Exelixis at Bernstein Forum: Oncology Focus and Strategic Growth

On Wednesday, 24 September 2025, Exelixis (NASDAQ:EXEL) participated in the Bernstein Insights: Healthcare Leaders and Disruptors - 2nd Annual Healthcare Forum. The conference highlighted Exelixis’s strategic focus on oncology, discussing both promising developments and challenges ahead. CEO Michael Morrissey emphasized the company’s dedication to improving cancer care and maintaining disciplined R&D investment, while navigating policy pressures and market competition.

Key Takeaways

• Exelixis remains committed to oncology, focusing on its flagship molecule cabozantinib (Cabo) and future pipelines like Zanzalintinib.
• The company plans to invest $1 billion annually in R&D, aiming for a disciplined, ROI-focused approach.
• Exelixis is expanding its market presence with CABOMETYX in neuroendocrine tumors and developing Zanzalintinib for colorectal cancer.
• Strategic collaborations, such as with Merck, are key to maximizing success while being profit-friendly.
• Exelixis aims to balance its growth from a small to a big company, maintaining accountability and urgency.

Financial Results

• Cabo leads Exelixis’s financial success as a key kidney cancer molecule.
• The company aims to develop a portfolio of franchises, investing $1 billion annually in R&D.
• Exelixis prioritizes capital allocation and is cautious about high-risk mergers and acquisitions.
• CABOMETYX market share has grown every quarter since early 2021.
• Quarterly royalties from partnerships with Ipsen and Takeda contribute to revenue.

Operational Updates

• CABOMETYX has launched for neuroendocrine tumors (NETs).
• Zanzalintinib is in phase three development, with promising results for colorectal cancer.
• Exelixis focuses on educating physicians rather than high-pressure sales tactics.
• The company has paused a head and neck trial to focus on colorectal cancer and meningioma.
• Partnerships with Ipsen and Takeda support CABOMETYX’s global presence.
• Collaboration with Merck on belzutifan and Zanzalintinib is ongoing.

Future Outlook

• Exelixis plans for CABOMETYX patent expiry in 2031 by transitioning to Zanzalintinib.
• The company aims to expand Zanzalintinib into renal, liver, and thyroid markets.
• Exelixis is exploring future standards of care for cancer treatment in the 2030s.
• Improving patient outcomes remains central to revenue growth.

Q&A Highlights

• Discussions focused on Zanzalintinib’s development, colorectal cancer data, and Merck collaboration.
• CEO Morrissey addressed policy pressures, including the Inflation Reduction Act.
• Emphasized data-driven decision-making and disciplined R&D investment.
• Long-term goals include building a portfolio of franchises and enhancing patient outcomes.

For a comprehensive understanding, refer to the full conference call transcript below.

Full transcript - Bernstein Insights: Healthcare Leaders and Disruptors - 2nd Annual Healthcare Forum:

Courtney Breen, Analyst, Bernstein: Hi everyone. Thank you so much for being here today. For those of you that don’t know me, my name is Courtney Breen. I cover large-cap biopharma here at Bernstein. I have spent a little while covering a lot of different companies, but my experience before being here was at Merck and spending a lot of time thinking about oncology.

Michael Morrissey, CEO, Exelixis: Good.

Courtney Breen, Analyst, Bernstein: I am looking forward to this conversation today and getting to chat about kind of the work that’s happening at Exelixis. I am privileged to share the stage today with Michael Morrissey, the CEO of Exelixis, and I will ask you to spend a couple of minutes perhaps giving a little bit of your background, kind of any high notes on the story that you would like to contextualize, and then we’ll dive into Q&A. A reminder for everyone in the room, please feel free to send through questions on the pigeonhole app and I can integrate those into the conversation as well.

Michael Morrissey, CEO, Exelixis: All right.

Courtney Breen, Analyst, Bernstein: Over to you, Mike.

Michael Morrissey, CEO, Exelixis: Fantastic. Nice to meet you.

Courtney Breen, Analyst, Bernstein: Yes.

