I am pleased to be joined by company CFO, Chris Senner, and Andrew Peters, Head of Strategy and IR. Thanks for joining us, gentlemen. Exelixis, I think, really exemplifies the paradigm of pipeline and a product. You have a solidly growing franchise in CABOMETYX, an emerging one with zanzalintinib. With that, perhaps I could get you guys to start with some high-level comments around Exelixis' top priorities on both parts of the business this year and throughout 2027.
Yeah. Thanks for the intro and the invite. Just as a reminder before I get started, we are going to be making some forward-looking statements today, so please see relevant disclosures around risks to our business in regulatory filings. So yeah, I am glad you highlighted CABO as a pipeline, a product, or however you framed it. It is really the way that we see our business. It is through this lens of franchises. And we think about franchises as the core operating through line of the company, and it is really across three dimensions. The first is exactly what you said. For a product like CABO and then hopefully zanza, expanding into multiple indications, that breadth, that stacking of revenue opportunities to really help patients. And then similarly, that second dynamic is around indications. So we are market leaders in RCC, we are market leaders in NETs.
We want to build CABO there, build zanza there, add pipeline products, potentially add external assets that we can bring in through business development, and so build product-wise and then build indication verticals. And then the last one is just around modalities. So obviously zanza and CABO on the small molecule side, if you look at our pipeline, either XB371, our tissue factor ADC or XB628, our novel next gen IO bispecific, it is that sort of can we build out the breadth of modality as well? And so over the last several years, we have really transformed the company, with the success of CABO, to really invest in all of those areas. And I think now is an important time and an interesting and exciting time at Exelixis, where we are starting to branch out into that second franchise, potentially the third franchise, the fourth franchise, the fifth franchise.
That is how we see the growth and the evolution of the company over time.
Okay. Got it. Let's pick up on CABOMETYX. Among the VEGF TKI class, it's seeing steadily increasing share each quarter, and presumably this is from increasing depth within RCC. Can you talk a little bit about what's driving market share and how durable this growth trend could be, particularly in view of some potential headwinds emerging? I guess what I'm thinking of there is really the potential expected approval of the LITESPARK-011 regimen.
All right. Yeah. Like you mentioned, CABO's market share has been increasing. If you look at it year-over-year, Q2 2026 versus Q2 2025, we grew two market share points from 45% to 47%. So we've been growing steadily over the last several years. We feel that's a very durable franchise, particularly from an RCC perspective. We've continued to see growth in RCC, which we call the base business, and then we're seeing growth from the NET business also that is driving revenue. So both of those together are really propelling the revenue forward as we look at the guidance for this year and as we look at beyond this year into 2030.
Okay.
Yeah. I think it's a truism in biopharma that really two things drive adoption: data and the team. I think those are things that we're continuing to emphasize and hammer home. On the data side, we're always generating new data to underscore that best-in-class TKI of choice, so to speak, profile for CABO. On the NET side, we continue to do things like earlier this year, we increased the size of the NET sales force, in part to add to the breadth and depth of penetration into that segment, but then also to be launch ready for zanza, given the overlap between NET and CRC. So it's those sorts of things that I think it's really the core part of what we do is that execution.
On the NET side, or in the NETs indication, can you talk about where CABO is today in terms of second line market penetration and how large of a contributor penetration of the NET segment could be for the CABO franchise overall?
Yeah. As we talked about on the last call, we are seeing about a 45% new patient share, as we looked at during the second quarter, so significant inroads into the NETs market.
Yeah
from a new patient perspective. What we haven't seen yet is the stacking of those patients and we expect that to happen as you continue out through 2026 and 2027 and 2028, and because this is a very indolent
tumor type. Therefore, the expectation is many of those patients will be on drug for a long time. Therefore, that stacking will drive the revenue. Now, we haven't said exactly what a number would be, but I think the TAM is about $1 billion at contemporary pricing today. We're trying to capture every market share point possible in the NET indication, and then drive the revenue from there. But it will be a contributor, a significant contributor in our growth going between now and 2030.
Okay. That share estimate, that 45% new to new patient share, I guess that's of therapies that are oral therapies in second line, I guess. But I guess within that class, how penetrated, what is the percent uptake, I guess, of second-line NETs overall?
