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What changed in EXELIXIS, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of EXELIXIS, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+682 added−691 removedSource: 10-K (2023-02-07) vs 10-K (2022-02-18)

Top changes in EXELIXIS, INC.'s 2023 10-K

682 paragraphs added · 691 removed · 466 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

225 edited+86 added−115 removed214 unchanged
Biggest changeThe following table summarizes our current and planned clinical development activities outside of the cabozantinib franchise: CLINICAL DEVELOPMENT PROGRAM FOR PIPELINE Product Mechanism of Action Setting Status Update XL092 Next-generation tyrosine kinase inhibitor (TKI) targeting MET/VEGFR/AXL/MER Advanced or metastatic solid tumors Phase 1b trials evaluating single-agent and immune checkpoint inhibitor (ICI) combination regimens ongoing • In combination with atezolizumab and with avelumab (STELLAR-001) • In combination with nivolumab, with nivolumab and ipilimumab and with nivolumab and bempegaldesleukin (STELLAR-002) Potential to initiate late-stage trials in 2022 (including STELLAR-303) 15 Table of Contents XB002 Next-generation tissue factor (TF)-targeting antibody-drug conjugate (ADC) Advanced solid tumors Phase 1 trial evaluating single-agent ongoing Potential to add combination regimens with ICIs and other targeted therapies in 2022 XL102 Potent, selective, orally bioavailable cyclin-dependent kinase 7 (CDK7) inhibitor Advanced or metastatic solid tumors Phase 1 trial evaluating single-agent and combination regimens ongoing • In combination with fulvestrant, with abiraterone and prednisone and potentially with other anti-cancer regimens XL114 CARD11-BCL10-MALT1 (CBM) complex inhibitor Non-Hodgkin’s lymphoma (NHL) Phase 1 trial evaluating single-agent planned for first half of 2022 XL092 Development Program The first compound discovered at Exelixis to enter the clinic following our re-initiation of drug discovery activities in 2017 was XL092, a next-generation oral TKI that targets VEGF receptors, MET, AXL, MER and other kinases implicated in cancer’s growth and spread.
Biggest changeThe following table summarizes our current and planned clinical development activities outside of the cabozantinib franchise: CLINICAL DEVELOPMENT PROGRAM FOR PIPELINE Product Candidate Mechanism of Action Setting Status Update Zanzalintinib Next-generation tyrosine kinase inhibitor (TKI) targeting MET/VEGFR/AXL/MER Advanced or metastatic solid tumors Phase 1b trials evaluating zanzalintinib as a single-agent and in combination with immune checkpoint inhibitors (ICIs) combination regimens ongoing • In combination with atezolizumab and with avelumab (STELLAR-001) • In combination with nivolumab, with nivolumab and ipilimumab and with a fixed dose of nivolumab and relatlimab (STELLAR-002) Colorectal cancer (CRC) Phase 3 trial evaluating zanzalintinib in combination with atezolizumab ongoing (STELLAR-303) Non-clear cell renal cell carcinoma (RCC) Phase 3 trial evaluating zanzalintinib in combination with nivolumab ongoing (STELLAR-304) XB002 Next-generation tissue factor (TF)-targeting antibody-drug conjugate (ADC) Advanced solid tumors Phase 1 trial evaluating single-agent and ICI combination regimens ongoing (JEWEL-101) • In combination with nivolumab, with bevacizumab, and potentially with additional ICIs or other targeted therapies XL102 Potent, selective, orally bioavailable cyclin-dependent kinase 7 (CDK7) inhibitor Advanced or metastatic solid tumors Phase 1 trial evaluating single-agent ongoing and combination regimens planned (QUARTZ-101) • In combination with fulvestrant, with abiraterone and prednisone and potentially with other anti-cancer regimens CBX-12 Peptide-drug conjugate (PDC) enhancing delivery of exatecan, a highly potent, second-generation topoisomerase I inhibitor, to tumor cells Advanced or metastatic refractory solid tumors Phase 1/2 evaluating CBX-12 as a single-agent ongoing (sponsored by Cybrexa) 10 Table of Co ntents Zanzalintinib Development Program The first compound discovered at Exelixis to enter the clinic following our re-initiation of drug discovery activities in 2017 was zanzalintinib, a next-generation oral TKI that targets VEGF receptors, MET, AXL, MER and other kinases implicated in cancer’s growth and spread.
For additional information on the terms of the clinical trial collaboration agreement, see “—Collaborations and Business Development Activities—Cabozantinib Development Collaborations—BMS . ” RCC - COSMIC-313.
For additional information on the terms of the BMS clinical trial collaboration agreement, see “—Collaborations and Business Development Activities—Cabozantinib Development Collaborations—BMS Collaboration . ” COSMIC-313 - RCC.
Relatedly, we entered into a supply agreement with Ipsen to supply finished and labeled drug product to Ipsen for distribution in the territories outside of the U.S. and Japan for the term of the collaboration agreement as well as a quality agreement that provides respective quality responsibilities for the aforementioned supply.
Relatedly, we entered into a supply agreement with Ipsen to supply finished and labeled drug product for distribution in the territories outside of the U.S. and Japan for the term of the collaboration agreement as well as a quality agreement that provides respective quality responsibilities for the aforementioned supply.
Cabozantinib Development Collaborations BMS In February 2017, we entered into a clinical trial collaboration agreement with BMS for the purpose of exploring the therapeutic potential of cabozantinib in combination with BMS’s ICIs, nivolumab and/or ipilimumab, to treat a variety of types of cancer.
Cabozantinib Development Collaborations BMS Collaboration In February 2017, we entered into a clinical trial collaboration agreement with BMS for the purpose of exploring the therapeutic potential of cabozantinib in combination with BMS’s ICIs, nivolumab and/or ipilimumab, to treat a variety of types of cancer.
Adagene In February 2021, we entered into a collaboration and license agreement with Adagene to utilize Adagene’s SAFEbody technology platform to generate masked versions of mAbs from our growing preclinical pipeline for the development of ADCs or other innovative biotherapeutics against Exelixis-nominated targets.
In February 2021, we entered into a collaboration and license agreement with Adagene to utilize Adagene’s SAFEbody technology platform to generate masked versions of mAbs from our growing preclinical pipeline for the development of ADCs or other innovative biotherapeutics against Exelixis-nominated targets.
Catalent In September 2020, we entered into a collaboration and license agreement with Catalent to develop multiple ADCs using Catalent’s proprietary SMARTag site-specific bioconjugation technology. Under the agreement, we made an upfront payment in exchange for an exclusive option to license up to four targets using Catalent’s ADC platform over a three-year period.
In September 2020, we entered into a collaboration and license agreement with Catalent to develop multiple ADCs using Catalent’s proprietary SMARTag site-specific bioconjugation technology. Under the September 2020 agreement, we made an upfront payment in exchange for an exclusive option to license up to four targets using Catalent’s ADC platform over a three-year period.
