments on our net product sales; cash payments for inventory; rent payments for our leased facilities and contract manufacturing payments.
The Tax Cuts and Jobs Act, signed into law on December 22, 2017, modified the tax treatment of research and experimental (R&E) expenditures beginning in fiscal year 2022, requiring that they must be capitalized and amortized ratably over five years for domestic R&E expenditures or 15 years for foreign R&E expenditures. The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, which, among other provisions, permanently repeals the requirement to capitalize domestic R&E expenditures for federal income tax purposes for taxable years beginning after December 31, 2024, and allows for the accelerated deduction of any remaining unamortized domestic R&E expenditures. Foreign R&E expenditures are still required to be capitalized and amortized ratably over 15 years. The federal cash tax benefit for this provision of the OBBBA was $191 million for our fiscal year 2025, with no corresponding impact to the federal income tax provision.
Our primary sources of operating cash are: cash collections from customers related to net product revenues, which we project may increase for fiscal year 2026, as compared to 2025; cash collections related to milestones achieved and royalties earned from our commercial collaboration arrangements with Ipsen, Takeda and others; and cash collections for cost reimbursements under certain of our development programs with Ipsen and Takeda which we project may decrease in 2026, as compared to 2025. The timing of cash generated from commercial collaborations and cash payments required for in-licensing collaborations relative to upfront license fee payments, cost reimbursements, exercise of option payments and other contingent payments such as development milestone payments may vary from period to period.
We project that we may continue to spend significant amounts of cash to fund the development of product candidates in our pipeline, including zanzalintinib, XB371, XB628, XL309 and XB010, and the development and commercialization of cabozantinib. In addition, we may continue to expand our oncology product pipeline through additional research collaborations, in-licensing arrangements and other strategic transactions that align with our oncology drug development, regulatory and commercial expertise.
In August 2024, our Board of Directors authorized a SRP to acquire up to $500.0 million of our outstanding common stock before December 31, 2025. In February 2025, our Board of Directors authorized the repurchase of up to an additional $500.0 million of our outstanding common stock before December 31, 2025. In October 2025, our Board of Directors authorized the October 2025 SRP for the repurchase of up to an additional $750.0 million of our common stock before December 31, 2026. As of December 31, 2025, we have repurchased 30.2 million shares of common stock for an aggregate purchase price of $1,159.7 million under these SRPs and have completed the SRPs authorized in August 2024 and February 2025. As of December 31, 2025, approximately $590.2 million remained available under the October 2025 SRP for future stock repurchases before December 31, 2026.
Stock repurchases under these SRPs may be made from time to time through a variety of methods, which may include open market purchases, in block trades, Rule 10b5-1 trading plans, accelerated share repurchase transactions, exchange transactions, or any combination of such methods. The timing and amount of a ny stock repurchases under the SRPs will be based on a variety of factors, including ongoing assessments of the capital needs of the business, alternative investment opportunities, the market price of Exelixis’ common stock and general market conditions. These SRPs do not obligate us to acquire any amount of our common stock, and the SRPs may be modified, suspended or discontinued at any time without prior notice.
Financing these activities could materially impact our liquidity and capital resources and may require us to incur debt or raise additional funds through the issuance of equity. Furthermore, even though we believe we have sufficient funds for our current and future operating plans, we may choose to incur debt or raise additional funds through the issuance of equity based on market conditions or strategic considerations.
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Sources and Uses of Cash (dollars in thousands):

 
Year Ended December 31, Percent Change

 
2025 2024
Working capital
$ 1,037,645  $ 1,063,810  -2 %
Cash, cash equivalents and marketable securities $ 1,662,694  $ 1,748,567  -5 %

Working capital : The decrease in working capital as of December 31, 2025, as compared to December 31, 2024, was primarily due to the payments for repurchases of our common stock, partially offset by the favorable impact to our net current assets resulting from our increase in net product revenues. In the future, our working capital may be impacted by one of these factors or other factors, the amounts and timing of which are variable.
Cash, cash equivalents and marketable securities : Cash and cash equivalents primarily consist of deposits at major banks, money market funds, commercial paper and other securities with original maturities 90 days or less. Marketable securities primarily consist of debt securities available-for-sale and certificates of deposit. For additional information regarding our cash, cash equivalents and marketable securities, see “Note 5. Cash and Marketable Securities,” of the “Notes to Consolidated Financial Statements” in Part II, Item 8 of this Annual Report on Form 10-K. The decrease in cash, cash equivalents and marketable securities at December 31, 2025, as compared to December 31, 2024, was primarily due to cash payments to repurchase our common stock, cash payments to support our development and discovery programs, including acquisition of in-process research and development technology, tax payments and operating cash payments for employee-related expenditures and restructuring, partially offset by cash inflows generated by our operations from sales of our products and our commercial collaboration arrangements.
Cash flow activities were as follows (dollars in thousands):

 
Year Ended December 31, Percent Change

 
2025 2024
Net cash provided by operating activities $ 884,267  $ 699,971  26 %
Net cash provided by (used in) investing activities $ 350,441  $ (116,783) -400 %
Net cash used in financing activities $ (969,594) $ (628,808) 54 %

Operating Activities
Cash provided by operating activities is derived by adjusting our net income for non-cash operating items such as deferred taxes, stock-based compensation, depreciation and amortization, non-cash lease expense, impairment of long-lived assets, acquired in-process research and development technology, and changes in operating assets and liabilities, which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in our Consolidated Statements of Income.
Net cash provided by operating activities increased for the year ended December 31, 2025, as compared to 2024, primarily due to an increase in cash received on sales of our products, lower cash paid for certain operating expenses, partially offset by cash payments related to the 2024 and 2025 Plans.
Investing Activities
The changes in cash flows from investing activities primarily relates to the timing of marketable securities activity, acquisition of in-process research and development technology and capital expenditures. Our capital expenditures primarily consist of investments to expand our operations and acquire assets that further support our research and development activities.
Net cash was provided by investing activities for the year ended December 31, 2025, as compared to net cash used in investing activities in 2024. The increase in cash provided by investing activities was primarily due to an increase in cash proceeds from maturities and sales of marketable securities and decreases in purchases of marketable securities, property and equipment and in-process research and development technology related to certain in-licensing collaboration arrangements.
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Financing Activities
The changes in cash flows from financing activities primarily relate to payments for repurchases of common stock, proceeds from employee stock programs and taxes paid related to net share settlement of equity awards.
Net cash used in financing activities increased for the year ended December 31, 2025, as compared to 2024, primarily due to increases in payments for repurchases of common stock and withholding taxes remitted to the government related to net share settlements of equity awards.

Contractual Obligations
As of December 31, 2025, we anticipate the aggregate of our cash, cash equivalents and marketable securities and cash generated from operations to be sufficient to fund our contractual obligations, as well as cash requirements to support our ongoing operations and capital expenditures. Our contractual obligations as of December 31, 2025 primarily consist of:
Operating leases: We have certain lease agreements related to our corporate campus facilities and laboratory facilities located in Alameda, California, under which we are obligated to make lease payments. As of December 31, 2025, we had $28.5 million of lease payments due in one year and $230.7 million due over the remaining lease term.
Purchase obligations: Purchase obligations include firm purchase commitments related to manufacturing of inventory, software services and other facilities and equipment. As of December 31, 2025, we had $61.7 million total purchase obligations due within one year and $29.6 million due after one year.
Contingent payments: We have committed to make certain contingent payments for potential future milestones, research funding commitments and royalties to certain collaboration partners, including contingent exercise fee payments if we decide to exercise certain of our options to in-license or acquire in-process research and development technology as part of our agreements with those parties. We do not expect these contingent payments to have a significant impact on our liquidity in the near term.
See “Notes 4. Collaboration Agreements and Business Development Activities” and “Note 12. Commitments and Contingencies” of the “Notes to Consolidated Financial Statements” in Part II, Item 8 of this Annual Report on Form 10-K for additional information regarding our contractual obligations and contingencies.
As of December 31, 2025, we did not have any material off-balance-sheet arrangements, as defined by applicable SEC regulations.

Critical Accounting Policies and Estimates
The preparation of our Consolidated Financial Statements conforms to accounting principles generally accepted in the U.S. which requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenues and expenses, and related disclosures. An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our Consolidated Financial Statements. On an ongoing basis, management evaluates its estimates including, but not limited to: those related to revenue recognition, including determining the nature and timing of satisfaction of performance obligations, and determining the standalone selling price of performance obligations, and variable consideration such as rebates, chargebacks, sales returns and sales allowances as well as milestones included in collaboration arrangements; the accrual for certain liabilities including accrued clinical trial liabilities; and valuations of equity awards used to determine stock-based compensation, including certain awards with vesting subject to market or performance conditions; and the amounts of deferred tax assets and liabilities including the related valuation allowance. We base our estimates on historical experience and on various other market-specific and other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our senior management has discussed the development, selection and disclosure of these estimates with the Audit Committee of our Board of Directors. Actual results could differ materially from those estimates.
We believe our critical accounting policies relating to revenue recognition, clinical trial and collaboration accruals, stock-based compensation and income taxes reflect the more significant estimates and assumptions used in the preparation of our Consolidated Financial Statements.
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For a complete description of our significant accounting policies, see “Note 1. Organization and Summary of Significant Accounting Policies” of the “Notes to Consolidated Financial Statements” in Part II, Item 8 of this Annual Report on Form 10-K.
Revenue Recognition
Net Product Revenues and Discounts and Allowances
We recognize revenues when our customers obtain control of promised goods or services, in an amount that reflects the consideration to which we are entitled to in exchange for those goods or services. We calculate gross product revenues based on the price that we charge to the specialty pharmacies and distributors in the U.S. We estimate our domestic net product revenues by deducting from our gross product revenues: (a) trade allowances, such as discounts for prompt payment; (b) estimated government rebates and chargebacks; (c) certain other fees paid to specialty pharmacies, distributors and commercial payors; and (d) returns. We record estimates for these deductions at the time we recognize the related gross product revenue. However, the actual rebate or chargeback on the sale of our product to a distributor is not invoiced to us until a future period, generally within three months from the date of sale. Due to this time lag, we must estimate the amount of rebates and chargebacks to accrue. We base our estimates for the expected utilization on customer and payer data received from the specialty pharmacies and distributors and historical utilization rates. We update our estimates every quarter to reflect actual claims and other current information. Actual rebates and chargebacks claimed for prior periods have varied from our estimates by less than 1% of the amount deducted from gross product revenues for the years ended December 31, 2025 and 2024. Our current estimates may differ significantly from actual results.
Collaboration Revenues
We enter into collaboration arrangements with third parties, under which we license certain rights to our intellectual property, and account for the arrangements as either license revenue or collaboration services revenue when the counterparty is a customer. The terms of these arrangements may include payments to us for one or more of the following: non-refundable, up-front license fees; development, regulatory and commercial milestone payments; product supply services; development cost reimbursements; profit sharing arrangements; and royalties on net sales of licensed products.
As part of the accounting for these arrangements, we must develop assumptions that require judgment to determine the standalone selling price for each performance obligation identified in the contract. We use key assumptions to determine the standalone selling price, which may include forecast revenues and costs, clinical development timelines and costs, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success. At the inception of each arrangement that includes development milestone payments, we evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price using the most likely amount method. At the end of each subsequent reporting period, we re-evaluate the probability of earning of such development milestones and any related constraint, and if necessary, adjust our estimate of the overall transaction price. For arrangements that may include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sale occurs or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). Development milestone adjustments are recorded on a cumulative catch-up basis, which would affect collaboration services revenues in the period of adjustment. In addition, in recording revenues for our research and development services performance obligations, we use projected development cost estimates to determine the amount of revenue to record as we satisfy this performance obligation.
Clinical Trial and Collaboration Accruals
We execute all of our clinical trials with support from contract research organizations and other vendors and we accrue costs for clinical trial activities performed by these third parties based upon the estimated amount of work completed on each trial. For clinical trial expenses, the significant factors used in estimating accruals include the number of patients enrolled, the activities performed for each patient, the number of active clinical sites and the duration for which the patients will be enrolled in the trial. Certain of our in-licensing collaboration arrangements include contingent payments in the form of development, regulatory and commercial milestones. We recognize expense for contingent payments when they are deemed probable of achievement which requires judgment as to the probability and timing of the achievement of the underlying milestones. To the extent actual results, or updated probability estimates, differ from current estimates, such amounts are recorded as an adjustment in the period estimates are revised. We monitor patient enrollment levels and assess the related research and development activities progress, including the probability of achieving milestone payments
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associated to the respective terms and conditions of our in-licensing and collaboration arrangements to the extent possible through internal reviews and estimates of the operational progress of our discovery and early-stage clinical development programs, correspondence with contract research organizations and review of contractual terms. We base our estimates on the best information available at the time. However, additional information may become available to us, which may allow us to make a more accurate estimate in future periods. If we do not identify costs that we have begun to incur or if we underestimate or overestimate the level of services performed or the costs of these services, our actual expenses could differ from our estimates.
Stock-based Compensation
Stock-based compensation expense requires us to estimate the fair value of performance-based restricted stock units (PSUs) and restricted stock units (RSUs) subject to market conditions, and estimate the number of shares subject to PSUs and RSUs with market conditions that will ultimately vest. To determine the fair value, we use models that require a number of complex and subjective assumptions including our stock price volatility, employee exercise patterns and risk-free interest rates. Monte Carlo simulation models are used to determine grant date fair value of awards with market conditions. The assumptions used in calculating the fair value of market conditions awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future.
We recognize stock-based compensation for PSUs over the requisite service period only for awards which we estimate will ultimately vest, which requires judgment as to the probability and timing of the achievement of the underlying performance goals. Significant factors we consider in making those judgments include forecasts of our product revenues and those of our collaboration partners, estimates regarding the operational progress of late-stage clinical development programs and discovery pipeline expansion performance targets. To the extent actual results, or updated estimates, differ from current estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised and as such, can materially affect our stock-based compensation expense in the current period and in the future. Compensation expense related to RSUs with market vesting conditions is recognized regardless of the outcome of the market conditions.
Income Taxes
We compute our income tax provision or benefit under the asset and liability method. Significant estimates are required in determining our income tax provision or benefit. We base some of these estimates on interpretations of existing tax laws or regulations. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined on the basis of the difference between the tax basis of assets and liabilities and their respective financial reporting amounts (temporary differences) at enacted tax rates in effect for the years in which the differences are expected to reverse. A valuation allowance is established for deferred tax assets for which it is more likely than not that some portion or all of the deferred tax assets, including net operating losses and tax credits, will not be realized. We periodically re-assess the need for a valuation allowance against our deferred tax assets based on various factors including our historical earnings experience by taxing jurisdiction, and forecasts of future operating results and utilization of net operating losses and tax credits prior to their expiration. Significant judgment is required in making this assessment and, to the extent that we deem a reversal of any portion of our valuation allowance against our deferred tax assets to be appropriate, we recognize a tax benefit against our income tax provision in the period of such reversal.
We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by tax authorities based on the technical merits of the position. The tax benefit recognized in the Consolidated Financial Statements for a particular tax position is based on the largest benefit that is more likely than not to be realized. The amount of unrecognized tax benefits is adjusted as appropriate for changes in facts and circumstances, such as significant amendments to existing tax law, new regulations or interpretations by tax authorities, new information obtained during a tax examination or resolution of an examination. We have elected to record interest and penalties in the accompanying Consolidated Statements of Income as a component of income taxes.
Recent Accounting Pronouncements
For a description of the expected impact of recent accounting pronouncements, see “Note 1. Organization and Summary of Significant Accounting Policies” of the “Notes to Consolidated Financial Statements” in Part II, Item 8 of this Annual Report on Form 10-K.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to cash flow and earnings fluctuations as a result of certain market risks. These market risks primarily relate to changes in interest rates and foreign exchange rates. Our investment portfolio is used to preserve our capital until it is required to fund operations, including our research and development activities. None of these market risk-sensitive instruments are held for trading purposes.
Interest Rate Risk
We invest our cash in a variety of financial instruments, principally securities issued by the U.S. government and its agencies, investment-grade corporate bonds and commercial paper, and money market funds. These investments are denominated in U.S. Dollars. All of our interest-bearing securities are subject to interest rate risk and could decline in value if interest rates fluctuate. Substantially all of our investment portfolio consists of marketable securities with active secondary or resale markets to help ensure portfolio liquidity, and we have implemented guidelines limiting the term-to-maturity of our investment instruments. Due to the conservative and short-term nature of these instruments, we do not believe that we have a material exposure to interest rate risk. If market interest rates were to increase or decrease by one percentage point, the fair value of our investment portfolio would increase or decrease by an immaterial amount.
Foreign Exchange Rate Risk
Fluctuations in the exchange rates of the U.S. dollar and foreign currencies may have the effect of increasing or decreasing our revenues and expenses and related financial assets, liabilities and cash flows. Royalty revenues and sales-based milestones we receive from our collaboration agreements with Ipsen, Takeda and Genentech are a percentage of the net sales made by those collaboration partners from sales made in countries outside the U.S. and are denominated in currencies in which the product is sold, which is predominantly the Euro or Japanese Yen. Research and development expenses include clinical trial and other services performed by third-party contract research organizations and other vendors located outside the U.S. that may bill us in currencies where their services are provided, which is predominantly the Euro. If the U.S. dollar strengthens against a foreign currency, then our royalty revenues will decrease for the same number of units sold in that foreign currency and the date we achieve certain sales-based milestones may also be delayed. Similarly, if the U.S. dollar weakens against a foreign currency, then our research and development expenses would increase. However, we believe that we are not subject to material risks arising from changes in foreign exchange rates and that a hypothetical 10% increase or decrease in foreign exchange rates would not have a material adverse impact on our financial condition, results of operations or cash flows. From time to time we have entered into forward foreign currency exchange contracts, that are not designated as hedges for accounting purposes, to hedge certain operational exposures for the changes in foreign currency exchange rates associated with assets or liabilities denominated in foreign currencies, primarily the Euro. Our strategy is to enter into foreign currency forward contracts for currencies in which we have an asset or liability exposure so that increases or decreases in the foreign currency exposure are offset by gains or losses on the foreign currency forward contracts, which mitigate the risks and volatility associated with certain foreign currency transactions. See “Note 6. Fair Value Measurements — Forward Foreign Currency Contracts” of the “Notes to Consolidated Financial Statements” in Part II, Item 8 of this Annual Report on Form 10-K for additional information about our foreign currency forward contracts.