Michael Morrissey, CEO, Exelixis: We certainly aspire to be, in your coverage universe, so good, good overlap there. I’m Michael Morrissey. I’m Chief Executive at Exelixis. 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. Exelixis, a commercial stage biotech company focused in oncology. I would say we’re probably, you know, mid-adolescence in terms of our growth and development. Very fortunate to have a lot of really strong data and kind of time evolving the organization to the point where today we’re at the age of having a strong franchise in RCC kidney cancer led by our flagship molecule called cabozantinib. Cabo is a molecule that we have discovered and developed in-house.

It’s, in some ways, an interesting story about the journey biotechs can take over the years, in terms of having early data, which may not pan out, early collaborations, which may not always, you know, reach fruition in terms of their success. Having a company that has great people, great data, opportunity to help a lot of patients and then commercialize their discoveries in a way that can bring value to shareholders too. That’s really the Cabo story. First couple of indications didn’t work well, didn’t fail in pivotal trials. We kind of shrunk the company, kept hung in there with the belief and the data that it would be a big drug elsewhere in between, you know, 2015 and 2025. We have now a label with seven different indications, the leading tyrosine kinase inhibitor in kidney cancer.

New indication in neuroendocrine tumors that we think can really help revolutionize that tumor type and having the ability to monetize that, grow the top line, certainly been profitable for the last seven or eight years, investing a lot in R&D. Now with the pipeline of molecules across modalities, across combination partners, across indications, that we think we can really move forward pretty aggressively. Our goal, quite simply, is to take the learnings from Cabo, where we built a franchise from scratch, and apply that to a pipeline that allows us to build really a pipeline of franchises. That’s how you build real value for patients, for the system, the healthcare system, and certainly for shareholders, and that’s our goal. I look forward to talking about all those different aspects today.

Courtney Breen, Analyst, Bernstein: Fantastic. I think the way that you set that up leads perfectly to where I wanted to take my first question, which is big picture on the company because you highlighted some of the elements of the portfolio. You’ve got Cabo in market, it’s got patent expiry in 2031, you’ve got Zanza in phase three, advancing and perhaps being that next innovation, coming pretty closely behind Cabo. Then a series of phase one assets. These span different modalities, different mechanisms of action, some in-house, some that you’ve acquired. What does the shape of the portfolio look like at the end of the decade? Yeah, and how will you manage through that 2031 patent cliff? I obviously spent a lot of time thinking about patent cliffs given the companies that I covered.

Michael Morrissey, CEO, Exelixis: Yeah, as do we, right? I think that’s the intermediate focus in terms of our aspirational goal to be, you know, to have this pipeline of franchise molecules, right? I think the whole Cabo Zanza opportunity, that transition, is really designed and has been designed and we’ve been executing on to convert a patent cliff into, if anything, a minor bottleneck, right, in terms of how we think we can build revenues, outside of CABOMETYX indications, within CABOMETYX indications. Our main focus, and if you distill everything we do down to one phrase, down to one sentence, our goal is to improve standard of care for patients with cancer.

Because, as you know from your past life and what you do now, the only way you’re going to get traction with prescribers and then with payers and ultimately, in the marketplace from a commercial point of view, is to raise the bar for what patients can expect. New twos, also-rans, you may win with a P-value, but that doesn’t necessarily mean you’re going to win hearts and minds and ultimately, you know, people writing scripts for you. It’s really around that.

How we navigate CABOMETYX to Zanzalintinib is super important, and I think we’ve been able to kind of stage that and frame that really well in terms of, you know, we don’t want to build Zanzalintinib, cannibalize CABOMETYX in the process, so how do we maneuver things temporally, around the 2030 area, certainly, you know, overlapping indications, we want to see them hit kind of their terminal commercial velocity, if you will, post the LOE, but then building in things like CRC, other tumor units, where we think we can have a definite impact, you know, in 2025, 2026, et cetera. A lot of the moving pieces. Our pipeline is similar to what you would see within, I think, most big pharmas. We have diversity of targets, diversity of modalities, diversity of combination approaches.

It all comes down to execution and really, investing, and looking at investments in terms of the ROI that we’re looking forward on relative to, you know, again, changing standard of care and then being able to monetize those assets. We don’t need to overinvest early. We need to let the winners present themselves to us and basically say, with this data, move me into full development. With this data, it makes sense from an ROI point of view, from a science point of view, from an upside point of view commercially, to be able to invest there. We have a different approach. Most biotechs, certainly today, they’re looking for their next financing. We don’t play that game. We’ve been out of that game for years, right?