Aurigene In July 2019, we entered into an exclusive collaboration, option and license agreement with Aurigene to in-license as many as six oncology target programs to discover and develop small molecules as therapies for cancer, and in April 2021, we expanded the collaboration to include three additional early discovery programs for a total of nine programs.
In July 2019, we entered into an exclusive collaboration, option and license agreement with Aurigene to in-license as many as six oncology target programs to discover and develop small molecules as therapies for cancer, and in April 2021, we expanded the collaboration to include three additional early discovery programs for a total of nine programs.
Iconic In May 2019, we entered into an exclusive option and license agreement with Iconic to advance an innovative next-generation ADC program for cancer, leveraging Iconic’s expertise in targeting TF in solid tumors.
In May 2019, we entered into an exclusive option and license agreement with Iconic to advance an innovative next-generation ADC program for cancer, leveraging Iconic’s expertise in targeting TF in solid tumors.
Invenra In May 2018, we entered into a collaboration and license agreement with Invenra to discover and develop multispecific antibodies for the treatment of cancer. Invenra is responsible for antibody lead discovery and generation while we will lead IND-enabling studies, manufacturing, clinical development in single-agent and combination therapy regimens, and future regulatory and commercialization activities.
In May 2018, we entered into a collaboration and license agreement with Invenra to discover and develop multispecific antibodies for the treatment of cancer. Invenra is responsible for antibody lead discovery and generation while we will lead IND-enabling studies, manufacturing, clinical development in single-agent and combination therapy regimens, and future regulatory and commercialization activities.
StemSynergy In January 2018, we entered into an exclusive collaboration and license agreement with StemSynergy for the discovery and development of novel oncology compounds targeting CK1α, a component of the Wnt signaling pathway implicated in key oncogenic processes, including in colorectal cancers. One such compound, EXEL-4329, reached development candidate status in 2021.
In January 2018, we entered into an exclusive collaboration and license agreement with StemSynergy for the discovery and development of novel oncology compounds targeting CK1α, a component of the Wnt signaling pathway implicated in key oncogenic processes, including in colorectal cancers. One such compound, EXEL-4329, reached development candidate status in 2021.
For additional information on XLB002, see “—Exelixis Development Programs—Other Development Programs - Advancing Exelixis’ Future Cancer Therapy Candidates—XB002 Development Program.” In January 2022, we announced an amendment to our agreement with Iconic, which we entered into in December 2021, to acquire broad rights to use the anti-TF antibody used in XB002 for any application, including conjugated to other payloads, as well as rights within oncology to a number of other anti-TF antibodies developed by Iconic, including for use in ADCs and multispecific biotherapeutics.
For additional information on XLB002, see “—Exelixis Development Programs—Pipeline Development Programs - Advancing Exelixis’ Future Cancer Therapy Candidates—XB002 Development Program.” In January 2022, we announced an amendment to our agreement with Iconic, which we entered into in December 2021, to acquire broad rights to use the anti-TF antibody used in XB002 for any application, including conjugated to other payloads, as well as rights within oncology to a number of other anti-TF antibodies developed by Iconic, including for use in ADCs and multispecific biotherapeutics.
The RTOR pilot program, which allows an applicant to pre-submit components of the application to allow the FDA to review clinical data before the complete filing is submitted, aims to explore a more efficient review process to ensure that safe and effective treatments are available to patients as early as possible, while maintaining and improving review quality.
The RTOR program, which allows an applicant to pre-submit components of the application to allow the FDA to review clinical data before the complete filing is submitted, aims to explore a more efficient review process to ensure that safe and effective treatments are available to patients as early as possible, while maintaining and improving review quality.
Because our products are covered in the U.S. by the Medicaid programs, we have various obligations, including government price reporting and rebate requirements, which generally require us to pay substantial rebates or offer our drugs at substantial discounts to certain purchasers (including “covered entities” purchasing under the 340B Drug Discount Program (the 340B Program)).
Because our products are covered in the U.S. by the Medicaid program, we have various obligations, including government price reporting and rebate requirements, which generally require us to pay substantial rebates or offer our drugs at substantial discounts to certain purchasers (including “covered entities” purchasing under the 340B Drug Discount Program (the 340B Program)).
All new laboratory staff are trained on chemical hygiene, the use of personal protective equipment, and certain other relevant laboratory safety topics, such as working with blood-borne pathogens, and current staff are retrained regularly. We also extend these trainings to facilities staff and others who support our work in the labs.
All laboratory staff are trained on chemical hygiene, the use of personal protective equipment, and certain other relevant laboratory safety topics, such as working with blood-borne pathogens, and current staff are retrained regularly. We also extend these trainings to facilities staff and others who support our work in the labs.
We also augment our small molecule discovery activities through research collaborations and in-licensing arrangements with other companies engaged in small molecule discovery, including: • STORM Therapeutics LTD (STORM), which is focused on the discovery and development of inhibitors of novel RNA modifying enzymes, including ADAR1; • Aurigene, which is focused on the discovery and development of novel small molecules as therapies for cancer; and • StemSynergy Therapeutics, Inc.
We augment our small molecule discovery activities through research collaborations and in-licensing arrangements with other companies engaged in small molecule discovery, including: • STORM Therapeutics LTD (STORM), which is focused on the discovery and development of inhibitors of novel RNA modifying enzymes, including ADAR1; • Aurigene, which is focused on the discovery and development of novel small molecules as therapies for cancer; and • StemSynergy Therapeutics, Inc.
Beyond XL102 and XL114, we are continuing to work with Aurigene to advance the other small molecule programs through preclinical development. For each additional option we decide to exercise, we will be required to pay an exercise fee, and we would then assume responsibility for all subsequent clinical development, manufacturing and commercialization for that program.
Beyond XL102, we are continuing to work with Aurigene to advance the other small molecule programs through preclinical development. For each additional option we decide to exercise, we will be required to pay an exercise fee, and we would then assume responsibility for all subsequent clinical development, manufacturing and commercialization for that program.
Drugs considered for review under the RTOR pilot program must be likely to demonstrate substantial improvements over available therapy, which may include drugs previously granted breakthrough therapy designation for the same or other indications, and must have straight-forward study designs and endpoints that can be easily interpreted.
Drugs considered for review under the RTOR program must be likely to demonstrate substantial improvements over available therapy, which may include drugs previously granted breakthrough therapy designation for the same or other indications, and must have straight-forward study designs and endpoints that can be easily interpreted.
Roche In February 2017, we entered into a master clinical supply agreement with Roche for the purpose of evaluating cabozantinib and Roche’s ICI, atezolizumab, in locally advanced or metastatic solid tumors. Under this agreement with Roche, in June 2017, we initiated COSMIC-021 and in December 2018, we initiated COSMIC-312.