Yeah. NETs is an interesting dynamic. We talked a little bit about this on the last quarter. Unlike many others, NETs just is a little bit different than a lot of other tumor types, given the more indolent disease and just how patients are managed on a day-to-day basis. Because of that, at this point in the launch, there's probably a little bit of a difference, say, between market share and new patient market share.
Yeah. All right.
What PJ talked about and this dynamic is really, imagine a lung cancer patient comes in for a scan every three months and determines how their disease is going. Is the tumor growing okay? They've stopped responding, switch onto a new therapy. NETs, because the tumors tend to grow a little bit slower, the scan interval can be longer for many patients, and so instead of coming in every three months, maybe you're coming in every six or nine months. Similarly, if the scan does show disease progression or something like that, again, because the tumor's much more slow-growing, oftentimes the conversation with the oncologist could be something like, "Well, maybe take a break from therapy as you're coming off of your prior anti-cancer therapy, before coming onto CABO." So there's this temporal dynamic around when that actual new start occurs.
But as Chris talked about before, that encouraging data point that we're seeing is increasingly and growing when those patients do switch onto a new therapy, more often it's becoming CABO.
Okay.
That's really what's driving our enthusiasm, our excitement around where we're going. Because as that new patient share translates to overall market share at a steady state, that destination, so to speak, is looking really good.
Real-world duration on therapy, is that sort of lining up? Once on CABO, real-world duration on therapy in NETs, is that lining up with expectations?
Yeah, it's probably still a little bit early to be definitive around that. We've been approved a little over a year now, so triangulating, you just need a more mature profile because the early patients may or may not be representative of a steady state patient population.
Got it.
We are pleased with the launch overall.
Okay. Great. So shifting to zanzalintinib, you have an approval decision approaching in the third-line metastatic or third line plus metastatic colorectal segment. You have talked about third line colorectal being at least a $1.5 billion opportunity here in the U.S. Can you talk a little bit about the duration of therapy assumptions underlying this outlook and what depth of market penetration or market share do you anticipate for zanza?
Yeah. It is tough to speculate on any of that until we get to market, but I think the dataset that we have presented is reasonably representative of how we think about the market opportunity. Third line plus CRC is still what we view as a high-end met need area, and all of the market research that we have done supports this enthusiasm in the marketplace among clinicians, patients, et cetera. The profile, the combination, the checkpoint-containing dynamic, chemo-free option, all of these things are building this excitement. The other thing I would highlight, just as we are on the topic of CRC, is one of the dynamics we are seeing right now is this echo chamber building excitement around zanza in the disease in general.
I mentioned our franchise approach earlier. So we have a second phase III study up and running in CRC called STELLAR-316, and that is the post-adjuvant or post-definitive therapy population.
So what we are finding is as clinicians are learning more about zanza, say from STELLAR-303 ahead of the launch, they are hearing about STELLAR-316 and are getting excited about it because we really are on the cutting edge there in defining this opportunity. Similarly, as docs are getting familiar with STELLAR-316 and this new space, they are starting to hear about zanza in the third line plus setting and getting ahead of the launch. So there is this back and forth, this echo chamber that I mentioned before that I think is driving a lot of awareness and enthusiasm for zanza in CRC.
Can you speak to how clinicians and payers as well perceive the relative clinical profiles or clinical positioning of zanza plus atezolizumab versus fruquintinib, FRUZAQLA in the third-line CRC setting?
Yeah. Just from a profile perspective, all the things that I mentioned before are certainly attractive. Our label, the patient population or potential label patient population we studied are certainly a little bit different there. I think their data are in a later line population monotherapy versus doublet. So a little bit of an apples and oranges comparison. What we've found is market share in that third line plus segment is a little bit more fragmented than I think people appreciate. It's about a third SUNLIGHT regimen, a third TKIs, and a third a smattering of chemos. That's in part driven by, again, CRC is a little different than other tumor types, and it's perhaps a little more, say, community-oriented. So there's certainly the academics who are driving certain treatment decisions, and then there's the community folks who drive certain others.
Our goal, from a launch perspective, is to capture share points from all of those categories. So we're not necessarily at the outset targeting any one prescriber pattern or anything like that. We think the profile of zanza/atezo certainly lends itself to the totality of patients.
