Exelixis, Inc. (EXEL) May 12, 2026 Conference Transcript

I guess we're getting started. All right, everybody. We're going to get going with our next company presenter. My name is Jason Gerber. I cover pharma and biotech at B of A, and I'm pleased to be introducing Exelixis and CEO Mike Morrissey. So, Mike, thanks again for joining us.

Great to be here. Nice to see you.

So hot off one cue and, you know, another announced share buyback. I figured I'd start with just a couple questions on capital allocation before we go into kind of program-specific questions. So maybe just to start, you know, as we think about capital allocation priorities longer term, you know, beyond this year, how are you guys thinking about kind of returning capital to shareholders versus, like, managing the next four years of Cabo exclusivity and then the investments that you're making in Zanza? Are there any specific, I guess, pivot points at all that you could see where, hey, maybe we want to invest more in Zanza or some early-stage assets that look particularly promising, and you step off the gas a little bit from a share buyback perspective. Just trying to get a sense of the toggles there beyond the share.

Yeah, that's great. We'll probably spend the next 28 minutes talking about that one topic, and maybe we will. So let me just say, great to be here. Thanks again for the invites. Always great to be in Vegas talking with the BAML team and all the investors that come. Before I begin, I'll just remind you that I'll be making forward-looking statements today, so please see our SEC filings for a description of the risks that we face in our business. So let's talk about capital allocation in the context of how we view the business, how we run the business, how we see it, how we've seen it in the past, and how we're going forward in terms of some of the themes that we've talked about a lot in the last year, certainly highlighted at our R&D Day in December around, you know, how we view building value for patients and shareholders, and that's through building franchise molecules that can improve standard of care for patients, and by doing that drive, you know, good value returns for shareholders. So our view has been to run the business very efficiently, and the key word is to prioritize how we do everything in discovery, in development, in the commercial world, to make the right set of priorities based upon data and based upon how we see the landscape evolving, how we see early data, how we see the competitor data flow, as well as movement to be able to maximize our chance of success, again, for patients, improving standard of care, and then having that then drive shareholder value appreciation. In terms of capital allocation, it's not one size fits all. It's not one lane that we look at in terms of temporal terms, sequential terms. You know, we've been profitable on an annual basis since 2017, and I think that is largely because we're asking the right questions around how we do investments, how we see the potential for drugs like Cabo, drugs like Zanza or Pipeline, and the opportunity to scale the company, not so much in terms of size, but in really top-line growth potential, right? So that's really the framework by which we look through that lens. And that lens is, you know, largely defined by our success with Cabo, right? molecule with eight different indications, the leading TKI for RCC. Last quarter, a good example of that, top TKI for RCC, top drug and second line plus net, highest new patient starts ever for us. So years into a launch, we're still growing that segment of the business. Leading frontline drug for RCC as well in the TKI space. So just lots of momentum, right? So in terms of how we view that success and how we translate that into capital allocation, it's really not mutually exclusive that we can do only one thing. We can do multiple things because we generate so much cash, and we efficiently utilize that cash, placing the right bets behind the right molecules and the right science as we go forward. So Zanza right now obviously is our, we think, our next big drug, probably undervalued by the street, which is fine. I think we'll rectify that over time. But it's certainly one area that we see driving growth into the 30s. And I think the way we framed it is Cabo has dominated RCC and other indications in the 20s, and we're positioning Zanza to be a dominant player in the 30s. That could actually surpass in terms of its scope and magnitude from what we see with Cabo. So we're investing a lot with Zanza, but we're doing it in a very controlled, measured sort of way, as we did with Cabo. And we can talk about how we did that back in the day in terms of being able to maximize the money we spend through collaborations and partnerships and those kinds of things. But, again, within the Zanza framework and within the company framework, you know, certainly investing in our internal R&D and development efforts makes a lot of sense. Having the ability to prioritize that on a, you know, month-to-month, quarter-to-quarter basis is really something that we do well, and we have the flexibility to be able to manage that based upon the data we're seeing. Obviously, Zanza, you know, maintains a big portion of that, But you'd be surprised, you know, how much room and flexibility we have there with the overall R&D budget. And then to be able to do the right BD at the right price at the right time for the right asset as we see this kind of franchise potential. And then have the ability to, you know, buy back shares when we think they're undervalued, which is the case now. And we've been doing that for the last few years very successfully.