Roche Collaboration In February 2017, we entered into a master clinical supply agreement with Roche for the purpose of evaluating cabozantinib and Roche’s ICI, atezolizumab, in locally advanced or metastatic solid tumors. Under this agreement with Roche, in June 2017, we initiated COSMIC-021 and in December 2018, we initiated COSMIC-312.
We also have the right to exercise options with respect to certain of Invenra’s other research programs in exchange for an option exercise payment, and Invenra is eligible for milestone payments and royalties for any products that arise from these optioned research programs.
We also have the right to exercise options with respect to certain of Invenra’s other research programs in exchange for an option exercise payment, and Invenra is eligible for milestone payments and royalties for any products that arise from these optioned research programs. • StemSynergy.
Specifically, we entered into agreements with secondary contract manufacturing organizations to produce additional commercial supplies of CABOMETYX tablets and cabozantinib drug substance, which bolsters our commercial supply chain and serves to mitigate the risk of supply chain interruptions or other failures.
Specifically with respect to CABOMETYX, we entered into agreements with secondary contract manufacturing organizations to produce additional commercial supplies of CABOMETYX tablets and cabozantinib drug substance, which bolsters our commercial supply chain and serves to mitigate the risk of supply chain interruptions or other failures.
No. 7,579,473, for the composition of matter of cabozantinib (the ‘473 Patent) and pharmaceutical compositions thereof. This composition of matter patent would expire in September 2024, but we have been granted a patent term extension to extend the term to August 2026.
Patent No. 7,579,473, for the composition of matter of cabozantinib and pharmaceutical compositions thereof. This composition of matter patent would expire in September 2024, but we have been granted a patent term extension to extend the term to August 2026.
For each target that we nominate, we would then assume responsibility for all subsequent clinical development, manufacturing and commercialization for that program. Adagene is eligible for potential development, regulatory and commercial milestone payments, as well as royalties on potential sales .
For each target that we nominate, we would then assume responsibility for all subsequent clinical development, manufacturing and commercialization for that program. Adagene is eligible for potential development, regulatory and commercial milestone payments, as well as royalties on potential sales. • NBE.
The laws that may affect our ability to operate 34 Table of Contents include, but are not limited to: the federal Anti-Kickback Statute (AKS), which prohibits, among other things, soliciting, receiving, offering or paying remuneration, directly or indirectly, to induce or reward for, the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as Medicare and Medicaid; the FDCA and its implementing regulations, which prohibit, among other things, the introduction or delivery for introduction into interstate commerce of any drug that is adulterated or misbranded; and federal civil and criminal false claims laws, including the civil False Claims Act, and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payers that are false or fraudulent.
The laws that may affect our ability to operate include, but are not limited to: the federal Anti-Kickback Statute (AKS), which prohibits, among other things, soliciting, receiving, offering or paying remuneration, directly or indirectly, to induce or reward for, the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as Medicare and Medicaid; the FDCA and its implementing regulations, which prohibit, among other things, the introduction or delivery for introduction into interstate commerce of any drug that is adulterated or misbranded; and federal civil and criminal false claims laws, including the civil False Claims Act, and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payers that are false or fraudulent.
For physicians treating these types of cancer, cabozantinib has become or is becoming an important drug in their selection of effective therapies. The other two products resulting from our discovery efforts are: COTELLIC® (cobimetinib), an inhibitor of MEK approved as part of multiple combination regimens to treat specific forms of advanced melanoma and marketed under a collaboration with Genentech, Inc.
For physicians treating these types of cancer, cabozantinib has become or is becoming an important medicine in their selection of effective therapies. The other two products resulting from our discovery efforts are: COTELLIC® (cobimetinib), an inhibitor of MEK approved as part of multiple combination regimens to treat specific forms of advanced melanoma and marketed under a collaboration with Genentech, Inc.
CABOMETYX - DTC: We believe the principal competition for CABOMETYX in its previously treated DTC indication includes two treatments that are also approved for previously untreated DTC: Bayer’s and Onyx’s sorafenib; and Eisai’s lenvatinib.
CABOMETYX - DTC: We believe the principal competition for CABOMETYX in its previously treated DTC indication includes two treatments that are also approved for previously untreated DTC: Bayer’s sorafenib; and Eisai’s lenvatinib.
Additionally, there are a variety of therapies being developed for previously treated HCC, including the combination of Roche’s atezolizumab and either Eisai’s Lenvatinib or Bayer’s and Onyx’s sorafenib.
Additionally, there are a variety of therapies being developed for previously treated HCC, including the combination of Roche’s atezolizumab and either Eisai’s lenvatinib or Bayer’s sorafenib.
Congressional inquiries, hearings and proposed and enacted federal legislation and rules, as well as executive orders, designed to, among other things: reduce or limit the prices of drugs and make them more affordable for patients (including, for example, by tying the prices that Medicare reimburses for physician-administered drugs to the prices of drugs in other countries); reform the structure and financing of Medicare Part D pharmaceutical benefits; implement additional data collection and transparency reporting regarding drug pricing, rebates, fees and other remuneration provided by drug manufacturers; enable the government to negotiate prices under Medicare; revise rules associated with the calculation of average manufacturer price and best price under Medicaid; eliminate the AKS discount safe harbor protection for manufacturer rebate arrangements with Medicare Part D plan sponsors; create new AKS safe harbors applicable to certain point-of-sale discounts to patients and fixed fee administrative fee payment arrangements with pharmacy benefit managers; and revise the rebate methodology under the Medicaid Drug Rebate Program.
Congressional inquiries, hearings and proposed and enacted federal legislation and rules, as well as executive orders, designed to, among other things: reduce or limit the prices of drugs and make them more affordable for patients (including, for example, by tying drug prices to the prices of drugs in other countries); reform the structure and financing of Medicare Part D pharmaceutical benefits; implement additional data collection and transparency reporting regarding drug pricing, rebates, fees and other remuneration provided by drug manufacturers; enable the government to negotiate prices under Medicare; revise rules associated with the calculation of average manufacturer price and best price under Medicaid; eliminate the AKS discount safe harbor protection for manufacturer rebate arrangements with Medicare Part D plan sponsors; create new AKS safe harbors applicable to certain point-of-sale discounts to patients and fixed fee administrative fee payment arrangements with pharmacy benefit managers; and revise the rebate methodology under the Medicaid Drug Rebate Program.
For additional information on XL102, see “—Exelixis Development Programs—Other Development Programs - Advancing Exelixis’ Future Cancer Therapy Candidates—XL102 Development Program.” In addition, we exercised our exclusive option to in-license XL114, Aurigene’s novel CBM inhibitor, in October 2021, resulting in our assuming responsibility for all subsequent clinical development, manufacturing and commercialization of XL114 and payment of an option exercise fee to Aurigene .