It’s really around how do we, in a very disciplined fashion, prioritize how we invest, because our commitment to keeping R&D at about $1 billion a year is real, and we’ve been really sticking to that, so we can have other, you know, we have lots of free cash then to utilize in other important ways, but it’s that mix and match of how we do our investments and how we focus in terms of execution to make sure that we’re always building value.

Courtney Breen, Analyst, Bernstein: Absolutely. I think you touched on a couple of things that I’d like to dive into. One is kind of the Zanzalintinib as your second kind of asset here, kind of going after the same opportunity space as CABOMETYX compared to going after kind of new indications that you were not currently playing in and sequencing that at the right time. How are you thinking about those priorities when it comes to price that you can garner for different indications, kind of when revenue will be generated, when perhaps the standard of care becomes much cheaper, and so therefore your competitor is kind of coming off a lower base. How are you trading off all of those access as well as scientific challenges?

Michael Morrissey, CEO, Exelixis: Yeah, for us it’s always about improving options for patients. Everything else is secondary. I think that has certainly been proven time and time again. You can exact a premium from a pricing point of view if you change the equation for patients. You actually offer them something that will take kidney cancer, take a relatively acute opportunity therapeutically, and make it into a chronic disease. That’s what we and others in collaboration with the competition have done in that space. You’ve taken a $3 billion, $4 billion market in the teens to what will be probably a $10 billion plus market moving into the thirties because the epi really hasn’t changed, but you’ve actually made the pie bigger because patients are living longer, patients are on drug longer. You’ve changed the needle, you’ve changed the trajectory of their disease.

That’s what we aim to do across the board, certainly in renal cancer, in kidney cancer, in colon cancer. Everything we work on, and it’s a pretty narrow focus, is to do that. That’s what we bring to patients. I think that the system is set up to really support that as old drugs, which we beat, go off patent and are then, you know, less A, they’re certainly cheaper, but they’re less likely to be used because there’s other agents that are better. That’s the game. It’s a simple game. It’s just really hard, right? Yeah, but it’s mixing the science and the clinical work and the business. Look, we’re in the P-value business. We have to, we have pivotal trials have to work, and they won’t always work and they won’t always work as well as they do.

Obviously, when they work well, as they have for us, we can do a good job of then monetizing them into the commercial segment.

Courtney Breen, Analyst, Bernstein: Fantastic. You also mentioned about the cap on R&D spend and the way that you think about financing your business, financing your innovation, and continuing to advance the portfolio. Can you talk a little bit about how both your balance sheet and your margin profile today set you up to navigate this path and give you the opportunity to make the bets that you need to? Do you have to look outside in terms of partnerships, collaboration, anything along those lines?

Michael Morrissey, CEO, Exelixis: We look at capital allocation and we’re in a fortunate spot to be able to even be talking about capital allocation at this stage of our existence as a very important part of the business. We’re investing and we have certainly made investments over the years in terms of both internal innovation as well as external innovation. We’re not as gung ho about doing high risk, modest reward M&A. I think our work and our team has done a very, very deep dive into that. The fastest way to incinerate a lot of cash is to do bad M&A, right? That’s been proven time and time again. We’re really focused on doing the right level of DD that allows us to back and load investments and pay for success.

Certainly, our ADC platform, our bi-specific platform, has really been built on the back of external technologies that we like, that we’ve used very, very effectively in collaboration with a variety of biotechs, in a way to move the needle on the pipeline, as well as then on the clinical side. If you look at the Cabo developments, we had clinical collaboration with every major player in the oncology space, and we’re doing that with Zanzalintinib now as well, in a way to combine and conquer, right? I mean, CheckMate 9ER, the CheckMate 9ER trial was CABOMETYX, nivo versus sunitinib in the frontline setting. I mean, that’s got to be in the ROI Hall of Fame, right? We paid $0.25 on the dollar for that trial. The success there and the ensuing commercial kind of focus and investment raised revenues by two, two and a half fold.