So if I could summarize, it sounds like obviously with a biotech company, things are fluid. But as you sit here today, given the Cabo-driven cash flows and the outlook for Zanza, it sounds like you could foresee for the next few years maintaining the current balance of how you're deploying capital. Is that fair?

Well, again, I would say we will continue to deploy capital behind the best opportunities that we've got relative to our view of our data and the evolving competitive landscape in such a way that we have the best chance for success. And we can maximize that chance of success in terms of clinical outcomes for patients that improve standard of care, which then, based upon our view with success with Cabo, really then will dictate use commercially and growth financially, right? So it's that, again, we have the opportunity to prioritize, and I think that's the key word. We talk about that a lot, you know, kind of in the trenches, and I'll certainly use that word a lot today. hey, we have the ability to prioritize based upon data, based upon insights, based upon the competitive landscape evolving, and we see a lot of that in real time. And that's fantastic. But the focus is always on maximizing success in terms of growth opportunities for patients, which then will drive shareholder value de facto.

And so you talked about the efficiency of the organization, and historically you've leveraged these sort of co-funding deals with partners like Merck and Roche. And this is not an attempt to seek any sort of future guidance, per se, but just directionally. Are we stepping into a timeframe where ZANZ is now more pivotal trials? Does that create any upward lift on the R&D? Because it seems like the consensus-only model is maybe plus 100 million or so of R&D lift over the next four or five years off current levels. And so I'm just kind of curious, are we not effectively moving into an area of higher trial costs?

I wouldn't say that from an expense point of view because we have a pretty good sense of how to control that and how to be able to mitigate those costs. And again, we're not starting all the trials at the same time and then ending at the same time. It's a staggered approach, and whether we do it ourselves or we do it with clinical collaborators, it gives us great flexibility with how we do that. Our job, and something that myself and Chris and Andrew, Dana, others talk about on a regular basis, is where's the best place to put our money, what has the highest probability of success, what has the greatest impact for patients and the greatest financial outcome if successful, and then place those bets there. So we have a very rigorous approach. One of the benefits of having a very deep commercial team is that we have a very deep analysis within commercial and within FP&A, within Chris's team, to be able to do the same kind of modeling I would imagine you guys do, maybe at a different level, to be able to tease out what success could look like from the standpoint of near and long-term growth. And we really play by that playbook from the standpoint of being able to then execute around those parameters really well. But flexibility is always built into what we do. As you know, we've always been very able to make the hard decisions based upon our priorities and based upon the data that we've got to be able to, again, maximize our chance of success. I'm not worried about failing here or there because you don't get any credit for minimizing failure. You get credit for maximizing success, and that's the Cabo story, and that's what we're doing with Zanza and the pipeline.

Okay, and so just a couple of commercial questions before we get into some of the Zanza programs. You're going to have multiple products with the Zanza approval presumably coming end of year. And so I'm just wondering, you know, as you get to the later stages of the Cabo life cycle, how you go about, do you tweak the strategy at all as you get towards the tail end and focus the resources on Zanza? Are there any things that you kind of modify as it pertains to pricing or resourcing of Cabo relative to, say, Zanza as you get to the last couple years of the Zanza product? I'm sorry, the Cabo life cycle. Yeah, let's get it right there.

So, you know, the Cabo runway goes to early 3031, so four and a half, five years from today, whatever that is. We don't – I'll say the following. I don't want to say too much specifically from a competitive point of view, but we don't take our foot off the gas ever on anything, right? And we're not going to glide on one while the other is on the launch pad, right? Our view is, and we've put a lot of thought into how to really navigate the ZANSA clinical program and narrative so that we don't really cannibalize Cabo with ZANSA. And we maximize the value of both simultaneously. So it's not a, again, they're not mutually exclusive. It's not an either or. Or it's how do you run fast and deep with both lanes in a way that, again, expands the opportunity to treat more patients and bring more clinical benefit to patients across indications in GU and GI, which is why we're focused there because there's so much you can do in that space. There's so many patients that need better therapies. Colon cancer is a great example where, you know, we're really hitting that hard right now, and we think that's a huge area for opportunity for us. But, again, it's not a matter of trying to get cute with Cabo. It's just continuing to build the Cabo business until the end. And if you look at the metrics, as we talked about last week, you know, we gained three share points with Cabo year over year, Q1 26 versus Q1 25. At this stage of the launch, that's probably pretty unprecedented, right? The number one TKI moniker, you know, we're seeing growth in the frontline segment, and that's because we're focused on building that momentum commercially. So we're never content. We're never satisfied. We think Cabo can keep growing. We certainly have high hopes for Zanza, and, you know, the first wave of pivotal trials is either going or about to start. The second wave we kind of alluded to on the call last week with prostate cancer, with squamous non-small cell lung cancer. You can see where we're going there in terms of other combination approaches. Yeah, look, it's a high-value opportunity. We have to execute at the highest level, and we have to have the right mindset to always have data driving the process, having the ability to prioritize as we go.