For additional information on XL102, see “—Exelixis Development Programs—Pipeline Development Programs - Advancing Exelixis’ Future Cancer Therapy Candidates—XL102 Development Program.” In addition, we exercised our exclusive option to in-license XL114, Aurigene’s novel CBM inhibitor, in October 2021, resulting in our assuming responsibility for all subsequent clinical development, manufacturing and commercialization of XL114 and payment of an option exercise fee to Aurigene .
As a result of the approvals of CABOMETYX and/or the combination of CABOMETYX with OPDIVO for RCC indications in 61 countries outside of the U.S., including the Member States of the EU, Japan, the U.K., Canada, Brazil, Taiwan, South Korea and Australia, CABOMETYX has continued to grow markedly outside the U.S. both in sales revenue and the number of RCC patients benefiting from its clinical effect.
As a result of the approvals of CABOMETYX and/or the combination of CABOMETYX with OPDIVO for RCC indications in 62 countries outside of the U.S., including the Member States of the EU, Japan, the U.K., Canada, Brazil, Taiwan, South Korea and Australia, CABOMETYX has continued to grow markedly outside the U.S. both in sales revenue and the number of RCC patients benefiting from its clinical effect.
The process required by the FDA before product candidates may be marketed in the U.S. generally involves the following: • nonclinical laboratory and animal tests, some of which must be conducted in accordance with Good Laboratory Practices (GLP); • submission of an IND, which contains results of nonclinical studies ( e.g. , laboratory evaluations of the chemistry, formulation, stability and toxicity of the product candidate), together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, and must become effective before human clinical trials may begin; • approval by an independent institutional review board or ethics committee at each clinical trial site before each trial may be initiated; • adequate and well-controlled human clinical trials conducted in accordance with the protocol, IND and Good Clinical Practice (GCP) to establish the safety and efficacy of the investigational drug candidate for its proposed intended use; • for drug products, submission of a New Drug Application (NDA) to the FDA for commercial marketing, or generally of an sNDA, for approval of a new indication if the product is already approved for another indication; • for biotherapeutic products, submission of a Biologics License Application (BLA) to the FDA for commercial marketing, or generally a supplemental Biologics License Application (sBLA) for approval of a new indication if the product is already approved for another indication; • pre-approval inspection of manufacturing facilities and selected clinical investigators, clinical trial sites and/or Exelixis as the clinical trial sponsor for their compliance with GMP and GCP, respectively; • payment of user fees for FDA review of an NDA or BLA unless a fee waiver applies; • agreement with the FDA on the final labeling for the product; • if the FDA convenes an advisory committee, satisfactory completion of the advisory committee review; and • FDA approval of the NDA or sNDA, or BLA or sBLA.
The process required by the FDA before product candidates may be marketed in the U.S. generally involves the following: • nonclinical laboratory and animal tests, some of which must be conducted in accordance with Good Laboratory Practices (GLP); • submission of an IND, which contains results of nonclinical studies ( e.g. , laboratory evaluations of the chemistry, formulation, stability and toxicity of the product candidate), together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, and must become effective before human clinical trials may begin; • approval by an independent institutional review board or ethics committee at each clinical trial site before each trial may be initiated; • adequate and well-controlled human clinical trials conducted in accordance with the protocol, IND and Good Clinical Practice (GCP) to establish the safety and efficacy of the investigational drug candidate for its proposed intended use; • for drug products, submission of a New Drug Application (NDA) to the FDA for commercial marketing, or generally of an sNDA, for approval of a new indication if the product is already approved for another indication; • for biotherapeutic products, submission of a Biologics License Application (BLA) to the FDA for commercial marketing, or generally a supplemental Biologics License Application (sBLA) for approval of a new indication if the product is already approved for another indication; • pre-approval inspection of manufacturing facilities and selected clinical investigators, clinical trial sites and/or Exelixis as the clinical trial sponsor for their compliance with GMP and GCP, respectively; • payment of user fees for FDA review of an NDA or BLA unless a fee waiver applies; • agreement with the FDA on the final labeling for the product and design and implementation of any required Risk Evaluation and Mitigation Strategy; • if the FDA convenes an advisory committee, satisfactory completion of the advisory committee review; and • FDA approval of the NDA or sNDA, or BLA or sBLA.
The competitive landscape for HCC has significantly changed with the increased adoption of ICI combination therapies in the first-line setting, which may lead to an increase in prescribing and sequencing of TKIs in subsequent lines of therapy. It is difficult to predict how these changes will affect sales of CABOMETYX during 2022 and going forward.
The competitive landscape for HCC has significantly changed with the increased adoption of ICI combination therapies in the first-line setting, which may lead to an increase in prescribing and sequencing of TKIs in subsequent lines of therapy. It is difficult to predict how these changes will affect sales of CABOMETYX during 2023 and going forward.
Other than the recent approvals of RET inhibitors to treat certain MTC patients, there has been little change in the treatment landscape for progressive, metastatic MTC during recent years, and due to the limited number of ongoing late-stage clinical trials in this indication, we do not expect many additional competitors to emerge in 2022.
Other than the recent approvals of RET inhibitors to treat certain MTC patients, there has been little change in the treatment landscape for progressive, metastatic MTC during recent years, and due to the limited number of ongoing late-stage clinical trials in this indication, we do not expect many additional competitors to emerge in 2023.
In addition, the Patient Protection and Affordable Care Act of 2010, as amended (PPACA) created a federal requirement under the federal Open Payments program, that requires certain manufacturers to track and report to the Centers for Medicare & Medicaid Services annually certain payments and other transfers of value provided to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other healthcare professionals (such as physician assistance and nurse practitioners) and teaching hospitals, as well as ownership interests held by such physicians and their immediate family during the previous calendar year.
In addition, the Patient Protection and Affordable Care Act of 2010, as amended (PPACA) created a federal requirement under the federal Open Payments program, that requires certain manufacturers to track and report to the Centers for Medicare & Medicaid Services (CMS) annually certain payments and other transfers of value provided to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other healthcare professionals (such as physician assistants and nurse practitioners) and teaching hospitals, as well as ownership interests held by such physicians and their immediate family during the previous calendar year.
Should the combination of cabozantinib and atezolizumab be approved for the treatment of patients with mCRPC, we believe its principal competition may include: Janssen Biotech’s (a wholly owned subsidiary of Johnson & Johnson) abiraterone; Astellas Pharma’s and Pfizer’s enzalutamide; Sanofi’s docetaxel; the combination of Merck & Co.’s pembrolizumab and Sanofi’s docetaxel; the combination of Merck & Co.’s pembrolizumab and Astellas Pharma’s and Pfizer’s enzalutamide; the combination of BMS’ nivolumab and Sanofi’s docetaxel; Veru Pharma’s sabizabulin; and generic versions of abiraterone and docetaxel.