It’s a really, really important way to understand how you can maneuver in a way that keeps the P&L and the balance sheet in focus, that allows us to maneuver. Everybody has a spending cap. Everybody, whether you’re the biggest pharma in the world or your smallest biotech, you have what you can spend and you have to use that wisely. That takes a degree of discipline and prioritization, which I think we do well.

Courtney Breen, Analyst, Bernstein: Absolutely. One of the other things that you touched on in your conversation up front was around kind of going after patients that really need improved cancer outcomes and demonstrating that clear improvement as being such a critical part. CABOMETYX has just launched into the neuroendocrine tumors, which is a challenging space for many, many patients. When you get NET tumors showing up, a really high area of unmet needs. It sounds like the launch is moving towards your expectations, but perhaps there’s been a bit of confusion on the sell side as to what this launch might look like. Can you talk us through some of the parameters here, perhaps how much of this market is new patients coming in versus ongoing treatment, and how you might see this next market overall?

Michael Morrissey, CEO, Exelixis: Yeah, let’s talk about NETs and the opportunity there. Again, it’s a relatively, I would say, not underserved, but underfocused indication. CABOMETYX was the first new drug approved in that space since probably 2015, 2016. It has a lot of standard of care, a lot of older drugs, the Nitinib, Everolimus, CAPTEM, all the parenteral SSAs, and then Lutathera, which came online actually years ago, and it continues to work well. There is a variety of offerings. These patients, again, they have relatively indolent tumors, and they can live for a long time. They have a lot of choices in terms of how they operate because they’re not under as much pressure as you would normally see in more, I would say, more advanced debilitating tumor types, which is a different mindset that you have to be able to play into from a marketing point of view.

We looked at the oral therapy-focused market, if you will, because that’s certainly where CABOMETYX plays. The CABINET data was, I think, just outstanding in terms of being able to look at a wide variety of patients in their journey who needed an oral therapy, largely because it took so long to enroll because it was a U.S.-only center, a study done by the Alliance Cooperative Group. It took five, six, seven years to enroll. Standard of care was evolving there. We covered all the bases. The data we have is, I think, very interesting, very encouraging in terms of its efficacy, as well as the opportunities to build upon that going forward commercially, right? We got approved at the end of Q1.

I think, as you would often expect, and we have 20 covering analysts, a few of them maybe got over their skis a little bit in terms of what was expected in the first quarter of launch where you would normally see new patient starts only because you don’t have much time for refills. I would say in general, there was good consensus on expectations. There were a few that got ahead of themselves, but that’s fine. Launch is going great, very strong feedback. I think the rate-limiting step here is simply patients coming off their existing therapy, looking for new opportunities of which CABOMETYX would be one, if not one of the more preferred ones. We’re excited about where we’re going and tracking it very closely and looking forward to continuing to see the ramp there.

Now, if you look at the situation with renal, where we’ve grown market share literally every quarter since CheckMate 9ER led out and was approved in early 2021, you would expect the same kind of ramp here, right? Because the population is indolent by nature and slowly evolving. We had big aspirations there both with CABOMETYX and then with zanzalintinib, where we’re going head to head against everolimus in a broad setting. We have some other assets that we’re excited about. There’s lots to do there. That’s an area of focus where we want to build a franchise in. We want to be able to really focus there going forward. Yeah.

Courtney Breen, Analyst, Bernstein: I think you also touched on, as we were talking about CABOMETYX before, in the early development phase, you partnered with many companies. You’ve also competed with many companies in terms of delivering those market share gains that you just alluded to. Can you talk about the shape of your sales and marketing organization? How have you been able to compete with, well, you’re partnered with Bristol Myers Squibb in some of these applications. You’re competing with Merck. You’re competing with Pfizer. You’re competing with some of these other players in the renal cell carcinoma space.

Michael Morrissey, CEO, Exelixis: It’s an interesting, again, case study. I think the whole opportunity is, can you expect a small little company, like especially in 2016 when we spent the last three or four years before then kind of looking over the edge of the abyss of just implosion. As we’ve talked about previously, great data, great team, great energy can really make very, very rapid headroom, kind of inroads into competing in areas that arguably, if not were owned by big pharma, certainly dominated by big pharma. I think we’ve been able to do that really effectively by having the right data and the right cadence of data and supported by the team that is built to compete. I mean, every single day we compete in that setting.