Okay. Let's pick up on STELLAR-304, where you're expected to read out some data in non-clear cell RCC. I guess on the readout itself, what should investors prepare for in terms of the scope of that top-line readout? Presumably, you'll report on PFS, but are you also testing for perhaps interim OS benefit within this window?
Great question. I don't think we've written the press release. I reserve the right to change whatever's in there. It's a statement of the obvious. Per protocol at the time of the PFS analysis, there will be an interim OS look. I don't know how mature that's going to be. Can't speculate on that. Our goal ultimately is to deliver as strong of a data set as we possibly can to plant that flag in the ground and define a new standard of care in nccRCC. For background, it's a little bit of an oddity of an indication in oncology where the population has never been studied, but for, I don't even know the exact reasons, all of the drugs that are approved in RCC are approved for both clear cell and non-clear cell. It's not like everything's off-label use.
Everything's actually on label, but utilization is driven not by any pivotal trial data. It's more interpretation of single center, small single-arm trials, that sort of thing that inform treatment decisions. We all know the challenges of interpreting these small end studies or single center studies. It's just hard to really make definitive conclusions given the limitations of these data. STELLAR-304 is the first large randomized pivotal study done in this segment to establish with level one evidence a standard of care. That's what our goal is with STELLAR-304, and coming back to your question, our goal is to just really generate as robust of a data set as we possibly can.
Assuming that's the case, can you talk a little bit about, from a commercial standpoint, the level of market preparation, establishing treatment pathways, et cetera, that you think is needed to support a launch in non-clear cell, just given what you noted here, right? Just the lack of a true standard of care today.
Yeah. Obviously, we have a lot of experience in RCC generally, so I think from either a CABO or a zanza perspective, I think we're definitely ready to go, and we've got all the relationships we need, both from a physician perspective and a payer perspective that allows us to be successful. If the data's positive, then we have potential approval. We're excited for the opportunity if it comes about, and looking forward to being able to go out there and capture as much market share in the non-clear cell RCC market as possible. As Andrew was talking about, it's a fragmented market right now. We'll have the first basically phase III trial that we'll read out, and if that's positive, that'll give us a lot of, as Andrew was talking about earlier, from a successful company perspective, data allows you to be successful.
If that data's positive, then it will allow us to be successful in the non-clear cell RCC market.
Okay.
That's really the strategic logic, so to speak, of the franchise model, where we're the market leaders in RCC. As we layer on new indications, new products in that space, our commercial organization, our relationships across the organization in RCC we're certainly going to leverage. That's the best way to think about it, either with zanza non-clear cell or the LITESPARK-033 and LITESPARK-034 studies that Merck is running as our partner. It's that franchise benefit, franchise strength that's driving a lot of that.
Okay. I guess coming back to clear cell RCC, and I'm thinking about the LITESPARK-033 trial, can you just speak to the market opportunity that's in scope here, which is the post-checkpoint adjuvant frontline setting? Is there an easy way to frame the size of that market opportunity relative to frontline untreated RCC?
I think the best way to think about it is more how are patients treated in 2026 versus how will they be treated in 2031 or 2030, or-
Yeah
the evolution of the patient journey in RCC over time. And so what the Pembro data in adjuvant, especially the overall survival advantage, showed is that for eligible patients, this really should be the standard of care. Patients live longer if they get KEYTRUDA in the adjuvant space. And so it opens up the question, well, as more and more patients get adjuvant therapy with KEYTRUDA earlier, what actually is the standard of care there? And so that green space is expected to grow over time, and LITESPARK-033 is positioned to basically be the first study to answer that question.
So again, it's an example of Exelixis leading the way, so to speak, in defining a new standard of care, where right now it's just done by inference or guess or CABO is used, a lot of things are used more by assumptions or guesses around, well, it's probably going to be active, but there's no real data to suggest it. And so the way we think about the market is more around an evolution over time because the number of patients treated with adjuvant Pembro today is probably going to be very different than it's going to be treated in the future. And so that's the dynamic that we like to think about. It's not are we generating a data set today, or are we generating a data set to be the standard of care at some point in the future when we're thinking about those markets?