Should the combination of cabozantinib and atezolizumab be approved for the treatment of these mCRPC patients, we believe its principal competition may include: Janssen Biotech’s (a wholly owned subsidiary of Johnson & Johnson) abiraterone; Astellas Pharma’s and Pfizer’s enzalutamide; Sanofi’s docetaxel; the combination of Merck & Co.’s pembrolizumab and Astellas Pharma’s and Pfizer’s enzalutamide; the combination of BMS’ nivolumab and Sanofi’s docetaxel; Veru Pharma’s sabizabulin; and generic versions of abiraterone and docetaxel.
While we have incurred, and may continue to incur, expenditures to maintain compliance with these laws and regulations, we do not expect the cost of complying with these laws and regulations to be material. Laboratory Safety Program Due to the focus of our business in discovering and developing drug products, many of our employees work in our on-site laboratory facilities.
While we have incurred, and will continue to incur, expenditures to maintain compliance with these laws and regulations, we do not expect the cost of complying with these laws and regulations to be material. Laboratory Safety Program Due to the focus of our business in discovering and developing drug products, many of our employees work in our on-site laboratory facilities.
T he trial aims to enroll approximately 580 patients at approximately 280 sites globally, and we expect to complete enrollment in the second half of 2022. Patients are being randomized 1:1 to the experimental arm of cabozantinib in combination with atezolizumab or to the control arm of a second NHT (either abiraterone and prednisone or enzalutamide).
T he trial aims to enroll approximately 580 patients at approximately 280 sites globally, and we expect to complete enrollment in the second half of 2023. Patients are being randomized 1:1 to the experimental arm of cabozantinib in combination with atezolizumab or to the control arm of a second NHT (either abiraterone and prednisone or enzalutamide).
In designing XL092, we sought to build upon our experience with cabozantinib, retaining a similar target profile while improving key characteristics, including the pharmacokinetic half-life. We are evaluating XL092 in a growing clinical development program across various tumor types. Advanced Solid Tumors - STELLAR-001.
In designing zanzalintinib, we sought to build upon our experience with cabozantinib, retaining a similar target profile while improving key characteristics, including the pharmacokinetic half-life. We are evaluating zanzalintinib in a growing clinical development program across various tumor types. STELLAR-001 - Advanced Solid Tumors.
The primary efficacy endpoint of the expansion phase will be ORR, except for the cohort of patients with mCRPC, for which the primary efficacy endpoint will be duration of radiographic PFS. To better understand the individual contribution of the therapies, treatment arms in the expansion cohorts may include XL092 as a single agent in addition to the ICI combination regimens.
The primary efficacy endpoint of the expansion phase will be ORR, except for the cohort of patients with mCRPC, for which the primary efficacy endpoint will be duration of radiographic PFS. To better understand the individual contribution of the therapies, treatment arms in the expansion cohorts may include zanzalintinib as a single agent in addition to the ICI combination regimens.
We are also eligible to receive future development and regulatory milestone payments from Ipsen, totaling an aggregate of $46.5 million upon additional approvals of cabozantinib in future indications and/or jurisdictions, as well as contingent payments of up to $350.0 million and CAD$26.5 million associated with future sales milestones.
We are also eligible to receive future development and regulatory milestone payments from Ipsen, totaling an aggregate of $19.5 million upon additional approvals of cabozantinib in future indications and/or jurisdictions, as well as contingent payments of up to $350.0 million and CAD$26.5 million associated with future sales milestones.
In consideration of these data, we amended the phase 1 study protocol in October 2020 to include dose-escalation and expansion cohorts for XL092 in combination with atezolizumab, and again in March 2021 to include dose-escalation and expansion cohorts for XL092 in combination avelumab, an ICI developed by Merck KGaA, Darmstadt, Germany (Merck KGaA) and Pfizer Inc. (Pfizer).
In consideration of these data, we amended the phase 1 study protocol in October 2020 to include dose-escalation and expansion cohorts for zanzalintinib in combination with atezolizumab, and again in March 2021 to include dose-escalation and expansion cohorts for zanzalintinib in combination with avelumab, an ICI developed by Merck KGaA, Darmstadt, Germany (Merck KGaA) and Pfizer Inc. (Pfizer).
The clinical trial expenses for each combined therapy trial agreed to be conducted jointly under the joint clinical research agreement will be shared equally between the parties, and the clinical trial expenses for each additional combined therapy trial not agreed to be conducted jointly under the joint clinical research agreement will be borne by the proposing party, except that the cost of clinical supply for all combined therapy trials will be borne by the party that owns the applicable product.
The clinical trial expenses for each combined therapy trial agreed to be conducted jointly under the joint clinical research agreement are shared equally between the parties, and the clinical trial expenses for each additional combined therapy trial not agreed to be conducted jointly under the joint clinical research agreement are borne by the proposing party, except that the cost of clinical supply for all combined therapy trials are borne by the party that owns the applicable product.
Manufacturing and Product Supply We do not own or operate manufacturing or distribution facilities for chemistry, manufacturing and control (CMC) development activities, preclinical, clinical or commercial production and distribution for our current products. Instead, we rely on various third-party contract manufacturing organizations to conduct these operations on our behalf.
Manufacturing and Product Supply We do not own or operate manufacturing or distribution facilities for chemistry, manufacturing and control (CMC) development activities, preclinical, clinical or commercial production and distribution for our current products and new product candidates. Instead, we rely on various third-party contract manufacturing organizations to conduct these operations on our behalf.
Examples of such programs included Fast Track designation, breakthrough therapy designation, priority review and accelerated approval, and the eligibility criteria of and benefits for each program vary: • Fast Track is a process designed to facilitate the development and expedite the review of drugs intended to treat serious or life-threatening diseases or conditions that demonstrate the potential to fill unmet medical needs, by providing, among other things, eligibility for accelerated approval if relevant criteria are met, and rolling review, 31 Table of Contents which allows submission of individually completed sections of an NDA or for FDA review before the entire submission is completed. • Breakthrough therapy designation is a process designed to expedite the development and review of drugs that are intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints.
Examples of such programs included Fast Track designation, breakthrough therapy designation, priority review and accelerated approval, and the eligibility criteria of and benefits for each program vary: 25 Table of Co ntents • Fast Track is a process designed to facilitate the development and expedite the review of drugs intended to treat serious or life-threatening diseases or conditions that demonstrate the potential to fill unmet medical needs, by providing, among other things, eligibility for accelerated approval if relevant criteria are met, and rolling review, which allows submission of individually completed sections of an NDA or for FDA review before the entire submission is completed. • Breakthrough therapy designation is a process designed to expedite the development and review of drugs that are intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints.