You can’t go in there with the kind of half-baked ideas and a half-resourced team, cutting corners from a marketing point of view, cutting corners from a sales point of view. You’ve got to go all in all the time every day. It’s this small, nimble, highly, highly intense team that can make a difference and make the extra call, have the extra data, have those kinds of things. We’re, I think that’s just who we are. We’re a bigger company now than we were 10 years ago, but we still have the small company mentality. We think we’re a big small company, right? That nimbleness, that intensity covers every gambit of the business, whether it’s in R&D, whether it’s in the FP&A team, whether it’s in sales, all those things have to come together for us to be effective. We do that very, very aggressively, right?

We use analytics and we understand the marketplace, literally on a day-by-day basis to be able to refocus the team, to be able to maximize their chance of success. We have to operate that way. We can’t be complacent. We can’t be content with success, today’s success, because we can build on that for tomorrow.

Courtney Breen, Analyst, Bernstein: Absolutely. You just noted that you kind of lean on analytics a lot and kind of continuing to pivot, continuing to evolve, how you target, how you approach your kind of delivery of those market share gains. Have you seen much change off the back of COVID in terms of your ability to engage with physicians, your ability to kind of support that kind of conversation, that ongoing conversation?

Michael Morrissey, CEO, Exelixis: Certainly, right after COVID, that was challenging. No question, challenging for everybody. I think we’re more or less back to normal now, right? I think from the standpoint of our ability to, you know, we don’t really sell. We educate. We don’t, there’s no tricks to this. It’s really, here’s the data. Here’s what we have to offer. It’s that enlightenment that I think HCPs and prescribers can, and then we support. We’ve always had a very real focus on kind of a white glove service approach. You know, make it easy for patients to help them navigate their disease, right? If we can, whatever we can do to help that process, we’ll help them, we’ll help practices, and we’ll ultimately benefit us too. It’s a real kind of organic approach to being able to build the business and build momentum.

Courtney Breen, Analyst, Bernstein: Absolutely. I’m sure you have a lot less bureaucracy in your organization than some of the large caps.

Michael Morrissey, CEO, Exelixis: We certainly do. Yeah, yeah.

Courtney Breen, Analyst, Bernstein: I did want to spend a little bit of time on Zanzalintinib, your next asset. We’re just seeing a late-breaking abstract get announced for STELLAR-303, right, colorectal cancer. That will be at ESMO next month. Tell us what we should expect here. Kind of why colorectal cancer? Why is this an exciting opportunity? What’s different about the way that you’re approaching the development with Zanzalintinib now with some of the learnings you have from CABOMETYX?

Michael Morrissey, CEO, Exelixis: Everything we’ve done with Zanzalintinib is based on the foundation from CABOMETYX, right? For a variety of reasons, with CABOMETYX, we explored a very, I would say, kind of focused area of the white space of where we could actually have taken CABOMETYX. Zanzalintinib’s built to be a kind of dental molecule, maybe more easily used by HCPs. Same target inhibition profiles, same pharmacodynamics. Again, CABOMETYX being a multi-targeted TKI, you never really know exactly what part of its inhibition profile is driving what. We hit all the important cell types into a microenvironment, some on purpose, some by accident, and that’s great. To be able to phenocopy that with Zanzalintinib with a shorter half-life, which should make it easier to use and dose adjust, which every patient will dose adjust in terms of how TKIs operate.

We’re excited about that and having that foundation of understanding and expertise and pivotal trial success with CABOMETYX, then going off and trying to improve standard of care in overlapping indications like renal, like liver, maybe thyroid, but then finding new indications too. CRC was really prime there, right? It’s a large addressable population. Standard of care has evolved slowly. Options are minimal. Checkpoint utilization there is low because it’s just not a very hot tumor outside of the MSI high population, which is very sensitive to checkpoints. To be quite frank, there have been four failed pivotal trials there with checkpoints. It just underscores the challenge of actually operating there. Zanzalintinib, Tezo, 303 against an active control, big win. We’re in the P-value business, so to get that to work in the ITT population was fantastic. The non-liver met population, which has a better prognosis, we just barely missed.