Item 8. Financial Statements and Supplementary Data.
EXELIXIS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

  Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 )
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Consolidated Balance Sheets
80

Consolidated Statements of Income
81

Consolidated Statements of Comprehensive Income
81

Consolidated Statements of Stockholders’ Equity
82

Consolidated Statements of Cash Flows
83

Notes to Consolidated Financial Statements
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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Exelixis, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Exelixis, Inc. (the Company) as of January 2, 2026 and January 3, 2025, the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended January 2, 2026, and the related notes (collectively referred to as the “consolidated financial statements“). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at January 2, 2026 and January 3, 2025, and the results of its operations and its cash flows for each of the three years in the period ended January 2, 2026, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of January 2, 2026, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 10, 2026 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Net product revenues

Description of the Matter For the year ended January 2, 2026, the Company recorded net product revenues of $2.1 billion. As discussed in Note 1 and Note 3 to the consolidated financial statements, the Company sells its products principally to specialty distributors and specialty pharmacy providers, collectively, Customers. These Customers subsequently resell the products to health care providers and patients. Revenues from product sales are recognized net of accruals for estimated rebates, wholesaler chargebacks, discounts and other deductions (collectively discounts and allowances), which are estimated at the time of sale. Revenues from product sales are recognized upon transfer of control of a product to a customer, generally upon delivery, and is based on an amount that reflects the consideration to which the Company expects to be entitled, which represents an amount that is net of accruals for estimated discounts and allowances.

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Auditing the Company’s net product revenues was complex and involved judgment given the volume of sales transactions and estimated rebates and chargebacks accruals related to U.S. product sales.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s revenue recognition process to determine the timing and measurement of product revenue and estimation of discounts and allowances. This included testing controls over management’s review of key assumptions and inputs used in the estimation of discounts and allowances, including but not limited to products delivered, contractual terms, and historical experience.

Our audit procedures over net product revenues included, among others, performing analytical procedures over revenues recognized and cash collections, testing appropriate cut-off of revenue recognition at period-end, and confirming a sample of outstanding receivable balances with customers. We also evaluated the Company’s methodology used to estimate discounts and allowances, tested key assumptions, and assessed the historical accuracy of the Company’s estimates of discounts and allowances by comparing assumptions to historical trends and evaluating the change from prior periods. We further tested the completeness and accuracy of the underlying data used in the Company’s calculations through reconciliation to third-party invoices, claims data and actual cash payments.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2002.

San Mateo, California
February 10, 2026
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EXELIXIS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)

December 31,
2025 2024
ASSETS
Current assets:
Cash and cash equivalents $ 482,488   $ 217,374  
Marketable securities 576,603   893,902  
Trade receivables, net 286,916   265,437  
Inventory 21,686   22,388  
Prepaid expenses and other current assets 75,596   68,478  
Total current assets 1,443,289   1,467,579  
Non-current marketable securities 603,603   637,291  
Property and equipment, net 98,960   119,391  
Deferred tax assets, net 292,582   420,027  
Goodwill 63,684   63,684  
Right-of-use assets and other non-current assets 342,305   239,718  
Total assets $ 2,844,423   $ 2,947,690  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 29,623   $ 38,191  
Accrued compensation and benefits 102,218   109,830  
Accrued clinical trial liabilities 65,742   57,976  
Rebates and fees due to customers 59,896   62,376  
Accrued collaboration liabilities 22,783   40,384  
Other current liabilities 125,382   95,012  
Total current liabilities 405,644   403,769  
Non-current operating lease liabilities 173,038   190,823  
Other non-current liabilities 104,422   108,895  
Total liabilities 683,104   703,487  
Commitments and contingencies (Note 12)
Stockholders’ equity:
Preferred stock, $ 0.001 par value, 10,000 shares authorized and no shares issued
—   —  
Common stock, $ 0.001 par value; 400,000 shares authorized; issued and outstanding: 262,483 and 281,732 at December 31, 2025 and 2024, respectively
262   282  
Additional paid-in-capital 2,234,411   2,343,915  
Accumulated other comprehensive income (loss) 3,476   ( 1,347 )
Accumulated deficit ( 76,830 ) ( 98,647 )
Total stockholders’ equity 2,161,319   2,244,203  
Total liabilities and stockholders’ equity $ 2,844,423   $ 2,947,690  

The accompanying notes are an integral part of these Consolidated Financial Statements.
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EXELIXIS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)

 
Year Ended December 31,
 
2025 2024 2023
Revenues:
Net product revenues $ 2,122,804   $ 1,809,395   $ 1,628,879  
Collaboration revenues 197,322   359,306   201,329  
Total revenues 2,320,126   2,168,701   1,830,208  
Operating expenses:
Cost of goods sold 83,697   76,216   72,547  
Research and development 825,001   910,408   1,044,071  
Selling, general and administrative 518,727   492,128   542,705  
Impairment of long-lived assets —   51,672   —  
Restructuring 20,510   33,660   —  
Total operating expenses 1,447,935   1,564,084   1,659,323  
Income from operations 872,191   604,617   170,885  
Interest income 69,213   77,156   86,543  
Other income (expenses), net ( 198 ) ( 133 ) 93  
Income before income taxes 941,206   681,640   257,521  
Provision for income taxes 158,636   160,373   49,756  
Net income $ 782,570   $ 521,267   $ 207,765  
Net income per share:

Basic $ 2.88   $ 1.80   $ 0.65  
Diluted $ 2.78   $ 1.76   $ 0.65  
Weighted-average common shares outstanding:
Basic 271,567   290,030   318,151  
Diluted 281,863   296,132   321,464  

The accompanying notes are an integral part of these Consolidated Financial Statements.

EXELIXIS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)

 
Year Ended December 31,
 
2025 2024 2023
Net income $ 782,570   $ 521,267   $ 207,765  
Other comprehensive income:
Net unrealized gains on available-for-sale debt securities, net of tax impact of $( 1,417 ), $( 706 ) and $( 3,174 ), respectively
4,823   2,403   10,771  
Comprehensive income $ 787,393   $ 523,670   $ 218,536  

The accompanying notes are an integral part of these Consolidated Financial Statements.
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EXELIXIS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)

Common Stock Additional
Paid-in
Capital Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit Total
Stockholders’
Equity
Shares Amount
Balance at December 31, 2022
323,951   $ 324   $ 2,536,849   $ ( 14,521 ) $ ( 34,225 ) $ 2,488,427  
Net income —  —  —  —  207,765   207,765  
Other comprehensive income —  —  —  10,771   —  10,771  
Issuance of common stock under the equity incentive plan and stock purchase plan 5,072   5   33,489   —  —  33,494  
Stock transactions associated with taxes withheld on equity awards —  —  ( 29,083 ) —  —  ( 29,083 )
Repurchase of common stock ( 26,230 ) ( 26 ) ( 207,953 ) —  ( 346,891 ) ( 554,870 )
Stock-based compensation —  —  107,408   —  —  107,408  
Balance at December 31, 2023
302,793   303   2,440,710   ( 3,750 ) ( 173,351 ) 2,263,912  
Net income —  —  —  —  521,267   521,267  
Other comprehensive income —  —  —  2,403   —  2,403  
Issuance of common stock under the equity incentive plan and stock purchase plan 5,356   5   61,775   —  —  61,780  
Stock transactions associated with taxes withheld on equity awards —  —  ( 38,632 ) —  —  ( 38,632 )
Repurchase of common stock ( 26,417 ) ( 26 ) ( 214,640 ) —  ( 446,563 ) ( 661,229 )
Stock-based compensation —  —  94,702   —  —  94,702  
Balance at December 31, 2024
281,732   282   2,343,915   ( 1,347 ) ( 98,647 ) 2,244,203  
Net income —  —  —  —  782,570   782,570  
Other comprehensive income —  —  —  4,823   —  4,823  
Issuance of common stock under the equity incentive plan and stock purchase plan 4,840   4   49,150   —  —  49,154  
Stock transactions associated with taxes withheld on equity awards —  —  ( 71,232 ) —  —  ( 71,232 )
Repurchases of common stock ( 24,089 ) ( 24 ) ( 201,268 ) —  ( 760,753 ) ( 962,045 )
Stock-based compensation —  —  113,846   —  113,846  
Balance at December 31, 2025
262,483   $ 262   $ 2,234,411   $ 3,476   $ ( 76,830 ) $ 2,161,319  

The accompanying notes are an integral part of these Consolidated Financial Statements.
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EXELIXIS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