The CCPA, CPRA, HIPAA and these other laws could create liability for us or increase our cost of doing business. International laws, such as the EU General Data Protection Regulation 2016/679 (GDPR), could also apply to our operations.
The CCPA, as amended by the CPRA, HIPAA and these other laws could create liability for us or increase our cost of doing business. International laws, such as the EU General Data Protection Regulation 2016/679 (GDPR), could also apply to our operations.
Exelixis Marketed Products: CABOMETYX and COMETRIQ As detailed below, CABOMETYX and COMETRIQ have been approved to treat patients with various forms of cancer by the FDA for the U.S. market, the European Commission (EC) for the European Union (EU) markets and the Japanese Ministry of Health, Labour and Welfare (MHLW), as well as by comparable regulatory authorities across other markets worldwide. 4 Table of Contents Product Indication Approval Date Regimen Major Markets CABOMETYX® (cabozantinib) Renal Cell Carcinoma (RCC) Patients with advanced RCC who have received prior anti-angiogenic therapy April 25, 2016 Monotherapy U.S.
Exelixis Marketed Products: CABOMETYX and COMETRIQ As detailed below, CABOMETYX and COMETRIQ have been approved to treat patients with various forms of cancer by the FDA for the U.S. market, the EC for the European Union (EU) markets and the Japanese Ministry of Health, Labour and Welfare (MHLW), as well as by comparable regulatory authorities across other markets worldwide. 4 Table of Co ntents Product Indication Approval Date Regimen Major Markets CABOMETYX® (cabozantinib) Renal Cell Carcinoma (RCC) Patients with advanced RCC who have received prior anti-angiogenic therapy April 25, 2016 Monotherapy U.S.
The two primary endpoints for the trial are PFS per RECIST v. 1.1 as assessed by BIRC and OS, and secondary endpoints include ORR, prostate-specific antigen response rate and DOR. CONTACT-02 is sponsored by us and co-funded by Roche.
The two primary efficacy endpoints for CONTACT-02 are PFS per RECIST v. 1.1 as assessed by BIRC and OS, and secondary efficacy endpoints include ORR, prostate-specific antigen response rate and DOR. CONTACT-02 is sponsored by us and co-funded by Roche.
The parties’ efforts will be governed through a joint steering committee established to guide and oversee the collaboration and the conduct of the combined therapy trials. Each party will be responsible for providing clinical supply for all combined therapy trials, and the cost of the supply will be borne by such party.
The parties’ efforts are governed through a joint steering committee established to guide and oversee the collaboration and the conduct of the combined therapy trials. Each party is responsible for providing clinical supply for all combined therapy trials, and the cost of the supply will be borne by such party.
For additional information on these clinical trial programs, see “—Exelixis Development Programs—Other Development Programs - Advancing Exelixis’ Future Cancer Therapy Candidates . ” In addition, we continue to make progress on multiple, additional lead optimization programs for inhibitors of a variety of targets that we believe play significant roles in tumor growth, and we anticipate that some of these other programs could reach development candidate status in 2022.
For additional information on these clinical trial programs, see “—Exelixis Development Programs—Pipeline Development Programs - Advancing Exelixis’ Future Cancer Therapy Candidates.” In addition, we continue to make progress on multiple, additional lead optimization programs for inhibitors of a variety of targets that we believe play significant roles in tumor growth, and we anticipate that some of these other programs could reach development candidate status in 2023.
It is difficult to predict how these changes will affect sales of CABOMETYX during 2022 and going forward. CABOMETYX - HCC: We believe the principal competition for CABOMETYX in previously treated HCC includes: Bayer’s regorafenib; and Eisai’s lenvatinib.
It is difficult to predict how these changes will affect sales of CABOMETYX during 2023 and going forward. CABOMETYX - HCC: We believe the principal competition for CABOMETYX in previously treated HCC includes: Bayer’s regorafenib; and Eisai’s lenvatinib.
As discussed below, Accelerated Approval generally requires a post-approval study to confirm clinical benefit. • Phase 2 studies are conducted with groups of patients afflicted with a specified disease in order to provide enough data to evaluate the preliminary efficacy, optimal dosage, and common short-term side effect and risks associated with the drug.
As discussed below, Accelerated Approval generally requires at least one post-approval study to confirm clinical benefit. • Phase 2 studies are conducted with groups of patients afflicted with a specified disease in order to provide enough data to evaluate the preliminary efficacy, optimal dosage, and common short-term side effect and risks associated with the drug.
Taking into account the rapidly evolving treatment landscape for RCC and based on positive early-stage results from COSMIC-021, in July 2020, we and Roche initiated CONTACT-03, a global, multicenter, randomized, open-label phase 3 pivotal trial evaluating cabozantinib in combination with atezolizumab versus cabozantinib alone in 13 Table of Contents patients with inoperable, locally advanced or metastatic RCC who progressed during or following treatment with an ICI as the immediate preceding therapy .
Taking into account the rapidly evolving treatment landscape for RCC and based on positive early-stage results from COSMIC-021, in July 2020, we and Roche initiated CONTACT-03, a global, multicenter, randomized, open-label phase 3 pivotal trial evaluating cabozantinib in combination with atezolizumab versus cabozantinib alone in patients with inoperable, locally advanced or metastatic RCC who progressed during or following treatment with an ICI as the immediate preceding therapy.
Third-party payers may limit coverage to specific drug products on an approved list, also known as a formulary, which might not include all of the FDA-approved drugs for a particular indication. Moreover, a third-party payer’s decision to provide coverage for a drug product 35 Table of Contents does not guarantee what reimbursement rate, if any, will be approved.
Third-party payers may limit coverage to specific drug products on an approved list, also known as a formulary, which might not include all of the FDA-approved drugs for a particular indication. Moreover, a third-party payer’s decision to provide coverage for a drug product does not guarantee what reimbursement rate, if any, will be approved.
We amended the agreement again in March 2020 and January 2021 to enable the use of target binders in non-Invenra platform-based modalities, such as ADC platforms, and to enable the development of biparatropic antibodies, respectively.
We amended the agreement again in March 2020 and January 2021 to enable the use of target binders in non-Invenra platform-based modalities, such as ADC platforms, and to enable the development of biparatopic antibodies, respectively.
In addition, we rely on Ipsen and Takeda for ongoing and further commercialization and distribution of CABOMETYX in territories outside of the U.S., as well as for access and distribution activities for the approved products under named patient use programs or similar programs with the effect of introducing earlier patient access to CABOMETYX, 28 Table of Contents and we also rely on Ipsen for these same activities with respect to the commercialization and distribution of COMETRIQ outside of the U.S.
In addition, we rely on Ipsen and Takeda for ongoing and further commercialization and distribution of CABOMETYX in territories outside of the U.S., as well as for access and distribution activities for the approved products under named patient use programs or similar programs with the effect of introducing earlier patient access to CABOMETYX, and we also rely on Ipsen for these same activities with respect to the commercialization and distribution of COMETRIQ outside of the U.S.