Hopefully that was an interim look and that’ll get over the goal line in the coming months as we accrue more events because we weren’t fully powered there yet. It’s the first step in the ballgame. Non-clear cell RCC is up next. That’s fully enrolled. Just counting events, looking for that to read out. We have a whole slew of pivotal trials ongoing after that too. We’re constantly evaluating where we invest, what makes sense. We had a head and neck trial going in terms of the phase 2/3 process that we’ve stopped to be able to move into, say, earlier lines CRC based upon the success of 303, as well as something like meningioma, which is completely underserved in terms of therapeutic approvals. We think it is a very, very important area for us to be in based upon some early Cabo data.

We’re constantly reevaluating our investments and asking the right questions, as you would have done in your old job in terms of how that strategy goes forward and tactically what makes the most sense from an ROI point of view and patient benefit. Yeah, for sure.

Courtney Breen, Analyst, Bernstein: Absolutely. You spoke about the science in many ways leading the day in terms of which indications you go after next. I also wanted to ask, are policy pressures, things like the Inflation Reduction Act and the small molecule nine-year time horizon, causing you to run more studies in parallel and think about the sequencing of zanzalintinib in a different way than you perhaps would have done otherwise.

Michael Morrissey, CEO, Exelixis: Yeah. Yes and no. I mean, I think about the Cabo development. I mean, we’ve, I think the number of pivotal trials that we were part of, either we ran ourselves, our partners ran, or were run by cooperative groups, in the 15, 16, 17 range. We embrace the idea that P-values make or break value here. You’ve got to run large global randomized pivotal trials to move the needle for patients, for the system, and certainly for our shareholders. I don’t think we have changed our approach with zanzalintinib per se. The IRA constraints, maybe they’re here today, maybe they’ll be gone tomorrow. I mean, who knows, right?

Courtney Breen, Analyst, Bernstein: It’s a volatile environment.

Michael Morrissey, CEO, Exelixis: I think the whole idea that people would stop working on small molecules when this came out a couple of years ago is just hazardous. You see that across the spectrum. Look, we’re investing in the science. We’re investing in what we think has the best probability of success in the highest ROI category. We can capitalize that because it’s a high attrition business. You’re not going to win every one of these examples, and you’ve got to be able to have enough high-quality inputs to be able to manage the upside when you’ve got those, open the envelope and see the P-values and then move forward. The oversight issues, MFN, ERUPS, FSCA, the whole list of them are real, and there’s certainly a level of uncertainty there.

What is certain is that if you don’t invest and you don’t have the opportunity to open the envelope and have a positive P-value, then you’re not going to move forward. It’s balancing that risk and balancing that uncertainty with the idea of making the right scientific kind of decisions that are going to give you the best chance for success.

Courtney Breen, Analyst, Bernstein: Yeah. Fantastic. I think everyone in the sector is grappling with all of those issues on an ongoing basis. We’ll see how they play out.

Michael Morrissey, CEO, Exelixis: For sure. Yeah, no doubt.

Courtney Breen, Analyst, Bernstein: Every day’s a new day. In addition, just on Zanzalintinib, it sounds like you have entered into a partnership with Merck regarding belzutifan and kind of the potential for combining those aspects as well. In the past, we saw the Bristol Myers Squibb combination being a critical anchor and the CheckMate 9ER being a very critical, critical trial. How important is this partnership, this collaboration on the science side? What do you hope to achieve over the long term? Are there learnings from partnerships? You spoke about partnerships that worked and that failed in your first time around. What does good look like for you?

Michael Morrissey, CEO, Exelixis: Yeah, so this is an example of a clinical collaboration, as was CheckMate 9ER. We had the COSMIC collaboration framework with Roche. Those are clinical trial collaborations where you, if you will, combine and conquer, or try to conquer on the clinical side without sharing any commercial rights. We like those kinds of collaborations. I would call it more of a collaboration than a partnership. We have a partnership with Ipsen and Takeda with CABOMETYX, ex-U.S. Takeda has Japan. Ipsen has the rest of ex-U.S., and that’s obviously a partnership that enables the broad commercialization and, you know, we do very well there financially, right? Like getting a check from those guys every quarter, that’s great. It’s really mixing and matching how we do that. We’re thrilled to be working with Merck, obviously the leader in large cap oncology, and their record of success there speaks for itself.