 
Year Ended December 31,
 
2025 2024 2023
Net income $ 782,570   $ 521,267   $ 207,765  
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 29,055   28,803   25,717  
Impairment of long-lived assets —   64,391   —  
Stock-based compensation 112,983   93,836   106,345  
Non-cash lease expense 24,229   27,461   28,976  
Deferred taxes 126,237   ( 59,458 ) ( 133,209 )
Acquired in-process research and development technology 11,999   50,750   128,500  
Other, net ( 11,609 ) ( 13,626 ) ( 16,797 )
Changes in operating assets and liabilities:
Trade receivables, net ( 21,398 ) ( 27,950 ) ( 22,623 )
Inventory 12,225   5,453   ( 12,977 )
Prepaid expenses and other assets ( 133,771 ) 31,079   ( 29,824 )
Accrued collaboration liabilities 1,899   ( 149 ) 1,345  
Accounts payable and other liabilities ( 50,152 ) ( 21,886 ) 50,106  
Net cash provided by operating activities 884,267   699,971   333,324  
Cash flows from investing activities:
Purchases of marketable securities ( 632,497 ) ( 927,905 ) ( 902,468 )
Proceeds from maturities and sales of marketable securities 1,022,866   877,307   1,038,482  
Purchases of property, equipment and other, net ( 8,429 ) ( 28,435 ) ( 40,469 )
Acquired in-process research and development technology ( 31,499 ) ( 37,750 ) ( 122,500 )
Net cash provided by (used in) investing activities 350,441   ( 116,783 ) ( 26,955 )
Cash flows from financing activities:
Payments for repurchases of common stock ( 947,511 ) ( 652,033 ) ( 550,378 )
Proceeds from issuance of common stock under the equity incentive plan and stock purchase plan 49,137   61,850   33,448  
Taxes paid related to net share settlement of equity awards ( 71,220 ) ( 38,625 ) ( 29,122 )
Net cash used in financing activities ( 969,594 ) ( 628,808 ) ( 546,052 )
Net increase (decrease) in cash and cash equivalents 265,114   ( 45,620 ) ( 239,683 )
Cash and cash equivalents at beginning of period 217,374   262,994   502,677  
Cash and cash equivalents at end of period $ 482,488   $ 217,374   $ 262,994  
Supplemental cash flow disclosures:

Net cash paid for income taxes $ 155,296   $ 170,482   $ 185,658  
Non-cash operating activities:
Right-of-use assets obtained in exchange for lease obligations $ —   $ 15,313   $ 16,623  
Impairment of right-of-use assets $ —   $ 59,735   $ —  
Non-cash investing activity:
Unpaid liabilities incurred for purchases of in-process research and development technology $ —   $ 19,500   $ 6,500  
Unpaid liabilities incurred for purchases of investment $ 21,825   $ —   $ —  