Right. Okay. All right. And just from an operational standpoint on LITESPARK-033, just how is enrollment in that study tracking against expectation? Is there a rough sense of when you might be able to report on the primary endpoint?
Yeah. Good news for us is this is a Merck study, so-
Okay. Yeah.
There's no better oncology drug developer in the world, so we love having them as a partner. One of the great benefits that we have of working with them is operationally, there's just no better team, and from an execution perspective, we're very, very happy.
Okay. All right. Hopefully, we'll let you speak to the market sizing or the market opportunity for LITESPARK-034 there. This is another Merck-run study, but in the second-line clear cell RCC setting. I guess there, I imagine the thinking going into that study is along the same lines for LITESPARK-033. From a sizing standpoint, how are you thinking about the size of that market opportunity in second-line plus RCC?
Yeah, maybe I'll frame it a little differently. A couple of years ago, we framed or gave guidance around this is what success looks like for zanza if we were successful in all of the studies that were ongoing at the time. Said is about zanza at a $5 billion TAM, 45% of that was GI, 45% was GU, and 10% was a head and neck study that we had running at the time. That 45% of the $5 billion, that was across the three RCC studies, so non-clear cell, LITESPARK-033, and LITESPARK-034. So that's a good sense of how we see the RCC or GU opportunity right now.
What I'd say also, just to add to that, is subsequent to that, we transitioned from STELLAR-305 and head and neck, given the emerging and growing competitive profiles of that space, and really said that our incremental investment dollar is much better spent with meningioma, which is a pivotal study we have up and running, and then the STELLAR-316 study, which I mentioned earlier as well. So those two studies collectively are probably about 3x the size of how we viewed head and neck. But the other dynamic here is we're not done with zanza. The first wave is out and ongoing, and it's a proud accomplishment to say that we have these seven pivotal studies up and running. But as we look to the next wave of zanza, certainly something like frontline RCC is now wide open. You mentioned other LITESPARK studies.
LITESPARK-012 was actually unsuccessful earlier this year. So what that future standard of care in frontline metastatic RCC looks like is an open question. So that's where we're being very careful in understanding how zanza can play a role there. What are the modalities? What are the targets? What are the combinations that the biology show us will be successful in that space? What are the lessons learned from our prior studies? What are the lessons learned from other contemporary studies as well? So that's how we're thinking about it, and then that wave two is going to lean into the RCC component, the GU component. But there's lots of other areas where we're expected to go. So stay tuned there.
Okay. Just thinking about, again, the LITESPARK regimen. I guess it's set up in a way where it does create optionality for Merck, right? In some ways, it could end up being an alternate TKI combination with belzutifan over where it's expected to, or is and expected to use further with LENVIMA. I guess, how should we think about the relative profiles or the tolerability profiles of zanza versus lenvatinib when combined with belzutifan? Are there other aspects to zanza's profile that you think, where you see it favoring or see it being the favored combo agent, versus LENVIMA?
Yeah, certainly. I think we view zanza as a best-in-class TKI. Its profile certainly lends itself to that sort of moniker. So if you think about, say, even the comparisons between CABO and LENVIMA, we're the number one TKI, both as a monotherapy as well as in combination with IO. The data we've generated with CABO support that. zanza then improves upon, so to speak, the overall profile of CABO in that it really the core insight around what we were hoping to do with zanza, both proactively and then fortuitously in how the data got generated, is really CABO's long half-life can be somewhat of a complication from a patient management perspective. So zanza takes that core CABO scaffold. We engineered in a metabolic liability to impact its PK, so it's much more user-friendly from a dose titration perspective, AE management perspective, tissue distribution perspective.
All of those things that support this best-in-class profile right now for CABO, we think then layer on with zanza with a more user-friendly, somewhat gentler TKI. All of those things as you move towards multi-drug, multi-modality combinations support that. That is why we are looking at it with belzutifan, looking at it with all sorts of checkpoints, and then even we have some cohorts open looking at it, say, with docetaxel. If we are successful on that front, then the door opens up to a whole host of either docetaxel combinations or even something like an ADC combination, given the profile we think zanza has.