It’s a very strong way to go. They’ll be running those trials themselves. We’ll be paying for half of one, which is great. The goal is to look forward. I think the discussion leading up to that collaboration was, you know, can we align on what standard of care could look like in the 2030s and then design the right trials and the right combinations to be able to go forward. You’re always looking for, you’re not really trying to beat what’s happening today. You’re looking forward four, five, six years and trying to, you know, kind of estimate where you think things will be and how you can fill gaps that might exist there that can drive value for patients. We’re doing that with them and having a lot of other discussions across the portfolio with others, especially with Zanzalintinib, about how we can do that.

It’s a great way to be P&L friendly with what you’re doing in R&D and at the same time, you know, maximize your chance of success by just having more shots on goal, good shots on goal that could really move the needle.

Courtney Breen, Analyst, Bernstein: Absolutely. The spend associated with some of those clinical trials in oncology can be astronomical.

Michael Morrissey, CEO, Exelixis: Oh gosh, yeah, no doubt. Yeah.

Courtney Breen, Analyst, Bernstein: I did want to dive into some of your earlier assets. We’ve spent a bunch of time talking about CABOMETYX and zanzalintinib, which are TKIs that kind of are sisters or cousins or siblings of one another. As we think about the earlier stage assets that you have in your portfolio, we see bi-specifics, we see ADCs, we see new modalities coming through, some of which you’ve acquired into your organization. Why were these the right assets for you to own? Why does it feel like this is the right thing for us to have inside our portfolio, then perhaps something for us to combine with or consider collaborating with in the future?

Michael Morrissey, CEO, Exelixis: Yeah, yeah. A lot of those were internally derived. I think the only one partnered asset, and we had a lot of activities going on in, say, USP one, that made sense to, we liked that asset, and certainly had a lot of data on that. Just quick, so it’s, yeah, it’s a constant, I would say, balancing act of where you invest from a discovery and early development point of view and how you mix and match those investments to maximize the success, right? If you do that in a very disciplined sort of way, you can spread the risk across the modalities and across indications and companies. Just maximize your chance of finding the winner. We use the needle in a haystack analogy a lot for DG and even for, you know, kind of our internal portfolio efforts, right?

We’re looking to burn haystacks and then find a needle as opposed to searching for needles as we go forward, right? If you can discard the losers quickly and then focus on the winners, that’s the best way to, to A, use your P&L and use your balance sheet in a way that can really be enabling, but also it’s very focusing at that positive momentum and then really drive and accelerate everything you’re doing inside the organization. We’re excited about our ADC program. We think we’ve got really good ideas and really good kind of next-gen molecules. Obviously, the data will speak for itself, right? Our small molecule programs are really best in class. We’ve invested a lot in our internal technology platform around structure-based design, cryo-EM.

We’re getting, you know, just amazing insights both in terms of more combinatorial approaches, higher throughput approaches, but also then looking kind of at the atomic level of what’s happening. I feel good about that. At the end of the day, it’s how fast can we move preclinically into clinically into then that next, I mean, the most important decision then is actually, okay, is this molecule worthwhile developing in terms of full development, pivotal trials, combinations, et cetera. It takes a while to get there, but once we’re there, stay with zanzalintinib, you know, we know how to operate there. We’re not shy about making some big bets because that’s the only way you’re going to be able to monetize that.

Courtney Breen, Analyst, Bernstein: Absolutely. I think with some of these modalities as well, we’re seeing a lot of crowding around targets. We’re seeing a lot of kind of perhaps groupthink in certain areas.

Michael Morrissey, CEO, Exelixis: Which has been happening for decades.

Courtney Breen, Analyst, Bernstein: Exactly. Especially when you get to a modality where there’s some scientific risk on that modality, you want to reduce the modality risk by having a target that’s well validated and people go after the same target. How are you thinking about?