The accompanying notes are an integral part of these Consolidated Financial Statements.
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EXELIXIS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Exelixis, Inc. (Exelixis, we, our or us) is an oncology company innovating next-generation medicines and regimens at the forefront of cancer care. We have produced four marketed pharmaceutical products, two of which are formulations of our flagship molecule, cabozantinib, and we are steadily advancing and evolving our product pipeline portfolio, including our lead clinical asset, zanzalintinib, currently under review by the U.S. Food and Drug Administration (FDA) for the treatment of certain forms of colorectal cancer (CRC), as well as the focus of an extensive late-stage clinical development program in other indications. With a rational and disciplined approach to investment, we are leveraging our internal experience and expertise, and the strength of strategic partnerships, to identify and pursue opportunities across the landscape of scientific modalities, including small molecules and biotherapeutics, such as antibody-drug conjugates.
Sales related to cabozantinib account for the majority of our revenues. Cabozantinib is an inhibitor of multiple tyrosine kinases, including MET, AXL, VEGF receptors and RET and has been approved by the FDA, and in other countries for all or a combination of, the following: as CABOMETYX® (cabozantinib) tablets for advanced renal cell carcinoma (RCC) (both alone and in combination with Bristol-Myers Squibb Company’s (BMS) nivolumab (OPDIVO®)), previously treated hepatocellular carcinoma, previously treated, radioactive iodine-refractory differentiated thyroid cancer, and previously treated, unresectable, locally advanced or metastatic, well-differentiated pancreatic neuroendocrine tumors (pNET) and extra-pancreatic neuroendocrine tumors (epNET); and as COMETRIQ® (cabozantinib) capsules for progressive, metastatic medullary thyroid cancer. For physicians treating these types of cancer, cabozantinib has become or is becoming an important medicine in their selection of effective therapies.
The other two products resulting from our discovery efforts are: COTELLIC® (cobimetinib), an inhibitor of MEK, approved as part of multiple combination regimens to treat specific forms of advanced melanoma and marketed under a collaboration with Genentech, Inc. (a member of the Roche Group) (Genentech); and MINNEBRO® (esaxerenone), an oral, non-steroidal, selective blocker of the mineralocorticoid receptor, approved for the treatment of hypertension in Japan and licensed to Daiichi Sankyo Company, Limited.
Basis of Presentation
The accompanying Consolidated Financial Statements include the accounts of Exelixis and those of our wholly-owned subsidiaries. These entities’ functional currency is the U.S. dollar. All intercompany balances and transactions have been eliminated.
We have adopted a 52- or 53-week fiscal year policy that generally ends on the Friday closest to December 31st. Fiscal year 2025, which was a 52-week fiscal year, ended on January 2, 2026; fiscal year 2024, which was a 53-week fiscal year, ended on January 3, 2025; and fiscal year 2023, which was a 52-week fiscal year, ended on December 29, 2023. For convenience, references in this report as of and for the fiscal years ended January 2, 2026, January 3, 2025, and December 29, 2023, are indicated as being as of and for the years ended December 31, 2025, 2024, and 2023, respectively.
We have made reclassifications to our prior years’ Consolidated Financial Statements to conform to the current year’s presentation. These reclassifications did not impact previously reported total revenues, income from operations, net income, total assets, total liabilities, total operating, investing or financing cash flows or total stockholders’ equity.
Use of Estimates
The preparation of the accompanying Consolidated Financial Statements conforms to accounting principles generally accepted in the U.S., which requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosures. On an ongoing basis, we evaluate our significant estimates. We base our estimates on historical experience and on various other market-specific and other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially from those estimates.
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Recently Adopted Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which enhances the disclosures required for income taxes in our annual consolidated financial statements. We adopted the new standard effective beginning fiscal year 2025 on a prospective basis. We have presented the effects of the adoption of ASU 2023-09 in “Note 10. Provision for Income Taxes.”
Cash, Cash Equivalents and Marketable Securities
We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents include high-grade, short-term investments in money market funds and marketable debt securities which are subject to minimal credit and market risk.
We designate all investments in marketable debt securities and certificates of deposit as available-for-sale and therefore, report such investments at fair value, with unrealized gains and losses recorded in accumulated other comprehensive income. For securities sold prior to maturity, the cost of securities sold is based on the specific identification method. We include realized gains and losses on the sale of marketable securities in other income (expenses), net in the accompanying Consolidated Statements of Income.
We classify those marketable securities that we do not require for use in current operations and that mature in more than 12 months as non-current marketable securities in the accompanying Consolidated Balance Sheets.
Investment Impairment
Quarterly, we assess each of our investments in available-for-sale debt securities whose fair value is below its cost basis to determine if the investment’s impairment is due to credit-related factors or noncredit-related factors. Factors considered in determining whether an impairment is credit-related include the extent to which the investment’s fair value is less than its cost basis, declines in published credit ratings, issuer default on interest or principal payments, and declines in the financial condition and near-term prospects of the issuer. If we determine a credit-related impairment exists, we will measure the credit loss based on a discounted cash flow model. Credit-related impairments on available-for-sale debt securities are recognized as an allowance for credit losses with a corresponding adjustment to other income (expenses), net in the accompanying Consolidated Statements of Income. The portion of the impairment that is not credit-related is recorded as a reduction of other comprehensive income, net of applicable taxes.
We have elected to exclude accrued interest from both the fair value and the amortized cost basis of the available-for-sale debt securities for the purposes of identifying and measuring an impairment. We write-off accrued interest as a reduction of interest income when an issuer has defaulted on interest payments due on a security.
Fair Value Measurements
Fair value is defined as the amount that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). When determining the fair value measurements for assets and liabilities which are required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risks.
Foreign Currency Remeasurement
Monetary assets and liabilities denominated in currencies other than the functional currency are remeasured using exchange rates in effect at the end of the period and related gains or losses are recorded in other income (expenses), net in the accompanying Consolidated Statements of Income. Net foreign currency gains or losses were immaterial for the years ended December 31, 2025, 2024 and 2023, respectively.
Accounts Receivable
Trade receivables, net, contain amounts billed to our customers for product sales, and amounts billed to our collaboration partners for development, regulatory and sales-based milestone payments, royalties on the sale of licensed products, profit-sharing arrangements, development cost reimbursements, and payments for product supply services. Our
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customers are primarily pharmaceutical and biotechnology companies that are located in the U.S., and collaboration partners that are located in Europe and Japan. We record trade receivables net of allowances for credit losses and chargebacks, and cash discounts for prompt payment. We apply an aging method to estimate credit losses and consider our historical loss information, adjusted to account for current economic conditions, and reasonable and supportable forecasts of future economic conditions affecting our customers. We write off trade receivables and related allowances for credit losses when it becomes probable we will not collect the amount receivable. The allowances for credit losses and write-offs for the years ended December 31, 2025 and December 31, 2024 were immaterial.
Inventory
We value inventory at the lower of cost or net realizable value. We determine the cost of inventory using the standard-cost method, which approximates actual cost based on a first-in, first-out method. We analyze our inventory levels quarterly and write down inventory subject to expiry in excess of expected requirements, or that has a cost basis in excess of its expected net realizable value. These write downs are charged to either cost of goods sold or the cost of supplied product included in collaboration services revenues in the accompanying Consolidated Statements of Income. On a quarterly basis, we analyze our estimated production levels for the following twelve-month period, which is our normal operating cycle, and reclassify inventory we expect to use or sell in periods beyond the next twelve months into other long-term assets in the accompanying Consolidated Balance Sheets.
Property and Equipment
We record property and equipment at cost, net of depreciation. We compute depreciation using the straight-line method based on estimated useful lives of the assets and amortize leasehold improvements over the lesser of their estimated useful lives or the remainder of the lease term. We charge repairs and maintenance costs to expense as incurred. We periodically review property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Long-Lived Assets Impairment
The carrying value of our long-lived assets, which includes property and equipment, right-of-use assets and leasehold improvements, is reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. Should there be an indication of impairment, we test for recoverability by comparing the estimated undiscounted future cash flows expected to result from the use of the asset to the carrying amount of the asset or asset group. If the asset or asset group is determined to be impaired, any excess of the carrying value of the asset or asset group over its estimated fair value is recognized as an impairment loss. The fair value is determined using an income approach where certain Level 3 inputs are used, including estimates and assumptions on the timing and amount of discounted cash flows. During the year ended December 31, 2024, we recognized $ 64.4  million in impairment charges primarily comprised of right-of use assets, leasehold improvements, and property and equipment. We did no t recognize any material impairment charges during the years ended December 31, 2025 and 2023. See “Note 12. Commitments and Contingencies – Impairment of long-lived assets ” and “Note 13. Restructuring” for further details.
Leases
We determine if an arrangement includes a lease at the inception of the agreement. For each of our lease arrangements, we record a right-of-use asset representing our right to use an underlying asset for the lease term and a lease liability representing our obligation to make lease payments. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the net present value of lease payments over the lease term. In determining the discount rate used to calculate the net present value of lease payments, we use our incremental borrowing rate based on the information available at the lease commencement date. Our leases may include options to extend or terminate the lease which are included in the lease term when it is reasonably certain that we will exercise any such options. The Company elected to account for lease and non-lease components as a single lease component. Lease expense for our operating leases is recognized on a straight-line basis over the lease term. Impairments of right-of-use assets are recognized as a reduction in their respective carrying values. Post-impairment, the lease expense for our operating leases is comprised of the straight-line amortization of the remaining right-of-use assets over the lease term and the accretion of lease liability. We have elected not to apply the recognition requirements of Topic 842, Leases, for short-term leases that do not include an option to purchase the underlying asset for which the Company is reasonably certain to exercise. For short-term leases, lease payments are recognized as incurred in operating expenses over the lease term.
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Goodwill
We record goodwill amounts as the excess of purchase price over identifiable net assets acquired based on their estimated fair value. We review the carrying amount of goodwill for impairment annually and whenever events or changes in circumstance indicate that the carrying value may not be recoverable. We perform our annual assessment of the recoverability of our goodwill as of the first day of our fourth quarter. The assessment of recoverability may first consider qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount. We perform a quantitative assessment if the qualitative assessment results in a more-likely-than-not determination or if a qualitative assessment is not performed. The quantitative assessment considers whether the carrying amount of a reporting unit exceeds its fair value, in which case an impairment charge is recorded for the amount by which the carrying amount of a reporting unit exceeds its fair value, limited to the goodwill balance. We operate in one business segment, which is also considered to be our sole reporting unit and therefore, goodwill is tested for impairment at the enterprise level. We did no t recognize any goodwill impairment charges in any of the periods presented.
Other current liabilities
As of December 31, 2025 and 2024, other current liabilities includes the current portion of the Branded Prescription Drug Fee due to the Internal Revenue Service in the amount of $ 27.7 million and $ 26.2 million, respectively, and the current portion of our lease liability in the amount of $ 27.9 million and $ 25.0 million, respectively.
Revenue
We account for revenues under the guidance of Topic 606, Revenues from Contracts with Customers (Topic 606). Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration to which the entity is entitled to in exchange for those goods or services. To determine revenue recognition for arrangements that are within the scope of Topic 606, we perform the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) we satisfy a performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer.
Net Product Revenues
We sell our products principally to specialty distributors and specialty pharmacy providers, or collectively, our Customers. These Customers subsequently resell our products to health care providers and patients. In addition to distribution agreements with Customers, we enter into arrangements with health care providers and payors that provide for government-mandated and/or privately-negotiated rebates, chargebacks and discounts with respect to the purchase of our products. Revenues from product sales are recognized when the Customer obtains control of our product, which occurs at a point in time, typically upon delivery to the Customer.
Product Sales Discounts and Allowances
We record revenues from product sales at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established primarily from chargebacks, discounts for prompt payment, rebates, co-pay assistance and other customer credits that are offered within contracts between us and our Customers, health care providers, payors and other indirect customers relating to the sales of our products. These reserves are based on the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is payable to the Customer) or a current liability (if the amount is payable to a party other than a Customer). Where appropriate, these estimates take into consideration a range of possible outcomes for relevant factors such as our historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted Customer buying and payment patterns. Overall, these reserves reflect our best estimates of the amount of consideration to which we are entitled based on the terms of our contracts. The amount of variable consideration that is included in the transaction price may be constrained, and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future vary from our estimates, we will adjust these estimates, which would affect net product revenues and earnings in the period such variances become known.
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Chargebacks:  Chargebacks are discounts that occur when contracted Customers purchase directly from a specialty distributor. Contracted Customers, which currently consist primarily of Public Health Service institutions, Federal government entities purchasing via the Federal Supply Schedule, Group Purchasing Organizations, and health maintenance organizations, generally purchase the product at a discounted price. The specialty distributor, in turn, charges back to us the difference between the price initially paid by the specialty distributor and the discounted price paid to the specialty distributor by the Customer. The allowance for chargebacks is based on actual chargebacks received and an estimate of sales to contracted Customers.
Discounts for Prompt Payment: Our Customers in the U.S. receive a discount of 2 % for prompt payment. We expect our Customers will earn 100 % of their prompt payment discounts and, therefore, we deduct the full amount of these discounts from total product sales when revenues are recognized.
Rebates: Allowances for rebates consist primarily of mandated discounts under the Medicaid Drug Rebate Program, other government programs and commercial contracts. Rebate amounts owed after the final dispensing of the product to a benefit plan participant are based upon contractual agreements or legal requirements with public sector benefit providers, such as Medicaid. The allowance for rebates is based on statutory or contractual discount rates and expected utilization. Our estimates for the expected utilization of rebates are based on Customer and payer data received from the specialty pharmacies and distributors and historical utilization rates. Rebates are generally invoiced by the payer and paid in arrears, such that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s shipments to our Customers, plus an accrual balance for known prior quarters’ unpaid rebates. If actual future rebates vary from estimates, we may need to adjust our accruals, which would affect net product revenues in the period of adjustment.
Allowances for rebates also include amounts related to the Medicare Part D Manufacturer Discount Program (MDP), which replaced the Medicare Part D Coverage Gap Discount, effective on January 1, 2025. The MDP was implemented under the Inflation Reduction Act of 2022 and eliminates the coverage gap benefit phase, introduces pharmaceutical manufacturer discount obligations in both the initial coverage and catastrophic phases, and lowers the annual cap on enrollee out-of-pocket costs. We estimate our MDP rebate liabilities based on the portion of our product sales expected to be attributable to patients enrolled in Medicare Part D plans. These rebate amounts are recorded in the same period in which the related revenue is recognized, resulting in a reduction of product revenues and the establishment of a current liability included in rebates and fees due to customers in the accompanying Consolidated Balance Sheets. MDP rebates are invoiced and paid in arrears. If invoiced amounts vary from estimates, we may need to adjust our accruals, which would affect net product revenues in the period of adjustment.
Co-payment Assistance: Patients who have commercial insurance and meet certain eligibility requirements may receive co-payment assistance. We accrue a liability for co-payment assistance based on actual program participation and estimates of program redemption using Customer data provided by the specialty distributor that administers the copay program.
Other Customer Credits: We pay fees to our Customers for account management, data management and other administrative services. To the extent the services received are distinct from the sale of products to the Customer, we classify these payments in selling, general and administrative expenses in our Consolidated Statements of Income.
Collaboration Revenues
We assess whether our collaboration agreements are subject to Topic 808,  Collaborative Arrangements  (Topic 808), based on whether they involve joint operating activities and whether both parties have active participation in the arrangement and are exposed to significant risks and rewards. To the extent that the arrangement falls within the scope of Topic 808, we apply by analogy the unit of account guidance under Topic 606 to identify distinct performance obligations, and then determine whether a customer relationship exists for each distinct performance obligation. If we determine a performance obligation within the arrangement is with a customer, we apply the guidance in Topic 606. If a portion of a distinct bundle of goods or services within an arrangement is not with a customer, then the unit of account is not within the scope of Topic 606, and the recognition and measurement of that unit of account shall be based on analogy to authoritative accounting literature or, if there is no appropriate analogy, a reasonable, rational, and consistently applied accounting policy election.
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We enter into collaboration arrangements, under which we license certain rights to our intellectual property to third parties. The terms of these arrangements may include payments to us for one or more of the following: nonrefundable up-front license fees; development, regulatory and sales-based milestone payments; product supply services; development cost reimbursements; profit-sharing arrangements; and royalties on net sales of licensed products. As part of the accounting for these arrangements, we develop assumptions that require judgment to determine the standalone selling price for each performance obligation identified in the contract. These key assumptions may include forecasted revenues, clinical development timelines and costs, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success.
Up-front License Fees: If the license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenues from nonrefundable up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license, which generally occurs at or near the inception of the contract. For licenses that are bundled with other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenues from nonrefundable up-front fees. We evaluate the measure of progress at the end of each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.
Regulatory and Development Milestone Payments: At the inception of each arrangement that includes development milestone payments, we evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our or the licensee’s control, such as regulatory approvals, are not considered probable of being achieved until uncertainty associated with the approvals has been resolved. The transaction price is then allocated to each performance obligation, on a relative standalone selling price basis, for which we recognize revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, we re-evaluate the probability of achieving such development and regulatory milestones and any related variable consideration constraint, and if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis.
Product Supply Services: Arrangements that include a promise for the future supply of drug product for either clinical development or commercial supply at the licensee’s discretion are generally considered as options. We assess if these options provide a material right to the licensee and if so, they are accounted for as separate performance obligations.
Development Cost Reimbursements: Our collaboration arrangements may include promises of future clinical development and drug safety services, as well as participation on certain joint committees. When such services are provided to a customer, and they are distinct from the licenses provided to our collaboration partners, these promises are accounted for as a separate performance obligation, which we estimate using internal development costs incurred and projections through the term of the arrangements. We record revenues for these services as the performance obligations are satisfied over time based on measure of progress. However, if we conclude that our collaboration partner is not a customer for those collaborative research and development activities, we present such payments as a reduction of research and development expenses.
Profit-sharing Arrangements: Under the terms of our collaboration agreement with Genentech for cobimetinib, we are entitled to a share of U.S. profits and losses received in connection with the commercialization of cobimetinib. We account for this arrangement in accordance with Topic 606. We have determined that we are an agent under the agreement and therefore revenues are recorded net of costs incurred. We record revenues for the variable consideration associated with the profits and losses under the collaboration agreement when it is probable that a significant reversal in the amount of cumulative revenues recognized will not occur.
Royalty and Sales-based Milestone Payments: For arrangements that include royalties and sales-based milestone payments, including milestone payments earned for the first commercial sale of a product, the license is deemed to be the predominant item to which such payments relate and we recognize revenues at the later of when the related sales occur or when the performance obligation to which the royalty has been allocated has been satisfied.
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Cost of Goods Sold
Cost of goods sold is related to our product revenues and consists primarily of a 3 % royalty we are required to pay on all net sales of any product containing cabozantinib, the cost of manufacturing, indirect labor costs, write-downs related to expiring and excess inventory, shipping and other third-party logistics and distribution costs for our product.
We consider regulatory approval of product candidates to be uncertain and product manufactured prior to regulatory approval may not be sold unless regulatory approval is obtained. As such, the manufacturing costs for product candidates incurred prior to regulatory approval are not capitalized as inventory but are expensed as research and development costs.
Research and Development Expenses
Research and development expenses consist of (1) direct and indirect internal costs for drug discovery; (2) upfront license and project initiation fees, license option fees and option exercise fees, funded research and milestone payments incurred or probable to be incurred for our in-licensing arrangements with our collaboration partners for research programs in development and prior to regulatory approval; and (3) development costs associated with our clinical trial projects, which include fees paid to Contract Research Organizations (CRO) performing work on our behalf.
Our clinical trial projects have been executed with support from third-party CROs, who specialize in conducting and managing global clinical trials. We accrue expenses for clinical trial activities performed by the CROs based upon the estimated amount of work completed on each trial. For clinical trial expenses, the significant factors used in estimating accruals include direct CRO costs, the number of patients enrolled, the number of active clinical sites involved, the duration for which the patients will be enrolled in the trial and patient out of pocket costs. We monitor patient enrollment levels and related activities to the extent possible through CRO meetings and correspondence, internal reviews and review of contractual terms. We base our estimates on the best information available at the time. However, additional information may become available to us which may allow us to make a more accurate estimate in future periods. In this event, we may be required to record adjustments to research and development expenses in future periods when the actual level of activity becomes more certain. As described further above, certain payments made to us from our collaboration partners may be presented as a reduction of research and development expense.
Advertising
Advertising expenses were $ 51.7  million, $ 43.5  million and $ 40.0  million for the years ended December 31, 2025, 2024 and 2023, respectively. We expense the costs of advertising, including promotional expenses, as incurred. Advertising expenses are recorded in selling, general and administrative expenses in the accompanying Consolidated Statements of Income.
Stock-Based Compensation
We account for stock-based payments to employees, including grants of service-based restricted stock units (RSUs), performance-based restricted stock units (PSUs), service-based stock options and purchases under our 2000 Employee Stock Purchase Plan (as amended and restated, the Amended ESPP) in accordance with Topic 718,  Compensation-Stock Compensation , which requires that stock-based payments (to the extent they are compensatory) be recognized in our Consolidated Statements of Income based on their fair values. We account for forfeitures of stock-based awards as they occur. The expense for stock-based compensation is based on the grant date fair value of the award. The grant date fair value of RSUs and PSUs are estimated as the value of the underlying shares of our common stock. The grant date fair values for certain PSUs and RSUs with market vesting conditions are estimated using a Monte Carlo simulation pricing model and for stock options, using a Black-Scholes Merton option pricing model. Both pricing models require the input of subjective assumptions. These variables include, but are not limited to, the expected volatility of our stock price and the expected term of the awards. We consider both implied and historical volatility when developing an estimate of expected volatility. We estimate the term using historical data. We recognize compensation expense over the requisite service period on an accelerated basis for awards with a market or performance condition and on a straight-line basis for service-based stock options and awards. Compensation expense related to PSUs is recognized when we determine that it is probable that the performance goals will be achieved, which we assess on a quarterly basis. Compensation expense related to RSUs with market vesting conditions is recognized regardless of the outcome of the market conditions.
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Provision for Income Taxes
Our provision for income taxes is computed under the asset and liability method. Significant estimates are required in determining our provision for income taxes. Some of these estimates are based on interpretations of existing tax laws or regulations. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined on the basis of the difference between the tax basis of assets and liabilities and their respective financial reporting amounts (temporary differences) at enacted tax rates in effect for the years in which the differences are expected to reverse. A valuation allowance is established for deferred tax assets for which it is more likely than not that some portion or all of the deferred tax assets, including net operating losses and tax credits, will not be realized. We periodically re-assess the need for a valuation allowance against our deferred tax assets based on various factors including our historical earnings experience by taxing jurisdiction, and forecasts of future operating results and utilization of net operating losses and tax credits prior to their expiration. Significant judgment is required in making this assessment and, to the extent that a reversal of any portion of our valuation allowance against our deferred tax assets is deemed appropriate, a tax benefit will be recognized against our provision for income taxes in the period of such reversal. Based on our evaluation and weighing of both positive and negative evidence, including our achievement of a cumulative three-year income position as of December 31, 2025 and forecasts of future operating results, as well as considering the utilization of net operating losses and tax credits prior to their expiration, management has continued to determine that there is sufficient positive evidence to conclude that it is more likely than not the deferred tax assets are realizable and therefore, we do not have a valuation allowance against our deferred tax assets as described in “Note 10. Provision For Income Taxes”, below. We continue to maintain a valuation allowance against our California state deferred tax assets and federal and state capital loss carryforwards.
We recognize tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained upon examination by the tax authorities based on the technical merits of the position. An adverse resolution of one or more of these uncertain tax positions in any period could have a material impact on the results of operations for that period.
Recent Accounting Pronouncements Not Yet Adopted
In December 2025, the FASB issued ASU 2025-12, Codification Improvements (ASU 2025-12), which addresses thirty-three issues, representing amendments to Accounting Standard Codification topics that clarify, correct errors or make minor improvements. The amendments make the Codification easier to understand and apply. ASU 2025-12 is effective for us in our annual reporting for fiscal year 2027, and in our interim periods beginning in fiscal year 2027. Early adoption and retrospective application are permitted on an issue-by-issue basis. We are currently evaluating the impact of ASU 2025-12 on our Consolidated Financial Statements.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements (ASU 2025-11), which clarifies the guidance in Topic 270 to improve the consistency of interim financial reporting. ASU 2025-11 provides a comprehensive list of required interim disclosures and introduces a disclosure principle requiring entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for us in our annual reporting for fiscal year 2028, and in our interim periods beginning in fiscal year 2028. Early adoption and retrospective application are permitted. We do not expect the adoption of ASU 2025-11 to have a material impact on our Consolidated Financial Statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (ASU 2024-03), which enhances the disclosures required for expense disaggregation in our annual and interim consolidated financial statements. In January 2025, the FASB issued ASU 2025-01, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40) – Clarifying the effective Date (ASU 2025-01), which clarifies the effective date of ASU 2024-03 for companies with a non-calendar year end. ASU 2024-03 is effective for us in our annual reporting for fiscal year 2027, and in our interim periods beginning in fiscal year 2028. Early adoption and retrospective application are permitted. We are currently evaluating the impact of ASU 2024-03 on our Consolidated Financial Statements.
In September 2025, the FASB issued ASU 2025-06, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Softwar e (ASU 2025-06) to clarify and modernize the accounting for costs related to internal-use software by removing all references to software development project stages and clarifying the threshold entities apply to begin capitalizing costs. ASU 2025-06 is effective for us in our
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annual reporting for fiscal year 2028 on a prospective basis. Early adoption and retrospective reporting are permitted. We do not expect the adoption of ASU 2025-06 to have a material impact on our Consolidated Financial Statements.