Okay. And then maybe what you're seeing with Cabo and neuroendocrine tumors so far, it seems like the early launch was successful in 2025, where the incremental opportunity resides as you kind of look ahead, academic versus community onks, some of the key segments of this market.

Yeah, so we talked about that last week, too. Yeah, really pleased with the launch. You know, we certainly had the academics locked in from, you know, from the go signal. The opportunity in the community is a little bit broader. Bringing in the reps to really handle that extra kind of breadth and depth in terms of scope is super important, and we're seeing an impact almost immediately. Having them in the community now makes a lot of sense because they'll be using those relationships to a large degree with CRC when we launch Zanza later in the year, hopefully. So, again, we're building up to this important inflection point where Cabo, sole Cabo marketing hopefully becomes Cabo and Zanza, and then we start building the Zanza brand. So it's all part of the grand plan, and it's gone really well so far. We have to just keep running the ball, keep executing.

And the last Cabo question, then we'll go to Lizanza. Any competitive impacts you see in RCC from the LightSpark 11 readout for Wellerreg? It hasn't gotten formal approval yet, but some at least anecdotal feedback suggests some doctors are moving to that as like a second line, but that could also be an opportunity for greater Cabo frontline utilization. So maybe what you're seeing now and just your view on how that will evolve.

Yeah, so that's been the narrative that we've heard, too, from KOLs. Certainly, you know, the LightSpark 5, 11, 12, 22 continuum, as that data gets, you know, certainly evolves as it gets published. I'm really curious to see the LightSpark 12 data that was announced that, again, did not hit the first, did not pass the first interim. I certainly understand that dynamic well, and any kind of lead-through between 11 and 12 and 12 and 22, et cetera, is going to be really important. Yeah, you know, we'll see. I don't want to speculate here. You know, I think the narrative that, you know, if we lose a little bit of share, second line, you know, we'd probably gain that back first line. I mean, if that's the case, if that scenario plays out, that's one that works for us since our duration of therapy is much longer first line than second line. And we're certainly putting a lot of effort right now. And we have been for the last couple of years now on the first line segment anyway in terms of building share there. Last couple quarters have been really, really encouraging that that investment is paying off. But, again, we are in the most competitive therapeutic area out there in terms of oncology. We collaborate with the competition. That was a mainstay of our Cabo program. It certainly is going to be an important part of the Zanza program. I think we're all, you know, everybody's working either with each other or competing with each other to improve outcomes for patients. So we're all aligned on that issue, and we're going to have to figure it out, right? But certainly from the standpoint of no surprise that, you know, we're the market leader in RCC. You know, people are trying to knock us off, and we accept that challenge and are doing our best to, you know, maintain our position on the hill and keep climbing as we go forward.

We'll shift to Zanza. And I know you've been asked this question before, but I'll ask it again just because things are fluid and changing in oncology at all times. But the rationale for the STELLAR-304 trial in non-clear cell, because that's the next big clinical readout that we have, right? My understanding is a lot of patients are already using IOTKI. So maybe just talk about what you're trying to solve for in that space. Is it mainly about just getting a stronger NCCN recommendation, and that can really drive commercial success for ZANSA? So as we think ahead to clinical success and how to define that, right?