Michael Morrissey, CEO, Exelixis: Yeah, we’ve played that game both ways and tried to stay on the edge, stay on the line between the two. That’s where I think our scientific rigor and discipline comes into play, partly because we don’t have the luxury or the balance sheet to be able to spend a couple billion dollars on a flyer. I mean, that’s not pocket change for us. That’s real money, right? We have to be extra, maybe skeptical about some of the new stuff and ask the hard questions. We’ve seen this with the bi-specifics recently. PFS in lung is interesting. You don’t have survival. It’s kind of a non-starter effect. We kind of saw that coming, and it could still play out differently. Who knows? It’s how you navigate that early, middle, and late that makes a difference.

The choices you make, it all comes down to your risk profile and where you’re going to put your bets, right? I think we have a very different lens, right? Cabo’s a great example, right? We got it back twice. First pivotal trials failed. We had enough data to be able to believe, yeah, that there was activity in indications. We just had to learn how to use the drug better, and we did that. I really like that dynamic. You never have all the data you need to mandate things are going to work in perfection, but you’ve got to be able to navigate that. I think we have a good nose for how to do that going forward, and then we execute really well too. It all comes down to execution.

Courtney Breen, Analyst, Bernstein: Absolutely. I do want to spend the last couple of minutes thinking about kind of the long term and kind of the big decisions you have to make. As we think about where you’re sitting today, over the next three years, what do you think are the most important decisions that you have to make at Exelixis? How do you get comfort in making the right ones? We think about the uncertainty of science, the uncertainty of the policy environment, as well as with that competition kind of reaching fever pitch in many places. What gives you comfort that you’re going to be sitting in the right place at the right time?

Michael Morrissey, CEO, Exelixis: Yeah, so I mean, it’s a good question, right? What gives me comfort is that the team we have has been successful, proven success in the face of as many roadblocks clinically, legally, commercially as most companies could see over a long span of time, right? I’ve been thrilled with that. You mix in a little bit of COVID on top of that, you know, it’s been a time when everybody’s been tested, right? We have, I think, come out with a great deal of momentum and focus. We haven’t lost that intensity of what it means to be successful and how you earn success going forward. Look, we all make decisions every day. Everybody faces the same generic decisions. Where do you invest? What do you kill? What do you accelerate? You know, what’s happening on the global stage or the domestic stage that can mess things up.

You have to keep your wits as you go as well. I think we’ve done that pretty well over the years. It’s the momentum that we’ve got. I really think it’s the mindset of what we’ve charted, a course for success for the last 10 years that we think we can replicate, and then on a much broader scale than with just one single molecule. That’s the challenge. It’s all about the pipeline. It’s all about building a franchise, a portfolio of franchises. Because when you track companies that have scaled from, you know, $5 billion market cap to $100 billion market cap, it all comes down to revenue and multiples, right? The math is simple, right?

How you do that is by having the ability to put up numbers in terms of P-values and revenue that can give people the confidence that you can be bigger and better in the outcomes too. We have that, right? We’ve got a lot going in our favor. The decisions, if you have the right data and you have the right people, the decisions are usually obvious. Those that aren’t, then we just navigate carefully and understand that if we have to course correct, we can do that, right? We have that, again, big, big small company mentality. Our governance is, we do things in hours that most big companies take months to do, right? Because we can do that and we can course correct and move as we go forward. That nimbleness is a really important part of our story and part of our culture too.

Courtney Breen, Analyst, Bernstein: To the point of kind of the journey that Exelixis might be on, what does what’s the goal? What does success look like over the long term for Exelixis in your mind?

Michael Morrissey, CEO, Exelixis: We can quantify that in terms of market caps and, you know, patients treated and all those kinds of things. Obviously, bigger is better, but we have to do that in a way that, I think, reinforces our culture of, you know, big and small, right? I think it’s the individual accountabilities and urgency. That intensity at an organizational level is what drives success of any organization. It’s kind of the 80-20 rule. If you can shift that to 50-50 or 60-40, you can do amazing things. Small companies can compete with large companies head-to-head anytime because of all those additional attributes that are just hard to find elsewhere, right? For me, success is all about moving the needle for patients. If we can improve standard of care, then we’re confident based upon our past success with CABOMETYX. We can move the needle for patients.

We can move the needle for prescribers. We can move the needle for the healthcare system. Obviously, that will have an impact on our shareholders too. That’s the goal.

Courtney Breen, Analyst, Bernstein: Fantastic. Thank you so much.

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