NOTE 2. SEGMENT REPORTING
We operate in one business segment that focuses on the discovery, development and commercialization of new medicines for difficult-to-treat cancers. Our President and Chief Executive Officer, as the chief operating decision-maker, manages and allocates resources to our operations on a total consolidated basis. Consistent with this decision-making process, our President and Chief Executive Officer uses net income to monitor budget versus actual results for purposes of evaluating performance and to make decisions about the allocation of resources.
Our significant segment expenses that are regularly provided to our President and Chief Executive Officer and included in the measure of segment net income consist of consolidated expenses for our operational departments: drug discovery, development, and selling, general and administrative and other segment items.
The segment and consolidated net income, including significant segment expenses were as follows (in thousands):

  Year Ended December 31,
  2025 2024 2023
Revenues $ 2,320,126   $ 2,168,701   $ 1,830,208  
Less:
Cost of goods sold 83,697   76,216   72,547  
Drug discovery 89,931   94,842   215,085  
Development 567,843   665,847   669,240  
Selling, general, and administrative 446,536   428,962   470,680  
Other segment items (1)
260,126   298,350   231,678  
Interest income ( 69,213 ) ( 77,156 ) ( 86,543 )
Provision for income taxes 158,636   160,373   49,756  
Segment and consolidated net income $ 782,570   $ 521,267   $ 207,765  

_________________
(1) Other segment items include stock-based compensation, impairment of long-lived assets, restructuring expenses, other research and development expenses, including the allocation of general corporate costs to research and development services and development cost reimbursements in connection with certain of our collaboration arrangements, and other income (expenses), net.
All of our long-lived assets are located in the U.S. See “Note 3. Revenues” for enterprise-wide disclosures about product sales, revenues from major customers and revenues by geographic region.

NOTE 3. REVENUES
Revenues consisted of the following (in thousands):

  Year Ended December 31,
  2025 2024 2023
Product revenues:
Gross product revenues $ 3,011,807   $ 2,518,246   $ 2,272,533  
Discounts and allowances ( 889,003 ) ( 708,851 ) ( 643,654 )
Net product revenues 2,122,804   1,809,395   1,628,879  
Collaboration revenues:
License revenues 214,375   349,244   178,635  
Collaboration services revenues ( 17,053 ) 10,062   22,694  
Collaboration revenues
197,322   359,306   201,329  
Total revenues $ 2,320,126   $ 2,168,701   $ 1,830,208  

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Net product revenues and license revenues are recorded in accordance with Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (Topic 606). License revenues include the recognition of the portion of milestone payments allocated to the transfer of intellectual property licenses for which it had become probable in the current period that the milestone would be achieved and a significant reversal of revenues would not occur, as well as royalty revenues and our share of profits under our collaboration agreement with Genentech. Collaboration services revenues are recorded in accordance with ASC Topic 808, Collaborative Arrangements. Collaboration services revenues include the recognition of deferred revenues for the portion of upfront and milestone payments allocated to our research and development services performance obligations, development cost reimbursements earned under our collaboration agreements, product supply revenues, net of product supply costs and the royalties we paid on sales of products containing cabozantinib by our collaboration partners.
Net product revenues by product were as follows (in thousands):
Year Ended December 31,
2025 2024 2023
CABOMETYX $ 2,113,369   $ 1,798,237   $ 1,614,942  
COMETRIQ 9,435   11,158   13,937  
Net product revenues $ 2,122,804   $ 1,809,395   $ 1,628,879  

The percentage of total revenues by customer who individually accounted for 10% or more of our total revenues were as follows:
Year Ended December 31,
 
2025 2024 2023
Affiliates of Cencora, Inc. 22 % 18 % 17 %
Affiliates of McKesson Corporation 19 % 16 % 17 %
Affiliates of CVS Health Corporation 15 % 17 % 17 %
Accredo Health, Incorporated 12 % 11 % 12 %
Affiliates of Optum Specialty Pharmacy 10 % 9 % 10 %
Ipsen Pharma SAS 7 % 15 % 8 %

The percentage of trade receivables by customer who individually accounted for 10% or more of our trade receivables were as follows:
 
December 31,
 
2025 2024
Affiliates of McKesson Corporation 25 % 23 %
Affiliates of Cencora, Inc. 23 % 17 %
Ipsen Pharma SAS 19 % 18 %
Affiliates of CVS Health Corporation 13 % 20 %
Cardinal Health, Inc. 12 % 10 %

Total revenues by geographic region were as follows (in thousands):
Year Ended December 31,
2025 2024 2023
U.S. $ 2,140,371   $ 1,822,992   $ 1,645,749  
Europe 154,165   318,633   144,969  
Japan 25,590   27,076   39,490  
Total revenues
$ 2,320,126   $ 2,168,701   $ 1,830,208  

Total revenues include net product revenues attributed to geographic regions based on ship-to location and license and collaboration services revenues attributed to geographic regions based on the location of our collaboration partners’ headquarters.
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Product Sales Discounts and Allowances
The activities and ending reserve balances for each significant category of discounts and allowances (which constitute variable consideration) were as follows (in thousands):

Chargebacks, Discounts for Prompt Payment and Other
Other Customer Credits/Fees and Co-pay Assistance
Rebates Total
Balance at December 31, 2023
$ 25,221   $ 19,721   $ 39,898   $ 84,840  
Provision related to sales made in:
Current period 470,103   63,354   179,297   712,754  
Prior periods ( 891 ) ( 2,044 ) ( 968 ) ( 3,903 )
Payments and customer credits issued ( 469,166 ) ( 56,086 ) ( 180,796 ) ( 706,048 )
Balance at December 31, 2024
25,267   24,945   37,431   87,643  
Provision related to sales made in:
Current period 616,641   69,949   213,391   899,981  
Prior periods ( 4,340 ) ( 2,109 ) ( 4,529 ) ( 10,978 )
Payments and customer credits issued ( 603,345 ) ( 69,173 ) ( 210,009 ) ( 882,527 )
Balance at December 31, 2025
$ 34,223   $ 23,612   $ 36,284   $ 94,119  

The allowance for chargebacks, discounts for prompt payment and other are recorded as a reduction of trade receivables, net, and the remaining reserves are recorded as rebates and fees due to customers in the accompanying Consolidated Balance Sheets.
Contract Assets and Liabilities
We receive payments from our collaboration partners based on billing schedules established in each contract. Amounts are recorded as accounts receivable when our right to consideration is unconditional. We may also recognize revenue in advance of the contractual billing schedule and such amounts are recorded as a contract asset when recognized. We may be required to defer recognition of revenue for upfront and milestone payments until we perform our obligations under these arrangements, and such amounts are recorded as deferred revenue upon receipt or when due. For those contracts that have multiple performance obligations, contract assets and liabilities are reported on a net basis at the contract level. Contract assets are primarily related to Ipsen Pharma SAS (Ipsen) and c ontract liabilities are primarily related to deferred revenues from Takeda Pharmaceutical Company Limited (Takeda).
Contract assets and liabilities were as follows (in thousands):

 
December 31,
 
2025 2024
Contract assets (1) :
$ —   $ 369  

Contract liabilities:
   Current portion (2)
$ 1,115   $ 2,739  
   Non-current portion (3)
6,112   3,392  
Total contract liabilities $ 7,227   $ 6,131  

____________________
(1) Presented in right-of-use assets and other non-current assets in the accompanying Consolidated Balance Sheets.
(2) Presented in other current liabilities in the accompanying Consolidated Balance Sheets.
(3) Presented in other non-current liabilities in the accompanying Consolidated Balance Sheets.
During the years ended December 31, 2025, 2024 and 2023, we recognized $ 6.1  million, $ 6.0  million and $ 6.9  million, respectively, in revenues that were included in the beginning deferred revenues balance for those years.
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During the years ended December 31, 2025, 2024 and 2023, we recognized $ 213.1  million, $ 351.9  million and $ 179.7  million, respectively, in revenues for performance obligations satisfied in previous periods. Such revenues were primarily related to the recognition of license revenues for the achievement of milestones and royalty payments allocated to our license performance obligations for our collaborations with Ipsen and Takeda.
As of December 31, 2025, $ 21.5  million of the combined transaction prices for our Ipsen and Takeda collaborations were allocated to research and development services performance obligations that had not yet been satisfied. See “Note 4. Collaboration Agreements and Business Development Activities — Cabozantinib Commercial Collaborations — Performance Obligations and Transaction Prices for our Ipsen and Takeda Collaborations” for additional information about the expected timing to satisfy these performance obligations.

NOTE 4. COLLABORATION AGREEMENTS AND BUSINESS DEVELOPMENT ACTIVITIES
We have established multiple collaborations with leading biopharmaceutical companies for the commercialization and further development of our cabozantinib franchise. Additionally, we have made considerable progress under our existing research collaboration and in-licensing arrangements to further enhance our early-stage pipeline and expand our ability to discover, develop and commercialize novel therapies with the goal of providing new treatment options for cancer patients. Historically, we also entered into other collaborations with leading biopharmaceutical companies pursuant to which we out-licensed other compounds and programs in our portfolio.
Under these collaborations, we are generally entitled to receive milestone and royalty payments, and for certain collaborations, to receive payments for product supply services, development cost reimbursements, and/or profit-sharing payments. See “Note 3. Revenues” for additional information on revenues recognized under our collaboration agreements during the years ended December 31, 2025, 2024 and 2023.
Cabozantinib Commercial Collaborations
Ipsen Collaboration
Description of the Collaboration
In February 2016, we entered into a collaboration and license agreement with Ipsen, which was subsequently amended, for the commercialization and further development of cabozantinib. Under the collaboration agreement, as amended, Ipsen received exclusive commercialization rights for current and potential future cabozantinib indications outside of the U.S. and Japan. We have also agreed to collaborate with Ipsen on the development of cabozantinib for current and potential future indications. The parties’ efforts are governed through a joint steering committee and appropriate subcommittees established to guide and oversee the collaboration’s operation and strategic direction; provided, however, that we retain final decision-making authority with respect to cabozantinib’s ongoing development.
In the second quarter of fiscal year 2024, Ipsen opted into and is now co-funding the development costs for CABINET, a phase 3 pivotal study that evaluated cabozantinib versus placebo in patients with either advanced pNET) or advanced epNET who experienced progression after prior systemic therapy. Under the terms of the agreement, Ipsen is now obligated to reimburse us for its share of the CABINET global development costs. We determined that Ipsen’s decision to opt into and co-fund the development costs for CABINET represented a contract modification for additional distinct services at its standalone selling price and therefore was treated as a separate contract under Topic 606. Accordingly, collaboration services revenues for the year ended December 31, 2024 includes a cumulative catch-up for Ipsen’s share of global development costs incurred since the beginning of the study and through the opt-in date.
In the fourth quarter of fiscal year 2025, the collaboration and license agreement with Ipsen was amended and restated to, among other things, modify the amount of reimbursements we receive for costs associated with pharmacovigilance activities. The change in transaction price represents a contract modification related to an ongoing performance obligation that was not distinct from services previously provided and, therefore, was treated as a modification of an existing contract under Topic 606. Accordingly, collaboration services revenues for the year ended December 31, 2025 includes a retrospective cumulative catch-up adjustment for the reduction in the transaction price based on an input-based measure of progress, which was not material.
Unless earlier terminated, the collaboration agreement has a term that continues, on a product-by-product and country-by-country basis, until the latter of (1) the expiration of patent claims related to cabozantinib, (2) the expiration of regulatory exclusivity covering cabozantinib or (3) ten years after the first commercial sale of cabozantinib, other than
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COMETRIQ. A related supply agreement will continue in effect until expiration or termination of the collaboration agreement. The collaboration agreement may be terminated for cause by either party based on uncured material breach of either the collaboration agreement or the supply agreement by the other party, bankruptcy of the other party or for safety reasons. We may terminate the collaboration agreement if Ipsen challenges or opposes any patent covered by the collaboration agreement. Ipsen may terminate the collaboration agreement if the FDA or European Medicines Agency (EMA) orders or requires substantially all cabozantinib clinical trials to be terminated. Ipsen also has the right to terminate the collaboration agreement on a region-by-region basis after the first commercial sale of cabozantinib in advanced RCC in the given region. Upon termination by either party, all licenses granted by us to Ipsen will automatically terminate, and, except in the event of a termination by Ipsen for our material breach, the licenses granted by Ipsen to us shall survive such termination and shall automatically become worldwide, or, if Ipsen were to terminate only for a particular region, then for the terminated region. Following termination by us for Ipsen’s material breach, or termination by Ipsen without cause or because we undergo a change of control by a party engaged in a competing program, Ipsen is prohibited from competing with us for a period of time.
Consideration under the Collaboration
In consideration for the exclusive license and other rights contained in the collaboration agreement, including commercialization rights in Canada, we received aggregate upfront payments of $ 210.0 million from Ipsen in 2016. As of December 31, 2025, we have achieved aggregate milestones of $ 659.2  million related to regulatory, development and sales-based threshold by Ipsen since the inception of the collaboration agreement, including $ 5.0  million and $ 164.7  million in milestone payments achieved during the years ended December 31, 2025 and 2024, respectively.
As of December 31, 2025, we are eligible to receive an additional regulatory milestone payment from Ipsen of $ 2.0  million as well as sales-based milestones of up to $ 200.0  million and CAD$ 23.5  million. We excluded these milestone payments from the transaction price as of December 31, 2025 because we determined such payments to be fully constrained under Topic 606 due to the fact that it was not probable that a significant reversal of cumulative revenue would not occur, given the inherent uncertainty of success with these milestones. We will adjust the constraint applied to the variable consideration at each reporting period as uncertain events are resolved or other changes in circumstances occur. See “—Performance Obligations and Transaction Prices for our Ipsen and Takeda Collaborations ,” below, for additional information related to the revenue recognition for this collaboration.
We also receive royalty revenues on the net sales of cabozantinib by Ipsen outside of t he U.S. and Japan. During the year ended December 31, 2025 and going forward, we are entitled to receive a tiered royalty of 22 % to 26 % on annual net sales, with separate tiers for Canada; these royalty tiers reset each calendar year.
Any variable consideration related to royalties and sales-based milestones will be recognized when the related sales occur as these amounts have been determined to relate to the relevant transferred license and therefore are recognized as the related sales occur.
We are required to pay a 3 % royalty on all net sales of any product containing cabozantinib, including net sales by Ipsen.
We are responsible for funding cabozantinib-related development costs for those trials in existence at the time we entered into the collaboration agreement with Ipsen; global development costs for additional trials are shared between the parties, with Ipsen reimbursing us for 35 % of such costs, provided Ipsen chooses to opt into such trials. Ipsen has opted into and is co-funding certain clinical trials, including: CheckMate -9ER, COSMIC-021, COSMIC-311, COSMIC-312, CONTACT-01, CONTACT-02 and CABINET.
We remain responsible for manufacturing and supply of cabozantinib for all development and commercialization activities under the collaboration agreement. Relatedly, we entered into a supply agreement with Ipsen to supply finished, labeled drug product to Ipsen for distribution in the territories outside of the U.S. and Japan for the term of the collaboration agreement as well as a quality agreement that provides respective quality responsibilities for the aforementioned supply. The product is supplied at our cost, as defined in the agreement. This agreement also requires us to maintain the global safety database for cabozantinib. To meet our obligations to regulatory authorities for the reporting of safety data from territories outside of U.S. and Japan from sources other than our sponsored global clinical development trials, we rely on data collected and reported to us by Japan.
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Revenues from the Collaboration
Revenues under the collaboration agreement with Ipsen were as follows (in thousands):