For example, the California Consumer Privacy Act of 2018, as amended (CCPA), went into operation on January 1, 2020 and broadly defines personal information, affords California residents expanded privacy rights and protections and provides for civil penalties for violations and a private right of action related to certain data security breaches.
For example, the California Consumer Privacy Act of 2018, as amended (CCPA), went into operation in January 2020 and broadly defines personal information, affords California residents expanded privacy rights and protections and provides for civil penalties for violations and a private right of action related to certain data security breaches.
We believe that our current manufacturing network has the appropriate capacity to produce sufficient commercial quantities of CABOMETYX to support the currently approved RCC, HCC and DTC indications, as well as potential additional indications if trials evaluating CABOMETYX in those indications prove to be successful and gain regulatory approval in the future.
We believe that our current manufacturing network has the appropriate capacity to produce sufficient commercial quantities of CABOMETYX to support the currently approved RCC, HCC and DTC indications, and also potential additional indications if trials evaluating CABOMETYX in those indications prove to be successful and gain regulatory approval in the future.
These efforts are led by our experienced scientists, including some of the same scientists that led the efforts to discover cabozantinib, cobimetinib and esaxerenone, each of which are now commercially distributed drug products.
These efforts are led by our experienced scientists, including some of the same scientists who led the efforts to discover cabozantinib, cobimetinib and esaxerenone, each of which are now commercially distributed drug products.
We have numerous patents and pending patent applications that relate to methods of screening drug targets, compounds that modulate drug targets, as well as methods of making and using such compounds. 39 Table of Contents While many patent applications have been filed relating to the drug candidates that we have developed, the majority of these are not yet issued or allowed.
We have numerous patents and pending patent applications that relate to methods of screening drug targets, compounds that modulate drug targets, as well as methods of making and using such compounds. While many patent applications have been filed relating to the drug candidates that we have developed, the majority of these are not yet issued or allowed.
For a more detailed discussion of these litigation matters, see “Legal Proceedings” in Part I, Item 3 of this Annual Report on Form 10-K. 40 Table of Contents In the EU, cabozantinib is protected by issued patents covering the composition of matter and methods of use.
For a more detailed discussion of these litigation matters, see “Legal Proceedings” in Part I, Item 3 of this Annual Report on Form 10-K. In the EU, cabozantinib is protected by issued patents covering the composition of matter and methods of use.
Phase 2 studies are typically well controlled, closely monitored, and conducted in a relatively small number of patients, usually involving no more than several hundred subjects. • Phase 3 studies are conducted to gather the additional information about effectiveness and safety across a higher number of patients and evaluate the overall benefit-risk relationship of the product candidate following earlier phase evaluations, which will have provided preliminary evidence suggesting an effective dosage range 30 Table of Contents and acceptable safety profile for the product candidate.
Phase 2 studies are typically well controlled, closely monitored, and conducted in a relatively small number of patients, usually involving no more than several hundred subjects. • Phase 3 studies are conducted to gather the additional information about effectiveness and safety across a higher number of patients and evaluate the overall benefit-risk relationship of the product candidate following 24 Table of Co ntents earlier phase evaluations, which will have provided preliminary evidence suggesting an effective dosage range and acceptable safety profile for the product candidate.
We continue to pursue additional patents and patent term extensions in the U.S. and other territories covering various aspects of our cabozantinib products that may, if issued, extend exclusivity beyond the expiration of the patents listed in the table. Product Patent No.
We continue to pursue additional patents and patent term extensions in the U.S. and other territories covering various aspects of our cabozantinib products that may, if issued, extend exclusivity beyond the expiration of the patents listed in the table. 34 Table of Co ntents Product Patent No.
We strive to live these values every day across the company, integrating them into everything from our interview, hiring and onboarding processes, to our performance evaluation, rewards and promotion programs. We provide generous compensation packages designed to attract and retain high-quality employees, and all of our employees are eligible for cash bonuses and grants of equity awards.
We strive to live these values every day across the company, integrating them into everything from our interview, hiring and onboarding processes, to our performance evaluation, rewards and promotion programs. We provide generous compensation packages designed to attract and retain high-quality employees, and all of our employees are eligible for cash bonuses and grants of long-term incentive awards.
Given our expanding operations and need to further grow our headcount to support our business, we continually assess employee turnover, recruitment initiatives, compensation and benefits programs, safety in performing critical laboratory work, diversity and other matters relevant to human capital management, and we review results with our Board of Directors on a periodic basis.
Given our expanding operations and need to further grow our headcount to support our business, we continually assess employee turnover, recruitment initiatives, compensation and benefits programs, safety in 36 Table of Co ntents performing critical laboratory work, diversity and other matters relevant to human capital management, and we review results with our Board of Directors on a periodic basis.
For our portfolio of small molecules and biotherapeutics, we continue to expand our network through well-established and reputable global third-party contract manufacturers for our CMC development and manufacturing that have good 27 Table of Contents regulatory standing, suitable manufacturing capacities and capabilities.
For our portfolio of biotherapeutics and small molecules, we continue to expand our network through well-established and reputable global third-party contract manufacturers for our CMC development and manufacturing that have good regulatory standing, suitable manufacturing capacities and capabilities.
As our operations continue to grow in these areas, we continue to expand our supply chain through secondary third-party contract manufacturers, distributors and suppliers.
As our operations continue to grow in these areas, we continue to expand our supply chain through additional third-party contract manufacturers, distributors and suppliers.
Historically, products launched in EU Member States and other non-U.S. jurisdictions do not follow the price structures of the U.S., and they generally tend to be priced significantly lower. Competition There are many companies focused on the development of small molecules, antibodies and other treatments for cancer.
Historically, products launched in EU Member States and other non-U.S. jurisdictions do not follow the price structures of the U.S., and they generally tend to be priced significantly lower. 31 Table of Co ntents Competition There are many companies focused on the development of small molecules, antibodies and other treatments for cancer.
In addition to having expanded our supply chain to include secondary contract manufacturing organizations, we have established and continue to maintain sufficient safety stock inventories for our drug substance and drug products, and we store these quantities in multiple locations.
In addition to having expanded our commercial supply chain to include secondary contract manufacturing organizations, we have established and continue to maintain substantial safety stock inventories for our drug substance and drug products, and we store these quantities in multiple locations.
In addition to the composition of matter patent, the table below includes certain later-expiring patents directed to the commercial product, including, particular salts, polymorphs, formulations, or use of the compound in the treatment of specified diseases or conditions. Product Patent No.
In addition to the composition of matter patent, the table below includes certain later-expiring patents directed to the commercial product, including, particular salts, polymorphs, formulations, or use of the compound in the treatment of specified diseases or conditions. 35 Table of Co ntents Product Patent No.