Yeah, so I guess if you look at the overall program, We're looking to, with ZANSA, build a franchise that has depth in existing and new indications relative to the profile that we've got, the overall, say, biochemical profile that we have, target inhibition profile that we have with both CAVO and ZANSA. They're very different molecules in terms of how they behave in vivo, but in terms of their target inhibition profile, their biochemistry, They're very similar in terms of hitting the important targets that drive tumor growth, that drive tumor angiogenesis, that can certainly impact the immune system. So it's the right framework of going after the right array of TKIs, and the question is how do you navigate that going forward, right? So, you know, if you go back to where we're at with, say, 304, a non-clear cell, There has not been any global, single global randomized pivotal trials, level one evidence generated in non-clear cell RCC. There's every drug in the RCC space has been approved based upon a predominant of clear cell data, and the labels include basically all patients with advanced RCC, not broken down by subtype or subtystology. So there is no level one evidence. And I think it was, if you go back a couple years now, I think it was viewed as the lowest of low-hanging fruit. It's a relatively small opportunity. You know, 15%, 20% of the population within RCC have non-clear cell histologies. But it was viewed as it was a good place to put a stake in the ground at the very earliest level of kind of designing this program. And it was certainly one that, you know, Cabo has some share. All the competitor molecules have a share, but nobody has a dominant share because there's no level one evidence to say use one over the other. And we all know, you know, small 50 patients, single arm, non-randomized phase 1B studies, you know, can be somewhat overestimates of what the global truth is when you run a global pivotal trial. So we're doing that with 304. We're guiding to have top-line data in the second half of the year, so we'll see.

So it sounds like lower clinical risk, good way to get your foot in the door with the first, or second, I guess, stands an indication. I imagine just by the fact that you're running the trial, you don't think that a lot of these existing modalities with lower-level recommendations, parentheses, are that entrenched in the space that you have at least an opportunity.

There's no clear market leader for non-clear sales, so if we can achieve that goal and, again, capture the vast majority of that 15%, 20% of the population, that's a great place to start. And then, as you saw on the slides that we had at earnings last week, I mean, the whole picture of RCC is actually fairly well-defined in terms of, you know, kind of front line bifurcated between post-adjuvant and, you know, de novo metastatic, second line, second later line. So our view is, you know, kind of cover the landscape with trials that cover the various opportunities, have the right combination partner and the right overall approach. You know, run the best trials possible with the best partners possible, and, you know, get the data you need to then build that franchise. And that specific indication, in this case, RCC.

And last point on this, and non-clear cell, is PFS delta separation enough? Do you need meaningful OS separation to drive these recommendations, to drive the clinical success in non-clear cell?

Yeah, look, statement of the obvious, it's always good to have an overall survival signal in your label, right, in terms of marketing. I mean, that was the special sauce, if you will, with the first approval we got with Meteor, right, was we had survival when no one else didn't, and it really helped us differentiate. So survival, I'm not sure you need it for approval, but in terms of building a winning commercial position, survival really helps, obviously. Yep.

Okay, fair enough. And then your clear cell strategy, and I guess just your outlook, right, in lieu of the LightSpark 11, maybe it's hard to answer this question without seeing, you know, detailed data, but just how you see the read across to the ongoing frontline studies, so you've got LightSpark 033, 034, I guess that's the second line study, but, you know, just with respect to the ability to generate practice-changing data with, like, a Zanzo-Wellerreg combination, given overlap in the combination mechanisms.

Well, I think that's one approach that we're taking, and I think that's juxtaposed with what we're looking at relative to the first line, where we've talked about, I think, pretty clearly that we're looking for combination opportunities with orthogonal MOAs. So, you know, before the fact, you've got hypotheses, and you have to test those hypotheses, right? And we're doing that, say, with Zanzibels in a couple different trials. We're talking to a lot of people and are in pretty advanced discussions now around looking at the first-line de novo metastatic population opportunity with ZANSA plus minus checkpoint plus a potentially orthogonal mechanism that doesn't have the same overlap with either one of those. That gives you more room to plan the upside for efficacy and potentially minimize the downside on safety tolerability. So I think that's a really important component here, obviously working in the same pathway, and there's examples of that working well sometimes, other times not within oncology, but it's a fine balance. You really have to thread the needle in terms of efficacy and safety, right? So I think our view, and we certainly have some experience here with Cosmic 313, is that you've got to pick your combination partners with care, and we've done a very careful survey. and know the space really well, looking at a variety of potentially bispecifics or add-ons to a ZANSA checkpoint combination that we think could give us some really interesting opportunities in that frontline de novo metastatic space. But again, we look at this as part of our, again, aspirational vision to take the success of Cabo had in the 20s and translate that to a much larger scale for ZANSA in the 30s. So we've got some time to navigate all that and be able to figure that out and get that going and get that done. So I'm excited about that for sure.

One thing that your commercial org has done really well, like when you roll out net, is you have physicians that are highly familiar with PubMedics, and so they're maybe more inclined to be prescribers in the neuroendocrine tumor setting. As we think ahead to the CRC launch, you've expanded the sales force in the GI setting. So can you talk about the ability to kind of leverage that competency in perhaps a newer subset of oncology?