  Year Ended December 31,
  2025 2024 2023
License revenues $ 170,270   $ 317,026   $ 135,818  
Collaboration services revenues ( 16,105 ) 1,607   9,151  
Total collaboration revenues
$ 154,165   $ 318,633   $ 144,969  

During the year ended December 31, 2025, we recognized $ 4.3  million in license revenues and $ 0.4 million in collaboration services revenues in connection with a $ 5.0  million regulatory milestone payment, upon approval by the European Commission for the treatment of patients with either advanced pNET or advanced epNET. During the year ended December 31, 2024, we recognized $ 150.0 million in license revenues related to a commercial milestone from Ipsen upon its achievement of $ 600.0 million in cumulative net sales of cabozantinib over four consecutive quarters in its related Ipsen license territory and $ 2.2 million in license revenues for a commercial milestone from Ipsen upon its achievement of CAD$ 30.0 million in cumulative net sales of cabozantinib over four consecutive quarters in Canada. In addition, we recognized $ 10.8 million in license revenues and $ 0.6 million in collaboration services revenues, in connection with a $ 12.5 million regulatory milestone payment, upon submission of a variation application to the EMA for evaluating cabozantinib versus placebo in patients with either advanced pNET or advanced epNET.
Takeda Collaboration
Description of the Collaboration
In January 2017, we entered into a collaboration and license agreement with Takeda, which was subsequently amended, to, among other things, modify the amount of reimbursements we receive, for costs associated with our required pharmacovigilance activities and milestones we are eligible to receive, as well as modify certain cost-sharing obligations related to the Japan-specific development costs associated with CONTACT-01 and CONTACT-02 for the commercialization and further development of cabozantinib. Under the collaboration agreement, as amended, Takeda received exclusive commercialization rights for current and potential future cabozantinib indications in Japan, and the parties have agreed to collaborate on the clinical development of cabozantinib in Japan. The operation and strategic direction of the parties’ collaboration is governed through a joint executive committee and appropriate subcommittees.
In the fourth quarter of fiscal year 2025, the collaboration and license agreement with Takeda was further amended to, among other things, grant Exelixis the right to develop and commercialize a competing product in Japan and modify certain cost sharing and milestone payments that may become payable if Takeda opts in to certain studies. We determined that this amendment represented a contract modification related to ongoing performance obligations that were not distinct from services previously provided and, therefore, was accounted for as a modification of an existing contract under Topic 606. As a result of the modification, we reallocated the revenues previously recognized and the remaining transaction price to the identified performance obligations in the modified contract based on their estimated relative standalone selling prices at the modification date. The standalone selling price of the license was estimated using a discounted cash flow model of projected income and costs, while the standalone selling prices of the research and development performance obligations were estimated based on costs incurred to date and projected future development costs over the term of the arrangement. The portion of the transaction price allocated to the license performance obligation was recognized immediately, as the license represents functional intellectual property transferred at a point in time. The portion allocated to the research and development services performance obligations is recognized over time using an input-based measure of progress. As a result, a retrospective catch-up adjustment under Topic 606, which was not material, was recorded in the fourth quarter of fiscal year 2025, resulting in an increase in license revenues and a decrease in collaboration services revenues.
Takeda is responsible for a portion of the costs associated with the cabozantinib development plan’s current and future trials, provided Takeda opts into such trials, and 100 % of costs associated with the cabozantinib development activities that are exclusively for the benefit of Japan. Takeda has opted into and is co-funding CheckMate -9ER, certain cohorts of COSMIC-021, CONTACT-01 and CONTACT-02. Under the collaboration agreement, as amended, Takeda has exclusive commercialization rights for current and potential future cabozantinib indications in Japan, and the parties have agreed to collaborate on the clinical development of cabozantinib in Japan. The operation and strategic direction of the
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parties’ collaboration is governed through a joint executive committee and appropriate subcommittees.
Unless earlier terminated, the collaboration agreement has a term that continues, on a product-by-product basis, until the earlier of (1) two years after first generic entry with respect to such product in Japan or (2) the later of (A) the expiration of patent claims related to cabozantinib and (B) the expiration of regulatory exclusivity covering cabozantinib in Japan. The collaboration agreement may be terminated for cause by either party based on uncured material breach by the other party, bankruptcy of the other party or for safety reasons. We may terminate the agreement if Takeda challenges or opposes any patent covered by the collaboration agreement. After the commercial launch of cabozantinib in Japan, Takeda may terminate the collaboration agreement upon twelve months’ prior written notice following the third anniversary of the first commercial sale of cabozantinib in Japan. Upon termination by either party, all licenses granted by us to Takeda will automatically terminate, and the licenses granted by Takeda to us shall survive such termination and shall automatically become worldwide.
Consideration under the Collaboration
In consideration for the exclusive license and other rights contained in the collaboration agreement, we received an upfront payment of $ 50.0  million from Takeda in 2017. As of December 31, 2025, we have also achieved regulatory, development and commercial milestones in the aggregate of $ 138.0  million since the inception of the collaboration agreement, including $ 11.0  million in milestones achieved during the year ended December 31, 2023.
Under the collaboration agreement, as amended, we are eligible to receive additional regulatory and development milestone payments, without contractual limit, for additional potential future indications. We are further eligible to receive commercial milestone payments, including milestone payments earned for the first commercial sale of a product, of $ 108.0 million. We excluded these milestone payments from the transaction price as of December 31, 2025 because we determined such payments to be fully constrained under Topic 606 due to the fact that it was not probable that a significant reversal of cumulative revenue would not occur, given the inherent uncertainty of success with these milestones. We will adjust the constraint applied to the variable consideration at each reporting period as uncertain events are resolved or other changes in circumstances occur.
We also receive royalty revenues on the net sales of cabozantinib in Japan. We are entitled to receive a tiered royalty of 15 % to 24 % on the initial $ 300.0 million of net sales, and following this initial $ 300.0 million of net sales, we are then entitled to receive a tiered royalty of 20 % to 30 % on annual net sales thereafter; these 20 % to 30 % royalty tiers reset each calendar year. Any variable consideration related to royalties and sales-based milestones will be recognized when the related sales occur as these amounts have been determined to relate to the relevant transferred license and therefore are recognized as the related sales occur.
We are required to pay a 3 % royalty on all net sales of any product containing cabozantinib, including net sales by Takeda.
Under the collaboration agreement, we are responsible for the manufacturing and supply of cabozantinib for all development and commercialization activities under the collaboration agreement. Relatedly, we entered into a clinical supply agreement covering the supply of cabozantinib to Takeda for the term of the collaboration agreement, as well as a quality agreement that provides respective quality responsibilities for the aforementioned supply. Furthermore, at the time we entered into the collaboration agreement, the parties also entered into a safety data exchange agreement, which defines each partner’s responsibility for safety reporting. This agreement also requires us to maintain the global safety database for cabozantinib. To meet our obligations to regulatory authorities for the reporting of safety data from Japan from sources other than our sponsored global clinical development trials, we rely on data collected and reported to us by Takeda.
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Revenues from the Collaboration
Revenues under the collaboration agreement with Takeda were as follows (in thousands):

  Year Ended December 31,
  2025 2024 2023
License revenues $ 20,125   $ 12,915   $ 20,671  
Collaboration services revenues ( 948 ) 8,455   13,543  
Total collaboration revenues $ 19,177   $ 21,370   $ 34,214  

Performance Obligations and Transaction Prices for our Ipsen and Takeda Collaborations
There is one remaining performance obligation for the Ipsen collaboration agreement: the research and development services, which includes certain committed studies for the development of cabozantinib, pharmacovigilance services and participation on various joint committees (as defined in the specific collaboration agreements). As part of the original contract, we also had a performance obligation associated with exclusive license for the commercialization and further development of cabozantinib, which was transferred in 2016.
There are two remaining performance obligations for the Takeda collaboration agreement: (1) the research and development services, which includes certain committed studies for the development of cabozantinib, pharmacovigilance services and participation on various joint committees (as defined in the specific collaboration agreements) and (2) the research and development services associated with CONTACT-01, CONTACT-02, and certain cohorts of COSMIC-021 studies. As part of the original contract, we had a performance obligation associated with the exclusive license for the commercialization and further development of cabozantinib, which was transferred in 2017.
We have allocated the transaction price for each of these collaborations to the originally identified performance obligations based on our best estimate of their relative standalone selling price. Any change to the transaction price resulting from a modification is allocated to the remaining performance obligations at the modification date based on the relative standalone selling price of the identified modified performance obligations. For the licenses, the estimate of the relative standalone selling price was determined using a discounted cash flow valuation utilizing forecasted revenues and costs. For research and development services the estimate of the relative standalone selling price was determined using an adjusted market assessment approach that relies on internal and external costs and market factors.
The portion of the transaction price allocated to our license performance obligation is recorded immediately as our license represents functional intellectual property that was transferred at a point in time. The portion of the transaction price allocated to our research and development services performance obligation is being recognized as revenue using the inputs method based on our internal development projected cost estimates through the current estimated patent expiration of cabozantinib in the European Union for the Ipsen collaboration and Japan for the Takeda collaboration, both of which are early 2030.
We adjust the constraint applied to the variable consideration for the collaboration agreements in each reporting period as uncertain events are resolved or other changes in circumstances occur and we allocate those changes in the transaction price between our performance obligations. During the years ended December 31, 2025, 2024 and 2023, the transaction price of the Ipsen and Takeda collaboration agreements increased, primarily as a result of the achievement of various milestones, and the reimbursements of research and development services related to committed and opt-in studies. We further updated the transaction price based upon the actual research and development services performed during the period and changes in our estimated reimbursements for our future research and development services. The portion of the increase in transaction price that was allocated to the previously satisfied performance obligations for the transfer of an intellectual property license was recognized during the period and the portion allocated to research and development services will be recognized in future periods as those services are delivered through early 2030. As of December 31, 2025, variable consideration related to the remaining unearned regulatory and development milestones for both agreements remained constrained due to the fact that it was not probable that a significant reversal of cumulative revenue would not occur.
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Cabozantinib and Zanzalintinib Development Collaborations
We have entered into multiple collaboration and supply agreements for the purpose of evaluating cabozantinib or zanzalintinib in various combination trials. Under these collaborations, clinical trials may be sponsored either by us or by our partners, and each party may supply its respective compound for use in the studies at no cost to the other. These arrangements fall within the scope of Topic 808 because they involve joint operating activities in which both parties actively participate and share significant risks and rewards. Payments exchanged between us and our collaborators under these agreements are not subject to other accounting literature. Amounts owed for our portion of clinical trial costs incurred by the collaborator are recorded as research and development expenses, while amounts due from the collaborator for their share of clinical trial costs that we incur are recorded as a reduction of research and development expenses.
Royalty Pharma
In October 2002, we established a product development and commercialization collaboration agreement with GlaxoSmithKline (now GSK plc, or GSK), that required us to pay a 3 % royalty to GSK on the worldwide net sales of any product containing cabozantinib sold by us and our collaboration partners. Effective January 1, 2021, Royalty Pharma plc (Royalty Pharma) acquired from GSK all rights, title and interest in royalties on net product sales containing cabozantinib for non-U.S. markets for the full term of the royalty and for the U.S. market through September 2026, after which time U.S. royalties will revert back to GSK. Royalty fees earned by Royalty Pharma in connection with our sales of cabozantinib are included in cost of goods sold and as a reduction of collaboration services revenues for sales by our collaboration partners. Such royalty fees earned by Royalty Pharma were $ 86.5  million, $ 75.5  million and $ 68.0  million during the years ended December 31, 2025, 2024 and 2023, respectively.
Research Collaborations, In-Licensing Arrangements and Other Business Development Activities
We enter into collaborative arrangements with other pharmaceutical or biotechnology companies to develop and commercialize oncology assets or other intellectual property. Our research collaborations and in-licensing arrangements are intended to enhance our early-stage pipeline and expand our ability to discover, develop and commercialize novel therapies with the goal of providing new treatment options for cancer patients. Our research collaborations, in-licensing arrangements and other strategic transactions generally include upfront payments for the purchase or in-licensing of intellectual property, development, regulatory and commercial milestone payments and royalty payments, in each case contingent upon the occurrence of certain future events linked to the success of the asset in development. Certain of our research collaborations provide us exclusive options that give us the right to license programs or acquire the intellectual property developed under the research collaborations for further discovery and development. When we decide to exercise the options, we are required to pay an exercise fee and then assume the responsibilities for all subsequent development, manufacturing and commercialization.
During the years ended December 31, 2025, 2024 and 2023, we recognized $ 25.7  million, $ 69.2  million and $ 173.0  million, respectively, within research and development expenses on the Consolidated Statements of Income, primarily related to upfront payments for the purchase or in-licensing of intellectual property, research and development funding and development milestone payments related to costs of intellectual property that have not yet reached technological feasibility and other fees.
As of December 31, 2025, in conjunction with these collaborative in-licensing arrangements and asset purchase agreements, we are subject to potential future development milestone payments of up to $ 441.5  million, regulatory milestone payments of up to $ 278.0  million, and commercial milestone payments of up to $ 2.5  billion, each in the aggregate per product or target, as well as royalties on future net sales of products.
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NOTE 5. CASH AND MARKETABLE SECURITIES
Cash, Cash Equivalents and Marketable Securities
Cash, cash equivalents and marketable securities consisted of the following (in thousands):