Okay. Maybe just coming back to NETs, the NET market here, where you are also developing zanza in the frontline setting. This is in the STELLAR-311 trial. I think you actually provided some update on your last call, just in that you are seeing faster than expected enrollment into that study. I guess, how should we think about just the kinetics or the dynamic when it comes to pace and treatment, in that setting compared with what you described earlier in the second line, plus setting where there is some interim between picking up treatment? I guess, speaking to perhaps what you think the pace of uptake might be in the frontline NET setting.
Yeah, so.
If successful there.
I think it's probably something we're still teasing out. The data will certainly help inform that. But I would just note the differences between, say, the [Cabozantinib]-based adoption or label for CABO and the population we're studying for zanza, is it's that first oral option. Given that first oral option, you're not switching necessarily from everolimus to CABO. Some of those dynamics are probably less relevant. But we'll still see that more indolent nature of NET probably impacting something. I think overall, the point being, we view NET as a large and very underserved population. It's one that from a franchise perspective, Exelixis is increasingly investing in, whether it's through the zanza programs or some of our earlier stage programs.
NET's going to be a franchise that we're a market leader in, we're going to continue to be a market leader in, because we think there's a real opportunity there and unmet need.
Okay. I guess if we just step back and take a look at everything that's going on, you have ongoing late-stage development here with zanza, in addition to potential new product launch. How should we think about operating margins in 2027 and perhaps going forward?
Yeah. If you think about what we've said, our expectations keep
R&D expense in that billion-dollar range for the foreseeable future or less. That helps us, as revenue grows, continue to potentially increase operating margin. As Andrew was talking about earlier, we built out the sales force earlier this year, so that is in our guidance for this year, and it is in our run rate. We basically have all the launch expenses we need for zanza. We think that operating margins based on continued revenue growth, both for CABO and potentially for zanza, and keeping R&D expense in that billion-dollar range allows us to continue to have healthy operating margins. We do throw off a lot of cash, so we are constantly looking at capital allocation and looking at investing in R&D, in potential BD deals, and in share buyback. Andrew and I talk about this all the time.
We are constantly looking at BD deals out in the market, and we are currently in the process of executing on a $750 million share repurchase program. Through the second quarter, we had purchased about $2.9 billion worth of shares, starting in the second quarter of 2023 through the second quarter of 2026. So that has been an important part of our capital allocation. The way we look at capital allocation too is we do not look at it mutually exclusive between R&D expense, BD, or share repurchase. They are all important, and we look at them all together.
One final question here. Our colleagues in tech are also running a conference this week, so I am kind of asking this on their behalf, thinking of their world. But it is a question that comes up or a theme that comes up in our space quite a bit, right? Or just in general, which is really about just the use of AI or AI-driven technology and the extent it might be having an impact on your business. How is Exelixis today making use of AI-enabled tools within the organization, and how do you measure its impact?
Yeah. For AI-
Yeah
IT reports up through me. AI is really driven by the business, and the implementation is done in combination with the business and the technology team. We're using it a lot in commercial right now. Over the last several years, we've enhanced the way we're collecting data, so we have this really robust commercial data warehouse that allows us to do deep insight. Actually, we've put tools in place that reps can do. Instead of just having canned reports that come out, reps actually can go in, type in their prompt, and get, "Okay, who should I detail? When was the last time? Whose prescription patterns have changed?" That kind of AI is actually very useful at the rep level, and that's enhancing how we go about detailing doctors. From an R&D expense perspective or R&D perspective, we have it both in the discovery organization.
We use tools. We've used some kind of off-the-shelf tools in the development side.
They haven't been as helpful as we would hope, so we're actually developing our own tools, allowing us to do things faster, more efficiently, because that time is very important. So we're using it in R&D, we're using commercial, and from a G&A perspective, we're trying to use it everywhere we can, both in finance and in legal and other parts of the organization so that I've challenged my finance team to basically not grow as we grow-
Yeah
utilize AI to do that, and utilize AI to be more efficient. So we're using it in all different parts of the organization, and I think it's having a very positive impact on Exelixis, and we think it's going to have a bigger impact going forward.
Okay. All right. Great. I think we'll have to leave it there for time. Thanks so much, Chris and Andrew.
Yep.
Thank you.
Thanks. Yep.