Yeah, well, you know, certainly part of the charm of Cabo is that, you know, we've had such broad success in the GU space that, again, in the community setting where, you know, the HCPs are much more generalist in terms of what they see in terms of patient tumor types, you know, they have the ability to mix and match there pretty readily. And so using that to then build off of wasanza, certainly in colon, is a really, really important part of that, right? And we're building that awareness, and we're building that, I would say, that information. You know, the good news about building out the GI team, and to a certain degree the GU team as well over years now, is that by location and by therapeutic area overlap, most of our reps have some experience, say, at Genentech, within the oncology setting with Avastin, with Colon, with other tumor types. So we have a very deep knowledge of that commercial space from a sales and marketing point of view, and I think that depth will play off dramatically in terms of a CRC launch, both for 303, if that happens in the near term, and then 303 and 316 play together really well. I like that idea of doubling down in these indications. Again, building franchises along that dimension of tumor types, multiple lines, multiple shots on goal, potentially combination partners. So it just gives you much more reach there as well.

So it sounds like you've mentioned community a couple times with respect to CRC. I would think third line would have been maybe more academic focused because it's like a later line patient. But maybe I'm wrong. Do you see this more as a community?

It's really a community setting. Yeah, which is why it's so important for us to really make sure that we've got that cover on the GI side going into that, yeah, for sure.

Because I would say your sales force probably plays pretty significantly in the community setting already.

We do well, both areas, extremely well, right, for sure.

Stellar 316, maybe if you can just talk a little bit about, like, the rationale for that study and what data points you saw, What really inspired the decision to go after that market opportunity that can really, like, expand?

Yeah, it's a really exciting approach and one that, as I said before, you know, 303 and 316, they just play together really well. So we're talking to KALs about one, and they bring up the other one and vice versa, right? So it just reinforces our commitment to GI oncology, to all lines, all opportunities within CRC. You know, the high-risk post-adjuvant population is truly high-risk. Those patients can progress within, you know, five, six months of their last round of adjuvant chemotherapy. So they're – and they're in a tough spot because there's nothing really approved for them besides basically – well, nothing, but they can go back on more chemo or go on to a clinical trial. But all that's, you know, kind of tenuous, right? So we saw that as a very important first step. The Natera technology, we think, works extremely well. You know, the application to bladder within Vigor just highlights the opportunity there where, you know, atezolizumab was shown to be successful at improving both DFS and overall survival with a selection process that was driven by the MRD positivity. So it's a very good way to find patients who are at risk, you know, select them if you will, out to study them as their own little group, or in this case, big group, and then go forward and run the trial. So we're very excited about that. The good news in terms of operationalizing a trial like that is that they have such a deep level of experience and data around both institutions and investigators that use that technology for late lines, for post-adjuvant and CRC that it makes site selection and investigator kind of recruitment very, very straightforward. So we think this is a trial that we could get up quickly, run fast. We're going to enroll it only in the U.S. because that's where that technology is used. It'll be a three-arm study. Excuse me. It'll be ZANSA monotherapy, ZANSA plus a checkpoint inhibitor that we'll talk about later versus best supportive care. So it'll be a very straightforward trial using, again, MRD positivity as the selection criteria for getting into the trial. How many cycles of ZANSA plus PD-1 are you testing? It's not limited.

Not limited. And the motivating force here, was this more the Altair study, which looked at lawn surf and CTD DNA positive in CRC setting, or ZANSA PD-1 data in metastatic setting and seeing that synergistic benefit?

Yeah, it was more the latter. or certainly some of the earlier data from the competition was enlightening. It wasn't that helpful because it was just such a complicated kind of convoluted study. I think the best way to frame the logic, and we're almost done here, but I'll just wrap it up like this, is if Zanzo plus a checkpoint was effective at improving survival for patients with radiographic tumor, large enough tumor mass where you could see it on an MRI or a CT scan, then going after micrometastases with the same approach was a pretty good bet, right, from the standpoint of being able to, you know, go after the same mechanisms that are driving established tumors, in this case trying to block, you know, micrometastases from forming, right? So the logic is kind of a no-brainer. It begs the question we've got survival from 303, which supports that, and, you know, we're super excited about being able to get that going very, very soon.

All right, great. Well, we're out of time, so thank you, Mike, for joining us.