December 31, 2025
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value

Debt securities available-for-sale:
Commercial paper $ 241,439   $ —   $ —   $ 241,439  
Corporate bonds 882,390   4,138   ( 28 ) 886,500  
U.S. Treasury and government-sponsored enterprises 154,449   700   ( 10 ) 155,139  
Municipal bonds 8,715   49   —   8,764  
Total debt securities available-for-sale 1,286,993   4,887   ( 38 ) 1,291,842  
Cash 112   —   —   112  
Money market funds 304,352   —   —   304,352  
Certificates of deposit 66,388   —   —   66,388  
Total cash, cash equivalents and marketable securities $ 1,657,845   $ 4,887   $ ( 38 ) $ 1,662,694  

December 31, 2024
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value

Debt securities available-for-sale:
Commercial paper $ 172,891   $ —   $ —   $ 172,891  
Corporate bonds 1,012,035   1,498   ( 2,167 ) 1,011,366  
U.S. Treasury and government-sponsored enterprises 339,126   226   ( 959 ) 338,393  
Municipal bonds 2,990   11   —   3,001  
Total debt securities available-for-sale 1,527,042   1,735   ( 3,126 ) 1,525,651  

Money market funds 145,690   —   —   145,690  
Certificates of deposit 77,226   —   —   77,226  
Total cash, cash equivalents and marketable securities $ 1,749,958   $ 1,735   $ ( 3,126 ) $ 1,748,567  

Interest receivable was $ 12.4 million and $ 14.9 million as of December 31, 2025 and 2024, respectively, and is included in prepaid expenses and other current assets in the accompanying Consolidated Balance Sheets.
Realized gains and losses on the sales of marketable securities were immaterial during the years ended December 31, 2025, 2024 and 2023.
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We manage credit risk associated with our marketable securities portfolio through our investment policy, which limits purchases to high-quality issuers and the amount of our portfolio that can be invested in a single issuer. The fair value and gross unrealized losses on debt securities available-for-sale in an unrealized loss position were as follows (in thousands):

December 31, 2025
In an Unrealized Loss Position Less than 12 Months In an Unrealized Loss Position 12 Months or Greater Total
Fair Value Gross Unrealized Losses Fair value Gross Unrealized Losses Fair value Gross Unrealized Losses
Corporate bonds $ 46,851   $ ( 25 ) $ 5,104   $ ( 3 ) $ 51,955   $ ( 28 )
U.S. Treasury and government-sponsored enterprises 11,350   ( 5 ) 4,991   ( 5 ) 16,341   ( 10 )
Total $ 58,201   $ ( 30 ) $ 10,095   $ ( 8 ) $ 68,296   $ ( 38 )

December 31, 2024
In an Unrealized Loss Position Less than 12 Months In an Unrealized Loss Position 12 Months or Greater Total
Fair Value Gross Unrealized Losses Fair value Gross Unrealized Losses Fair value Gross Unrealized Losses
Corporate bonds $ 370,065   $ ( 1,630 ) $ 160,887   $ ( 537 ) $ 530,952   $ ( 2,167 )
U.S. Treasury and government-sponsored enterprises 125,224   ( 755 ) 56,984   ( 204 ) 182,208   ( 959 )

Total $ 495,289   $ ( 2,385 ) $ 217,871   $ ( 741 ) $ 713,160   $ ( 3,126 )

There were 35 and 255 debt securities available-for-sale in an unrealized loss position as of December 31, 2025 and 2024, respectively. During the years ended December 31, 2025 and 2024, we did not record an allowance for credit losses or other impairment charges on our marketable securities. Based upon our quarterly impairment review, we determined that the unrealized losses were not attributed to credit risk but were primarily associated with changes in interest rates and market liquidity. Based on the scheduled maturities of our marketable securities , we determined that it was more likely than not that we will hold these marketable securities for a period of time sufficient for a recovery of our cost basis.
The fair values of debt securities available-for-sale by contractual maturity were as follows (in thousands):

 
December 31,
 
2025 2024
Maturing in one year or less $ 691,409   $ 888,360  
Maturing after one year through five years 600,433   637,291  
Total debt securities available-for-sale $ 1,291,842   $ 1,525,651  

NOTE 6. FAIR VALUE MEASUREMENTS
Fair value reflects the amounts that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy has the following three levels:
• Level 1 - quoted prices (unadjusted) in active markets for identical assets and liabilities;
• Level 2 - inputs other than Level 1 that are observable either directly or indirectly, such as quoted prices in active markets for similar instruments or on industry models using data inputs, such as interest rates and prices that can be directly observed or corroborated in active markets; and
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• Level 3 - unobservable inputs that are supported by little or no market activity that are significant to the fair value measurement.
The classifications within the fair value hierarchy of our financial assets that were measured and recorded at fair value on a recurring basis were as follows (in thousands):

December 31, 2025
Level 1
Level 2
Total

Commercial paper $ —   $ 241,439   $ 241,439  
Corporate bonds —   886,500   886,500  
U.S. Treasury and government-sponsored enterprises —   155,139   155,139  
Municipal bonds —   8,764   8,764  
Total debt securities available-for-sale —   1,291,842   1,291,842  
Money market funds 304,352   —   304,352  
Certificates of deposit —   66,388   66,388  
Total financial assets carried at fair value $ 304,352   $ 1,358,230   $ 1,662,582  

December 31, 2024
Level 1
Level 2
Total

Commercial paper $ —   $ 172,891   $ 172,891  
Corporate bonds —   1,011,366   1,011,366  
U.S. Treasury and government-sponsored enterprises —   338,393   338,393  
Municipal bonds —   3,001   3,001  
Total debt securities available-for-sale —   1,525,651   1,525,651  
Money market funds 145,690   —   145,690  
Certificates of deposit —   77,226   77,226  
Total financial assets carried at fair value $ 145,690   $ 1,602,877   $ 1,748,567  

When available, we value marketable securities based on quoted prices for those financial instruments, which is a Level 1 input. Our remaining marketable securities are valued using third-party pricing sources, which use observable market prices, interest rates and yield curves observable at commonly quoted intervals for similar assets as observable inputs for pricing, which is a Level 2 input.
The carrying amount of our remaining financial assets and liabilities, which include cash, receivables and payables, approximate their fair values due to their short-term nature.
Forward Foreign Currency Contracts
We may enter into forward foreign currency exchange contracts that are not designated as hedges for accounting purposes to hedge certain operational exposures for the changes in foreign currency exchange rates associated with assets or liabilities denominated in foreign currencies, primarily the Euro.
As of December 31, 2025, we had one forward contract outstanding to sell € 3.4  million. The forward contract with a maturity of three months is recorded at fair value and is included in other current liabilities in the Consolidated Balance Sheets. The unrealized gain on the forward contract was immaterial as of December 31, 2025. The forward contract is considered a Level 2 in the fair value hierarchy of our fair value measurements. The net realized gains (losses) we recognized on the maturity of forward contracts were immaterial for the years ended December 31, 2025, 2024 and 2023, respectively. Realized and unrealized gains and losses on our forward contracts are included in other income (expenses), net on our Consolidated Statements of Income.
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NOTE 7. INVENTORY
Inventory consisted of the following (in thousands):

 
December 31,
 
2025 2024
Raw materials $ 894   $ 2,784  
Work in process 53,531   60,316  
Finished goods 5,942   8,629  
Total $ 60,367   $ 71,729  

Balance Sheet classification:
Current portion included in inventory $ 21,686   $ 22,388  
Non-current portion included in other non-current assets 38,681   49,341  
Total $ 60,367   $ 71,729  

NOTE 8. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following (in thousands):

Estimated Useful Lives
December 31,
 
2025 2024
Leasehold improvements up to 15 years
$ 111,087   $ 108,277  
Computer equipment and software up to 3 years
17,160   15,671  
Furniture and fixtures up to 7 years
23,648   22,865  
Laboratory equipment 5 years 76,290   70,435  
Construction in progress 3,003   2,875  
Total property and equipment 231,188   220,123  
Less: accumulated depreciation and amortization ( 132,228 ) ( 100,732 )
Total property and equipment, net $ 98,960   $ 119,391  

Depreciation and amortization expense was $ 29.1 million, $ 28.8 million and $ 25.7 million during the years ended December 31, 2025, 2024 and 2023, respectively.

NOTE 9. STOCKHOLDERS’ EQUITY
Stock-based compensation
We allocated the stock-based compensation expense for our equity incentive plan and our ESPP as follows (in thousands):

 
Year Ended December 31,
 
2025 2024 2023
Research and development $ 40,792   $ 30,670   $ 34,320  
Selling, general and administrative 72,191   63,166   72,025  
Total stock-based compensation expense $ 112,983   $ 93,836   $ 106,345  

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Year Ended December 31,
 
2025 2024 2023
Stock options $ 2,529   $ 6,035   $ 7,771  
Restricted stock units 105,964   81,130   70,462  
Performance stock units 241   3,058   23,938  
Employee stock purchase plan 4,249   3,613   4,174  
Total stock-based compensation expense $ 112,983   $ 93,836   $ 106,345  

We have an equity incentive plan under which we grant stock options and RSUs, including market condition-based RSUs and PSUs to employees and directors. As of December 31, 2025, 15.8 million sh ares were available for grant under the Exelixis, Inc. 2017 Equity Incentive Plan (as amended and restated, the 2017 Plan). The share reserve is reduced by 1 share for each share issued pursuant to a stock option and 2 shares for full value awards, including RSUs and PSUs.
The Board of Directors delegated responsibility for administration of our equity incentive plan to the Compensation Committee of our Board of Directors, including the authority to determine the term, exercise price and vesting requirements of each grant. Stock options granted to our employees and directors generally have a four-year vesting term and a one-year vesting term, respectively, an exercise price equal to the fair market value on the date of grant, and a seven-year life from the date of grant. RSUs granted to our employees and directors generally have a four-year vesting term and a one-year vesting term, respectively. PSUs granted pursuant to our equity incentive plans vest upon specified service conditions and the achievement of a performance target or market condition.
We have adopted a Change in Control and Severance Benefit Plan for certain executive officers. Eligible Change in Control and Severance Benefit Plan participants include employees with the title of vice president and above. If a participant’s employment is terminated without cause during a period commencing three months before and ending fifteen months following a change in control, as defined in the plan document, then the Change in Control and Severance Benefit Plan participant is entitled to have the vesting of all their outstanding equity awards accelerated and the exercise period for their stock options extended to no more than one year.
We have an Employee Stock Purchase Plan (as amended and restated, the Amended ESPP) that allows for qualified employees (as defined in the Amended ESPP) to purchase shares of our common stock at a price equal to the lower of 85 % of the closing price at the beginning of the offering period or 85 % of the closing price at the end of each six-month purchase period. As of December 31, 2025, we had 6.6 million shares available for issuance under our Amended ESPP. Pursuant to the Amended ESPP, we issued 0.4  million, 0.7 million and 0.9 million shares of common stock at an average price per share of $ 29.51 , $ 18.23 and $ 14.56 during the years ended December 31, 2025, 2024 and 2023, respectively. Cash received from purchases under the Amended ESPP for the years ended December 31, 2025, 2024 and 2023 was $ 13.1 million, $ 12.1 million and $ 12.7 million, respectively.
We used a Black-Scholes Merton option pricing model to value stock options and ESPP purchases. The weighted average grant-date fair value per share of stock options and ESPP purchases were as follows:

 
Year Ended December 31,
 
2025 2024 2023
Stock options $ 19.46   $ 9.79   $ 9.45  
ESPP $ 10.03   $ 6.39   $ 4.67  

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The grant-date fair value of stock option grants and ESPP purchases was estimated using the following weighted average assumptions:

 
Year Ended December 31,
 
2025 2024 2023
Stock options:
Risk-free interest rate 4.0 % 4.4 % 4.1 %
Dividend yield — % — % — %
Volatility 43 % 39 % 44 %
Expected life 5.7 years 5.6 years 5.6 years
ESPP:
Risk-free interest rate 4.2 % 5.2 % 5.1 %
Dividend yield — % — % — %
Volatility 42 % 34 % 40 %
Expected life 6 months 6 months 6 months

We considered both implied and historical volatility in developing our estimate of expected volatility. The assumption for the expected life of stock options is based on historical exercise patterns and post-vesting termination behavior. The risk-free interest rate is based on U.S. Treasury rates with the same or similar term as the underlying award. Our dividend rate is based on historical experience and our investors’ current expectations.
The fair value of RSUs was based on the closing price of the underlying common stock on the date of grant.
Activity for stock options, during the year ended December 31, 2025, was as follows (in thousands , except per share amounts):

Shares
Weighted  Average Exercise Price
Weighted  Average Remaining Contractual Term Aggregate Intrinsic Value

Stock options outstanding at December 31, 2024
4,616   $ 20.64   2.5 years $ 61,551  
Granted 21   $ 42.60  
Exercised ( 2,108 ) $ 20.05  
Cancelled ( 106 ) $ 21.29  
Stock options outstanding at December 31, 2025
2,423   $ 21.31   2.3 years $ 53,959  
Stock options exercisable at December 31, 2025
2,322   $ 21.12   2.2 years $ 52,153  

As of December 31, 2025, there was $ 0.9 million of unrecognized compensation expense related to our unvested stock options. The compensation expense for the unvested stock options will be recognized over a weighted-average period of 1.3 years.
The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between our closing stock price on the last trading day of fiscal year 2025 and the exercise prices, multiplied by the number of in-the-money stock options) that would have been received by the stock option holders had all stock option holders exercised their stock options on December 31, 2025. The total intrinsic value of stock options exercised during the years ended December 31, 2025, 2024 and 2023 was $ 45.9 million, $ 16.7 million and $ 16.7 million, respectively. Cash received from stock option exercises during the years ended December 31, 2025, 2024 and 2023 was $ 36.1 million, $ 49.6 million and $ 20.8 million, respectively.
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Activity for RSUs, including market condition-based RSUs, during the year ended December 31, 2025, was as follows (in thousands, except per share amounts):

Shares Weighted  Average Grant Date Fair Value
Weighted  Average Remaining Contractual  Term
Aggregate Intrinsic Value

RSUs outstanding at December 31, 2024
12,940   $ 22.84   1.5 years $ 439,580  
Awarded 11,751   $ 31.54  
Vested and released ( 3,712 ) $ 23.36  
Forfeited ( 3,798 ) $ 26.54  
RSUs outstanding at December 31, 2025
17,181   $ 27.86   2.5 years $ 748,728  

As of December 31, 2025, there was $ 299.9 million of unrecognized compensation expense related to our unvested RSUs which will be recognized over a weighted-average period of 2.9 years.
Activity for PSUs, during the year ended December 31, 2025, was as follows (in thousands , except per share amounts):

Shares
Weighted  Average Grant Date Fair Value
Weighted  Average Remaining Contractual  Term
Aggregate Intrinsic Value

PSUs outstanding at December 31, 2024
449   $ 24.54   0.1 years $ 15,257  
Awarded —   $ —  
Vested and released 449   $ 24.54  
Forfeited —   $ —    

PSUs outstanding at December 31, 2025
—   $ —   0.0 years $ —  

In February 2025, we awarded to certain employees an aggregate of 1.0 million RSUs (the target number) that are subject to a total shareholder return (TSR) market condition and a time-based service condition (the 2025 TSR-based RSUs). The TSR market condition is based on our relative TSR percentile rank compared to companies in the Nasdaq Biotechnology Index during the performance period, which is January 4, 2025 through December 31, 2027. Depending on the results relative to the TSR market condition, the holders of the 2025 TSR-based RSUs may earn up to 175 % of the target number of shares. Following achievement of the market condition at the end of the performance period and upon employee’s continuous service through the vesting dates, 50 % of the shares earned pursuant to the 2025 TSR-based RSUs will vest shortly after the end of the performance period, and the remainder will vest approximately one year later. The 2025 TSR-based RSUs will be forfeited if the market condition at or above a threshold level is not achieved, and/or the time-based service condition is not fulfilled, by the end of the performance period and through the vesting dates.
In March 2025 and September 2025, we awarded to employees an aggregate of 7.2 million RSUs that are subject to a stock price appreciation market condition and a time-based service condition (the 2025 stock price target-based RSUs). The market condition will be satisfied to the extent that the volume-weighted average closing price of our common stock for any consecutive 90-calendar-day period equals or exceeds $ 60 per share on any day during the performance period, which is March 31, 2025 through March 31, 2030. Following achievement of the market condition, the 2025 stock price target-based RSUs will vest upon employee’s continuous service through the end of the performance period on March 31, 2030 (the time-based service condition). The 2025 stock price target-based RSUs will be forfeited if the market condition at or above the target price is not achieved, and/or the time-based service condition is not fulfilled, by the end of the performance period.
In February 2024, we awarded to certain employees an aggregate of 1.3  million RSUs (the target number) that are subject to a total shareholder return (TSR) market condition (the 2024 TSR-based RSUs). The TSR market condition is based on our relative TSR percentile rank compared to companies in the Nasdaq Biotechnology Index during the performance period, which is December 30, 2023 through January 1, 2027. Depending on the results relative to the TSR market condition, the holders of the 2024 TSR-based RSUs may earn up to 175 % of the target number of shares. 50 % of the shares
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earned pursuant to the 2024 TSR-based RSU awards will vest shortly after the end of the performance period, and the remainder will vest approximately one year later, subject to an employee’s continuous service. These 2024 TSR-based RSUs will be forfeited if the market condition at or above a threshold level is not achieved, and/or the time-based service condition is not fulfilled, by the end of the performance period and through the vesting dates.
In April 2023, we awarded to certain employees an aggregate of 0.8 million RSUs (the target amount) that are subject to a TSR market condition (the 2023 TSR-based RSUs). The TSR market condition was based on our relative TSR percentile rank compared to companies in the Nasdaq Biotechnology Index during the performance period, which was December 31, 2022 through January 2, 2026. Depending on the results relative to the TSR market condition, the holders of the 2023 TSR-based RSUs could have earned up to 175 % of the target number of shares. At the end of fiscal year 2025 (end of the performance period), the TSR market condition was achieved at 175 % level, resulting in 1.0  million shares earned ( 175 % of the 2023 TSR-based RSUs target amount, net of forfeitures). 50 % percent of the shares earned subject to the market conditions vested shortly after the end of the performance period, and the remainder will vest approximately one year later, subject to an employee’s continuous service.
We used a Monte Carlo simulation model and the following weighted-average assumptions to determine the weighted-average grant date fair value of $ 47.58 per share for the 2025 TSR-based RSUs, $ 25.26 per share for the 2025 stock price target-based RSUs, $ 20.19 per share for the 2024 TSR-based RSUs, and $ 26.05 per share for the 2023 TSR-based RSUs:

2025 TSR-Based RSUs 2025 stock price target-based RSUs
2024 TSR-Based RSUs 2023 TSR-Based RSUs
Fair value of Exelixis common stock on grant date $ 37.53   $ 37.09   $ 21.71   $ 19.48  
Expected volatility 33 % 38 % 37 % 40 %
Risk-free interest rate 4.0 % 3.9 % 4.4 % 3.8 %
Dividend yield — % — % — % — %

The Monte Carlo simulation model assumed correlations of returns of the stock prices of Exelixis common stock and the common stock of a peer group of companies and historical stock price volatility of the peer group of companies. The valuation model also used terms based on the length of the performance period and compound annual growth rate goals for TSR based on the provisions of the awards. The Monte Carlo simulation model for our 2025 stock price target-based RSUs assumed historical stock price volatility and compounded risk-free rate over the remaining length of the performance period. Stock-based compensation related to RSUs with a market condition is recognized regardless of the outcome of the market condition.
Exelixis, Inc. 401(k) Plan (the 401(k) Plan)
We sponsor the 401(k) Plan under which we make matching cash contributions to our employees’ 401(k) accounts. We recorded compensation expense of $ 12.8 million, $ 15.0 million and $ 13.9 million for the years ended December 31, 2025, 2024 and 2023, respectively, for matching contributions.
Common Stock Repurchases
In August 2024, our Board of Directors authorized a stock repurchase program (SRP) to acquire up to $ 500.0 million of our outstanding common stock before December 31, 2025. In February 2025, our Board of Directors authorized the repurchase of up to an additional $ 500.0 million of our outstanding common stock before December 31, 2025. In October 2025, our Board of Directors authorized the repurchase of up to an additional $ 750.0 million of our common stock before December 31, 2026 (the October 2025 SRP). As of December 31, 2025, we have repurchased 30.2 million shares of common stock for an aggregate purchase price of $ 1,159.7 million under these SRPs and have completed the SRPs authorized in August 2024 and February 2025. As of December 31, 2025, approximately $ 590.2 million remained available under the October 2025 SRP for future stock repurchases before December 31, 2026.
Stock repurchases under these SRPs may be made from time to time through a variety of methods, which may include open market purchases, in block trades, Rule 10b5-1 trading plans, accelerated share repurchase transactions, exchange transactions, or any combination of such methods. The timing and amount of any stock repurchases under the SRPs will be based on a variety of factors, including ongoing assessments of the capital needs of the business, alternative
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investment opportunities, the market price of our common stock and general market conditions. These SRPs do not obligate us to acquire any amount of our common stock, and the SRPs may be modified, suspended or discontinued at any time without prior notice.

NOTE 10. PROVISION FOR INCOME TAXES
Our income before income taxes is derived solely from within the U.S. Our provision for income taxes was as follows (in thousands):

 
Year Ended December 31,
 
2025 2024 2023
Current:
Federal $ 16,230   $ 201,890   $ 167,954  
State 16,169   17,941   15,011  
Total current tax expense $ 32,399   $ 219,831   $ 182,965  
Deferred:
Federal $ 128,463   $ ( 52,433 ) $ ( 123,486 )
State ( 2,226 ) ( 7,025 ) ( 9,723 )
Total deferred tax expense 126,237   ( 59,458 ) ( 133,209 )
Provision for income taxes $ 158,636   $ 160,373   $ 49,756  

The reconciliation of the U.S. federal income tax provision at the statutory federal income tax rate of 21% for the year ended December 31, 2025, to our provision for income taxes was as follows (dollars in thousands):
The table reflects the ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which was adopted prospectively for the year ended December 31, 2025. See “Note 1. Organization and Summary of Significant Accounting Policies — Recently Adopted Accounting Pronouncements ” for additional information on the adoption of ASU 2023-09.

Year Ended December 31,
2025
Amount Percent
U.S. federal statutory tax rate $ 197,653   21.0 %
State and local income taxes, net of federal income tax effect 11,015   1.2 %
Effects of cross-border tax laws:
Foreign-derived intangible income ( 28,011 ) - 3.0 %
Tax credits:
Research and development tax credits ( 23,941 ) - 2.5 %
Nontaxable or nondeductible items:
Non-deductible executive compensation 14,220   1.5 %
Branded prescription drug fee 5,100   0.5 %
Stock-based compensation ( 23,029 ) - 2.4 %
Changes in unrecognized tax benefits 3,933   0.4 %
Other 1,696   0.2 %
Provision for income taxes and effective income tax rate $ 158,636   16.9 %

The states that contribute to the majority (greater than 50%) of the tax effect in the state and local income taxes, net of federal income tax effect category include Kentucky, Illinois and New Jersey for 2025.
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The reconciliation of the U.S. federal income tax provision at the statutory federal income tax rate of 21% for each of the years ended December 31, 2024 and 2023, respectively, to our provision for income taxes, as previously disclosed, prior to the adoption of ASU 2023-09, were as follows (in thousands):

Year Ended December 31,
2024 2023
U.S. federal statutory tax rate
$ 143,144   $ 54,080  
State and local income taxes, net of federal income tax effect
12,240   ( 1,487 )
Research and development tax credits
( 10,997 ) ( 23,714 )
Non-deductible executive compensation 7,094   7,019  
Branded prescription drug fee 4,633   4,968  
Stock-based compensation 665   1,066  
Change in valuation allowance
( 3,617 ) 5,770  
Other 7,211   2,054  
Provision for income taxes $ 160,373   $ 49,756  

The amounts of income taxes paid, net of refunds received, for the year ended December 31, 2025, were as follows (in thousands):

Amount

Federal $ 135,555  
State
Kentucky
10,633  
All other states
9,108  
Total net cash paid for income taxes $ 155,296