We deliver a benefits program that is designed to keep our employees and their families healthy, which includes not only medical, dental and vision benefits, but also dependent care, mental health and other wellness benefits.
We deliver a benefits program that is designed to keep our employees and their families mentally, physically and emotionally healthy, which includes not only medical, dental and vision benefits, but also dependent care, mental health and other wellness benefits.
If the 505(b)(2) applicant establishes that reliance on the FDA’s prior findings of safety and efficacy for an approved product is 32 Table of Contents scientifically appropriate, it may eliminate the need to conduct certain preclinical or clinical studies. The FDA may require additional studies or measurements, including comparability studies.
If the 505(b)(2) NDA applicant establishes that reliance on the FDA’s prior findings of safety and efficacy for an approved product is scientifically appropriate, it may eliminate the need to conduct certain preclinical or clinical studies. The FDA may require additional studies or measurements, including comparability studies.
Food and Drug Administration (FDA) and in 61 other countries as: CABOMETYX® (cabozantinib) tablets approved for advanced renal cell carcinoma (RCC), both alone and in combination with Bristol-Myers Squibb Company’s (BMS) OPDIVO® (nivolumab), for previously treated hepatocellular carcinoma (HCC) and, currently by the FDA, for previously treated, radioactive iodine (RAI)-refractory differentiated thyroid cancer (DTC); and COMETRIQ® (cabozantinib) capsules approved for progressive, metastatic medullary thyroid cancer (MTC).
Food and Drug Administration (FDA) and in 62 other countries as: CABOMETYX® (cabozantinib) tablets approved both alone and in combination with Bristol-Myers Squibb Company’s (BMS) OPDIVO® (nivolumab) for advanced renal cell carcinoma (RCC), for previously treated hepatocellular carcinoma (HCC) and, currently by the FDA and European Commission (EC), for previously treated, radioactive iodine (RAI)-refractory differentiated thyroid cancer (DTC); and COMETRIQ® (cabozantinib) capsules approved for progressive, metastatic medullary thyroid cancer (MTC).
Under the collaboration agreement, Takeda has exclusive commercialization rights for current and potential future cabozantinib indications in Japan, and the parties have agreed to collaborate on the clinical development of cabozantinib in Japan. The operation and strategic direction of the parties’ collaboration is governed through a joint executive committee and appropriate subcommittees.
Under the collaboration agreement, Takeda has exclusive commercialization rights for current and potential future cabozantinib indications in Japan, and the parties have agreed to collaborate on the clinical development of cabozantinib in Japan. The 16 Table of Co ntents operation and strategic direction of the parties’ collaboration is governed through a joint executive committee and appropriate subcommittees.
We regularly evaluate our compensation programs with an independent compensation consultant and utilize industry benchmarking in an effort to ensure they are competitive compared to similar biotechnology and biopharmaceutical companies with which we compete for talent, as well as fair and equitable across our workforce with respect to gender, race and other personal characteristics.
We regularly evaluate our compensation programs with an independent compensation consultant and utilize industry benchmarking in an effort to ensure they are competitive with the biotechnology and biopharmaceutical companies against which we compete for talent, as well as fair and equitable across our workforce with respect to gender, race and other personal characteristics.
General Subject Matter Patent Expiration CABOMETYX 7,579,473 Composition of matter 2026 8,497,284 Methods of treatment 2024 8,877,776 Salt and polymorphic forms of cabozantinib 2030 9,724,342 Formulations of cabozantinib 2033 10,034,873 Methods of treatment 2031 10,039,757 Methods of treatment 2031 11,091,439 Salt and polymorphic forms of cabozantinib 2030 11,091,440 Formulations of cabozantinib 2030 11,098,015 Methods of treatment 2030 11,141,413 Methods of treatment 2037 COMETRIQ 7,579,473 Composition of matter 2026 8,877,776 Salt and polymorphic forms of cabozantinib 2030 9,717,720 Formulations of cabozantinib 2032 11,091,439 Salt and polymorphic forms of cabozantinib 2030 11,091,440 Formulations of cabozantinib 2030 11,098,015 Methods of treatment 2030 Given the importance of our intellectual property portfolio to our business operations, we intend to vigorously enforce our rights and defend against challenges that have arisen or may arise with respect to patents and patent applications required for the commercialization of medicines containing cabozantinib.
General Subject Matter Patent Expiration CABOMETYX 7,579,473 Composition of matter 2026 8,497,284 Methods of treatment 2024 8,877,776 Salt and polymorphic forms of cabozantinib 2030 9,724,342 Formulations of cabozantinib 2033 10,034,873 Methods of treatment 2031 10,039,757 Methods of treatment 2031 11,091,439 Crystalline salt forms of cabozantinib 2030 11,091,440 Pharmaceutical composition 2030 11,098,015 Methods of treatment 2030 11,298,349 Pharmaceutical composition 2032 COMETRIQ 7,579,473 Composition of matter 2026 8,877,776 Salt and polymorphic forms of cabozantinib 2030 9,717,720 Formulations of cabozantinib 2032 11,091,439 Crystalline salt forms of cabozantinib 2030 11,091,440 Pharmaceutical composition 2030 11,098,015 Methods of treatment 2030 11,298,349 Pharmaceutical composition 2032 Given the importance of our intellectual property portfolio to our business operations, we vigorously enforce our rights and defend against challenges that have arisen or may arise with respect to patents and patent applications required for the commercialization of medicines containing cabozantinib.
We are eligible 21 Table of Contents to receive additional regulatory and development milestone payments, without limit, for additional potential future indications. We are further eligible to receive commercial milestones, including milestone payments earned for the first commercial sale of a product, of up to $119.0 million. We also receive royalties on the net sales of cabozantinib in Japan.
We are eligible to receive additional regulatory and development milestone payments, without limit, for additional potential future indications. We are further eligible to receive commercial milestones, including milestone payments earned for the first commercial sale of a product, of $119.0 million. We also receive royalties on the net sales of cabozantinib in Japan.
In markets outside the U.S. in 2021, we continued to work closely with our collaboration partner Ipsen in support of its regulatory strategy and commercialization efforts for CABOMETYX as a treatment for advanced RCC, both as a single 6 Table of Contents agent and in combination with OPDIVO, as well as in preparation for submission of applications for approvals of CABOMETYX in combination with other therapies, and similarly with our collaboration partner Takeda with respect to the Japanese market.
In 2022, in markets outside the U.S., we continued to work closely with our collaboration partner Ipsen in support of its regulatory strategy and commercialization efforts for CABOMETYX as a treatment for advanced RCC, both as a single agent and in combination with OPDIVO, as well as in preparation for submission of applications for approvals of CABOMETYX in combination with other therapies, and similarly with our collaboration partner Takeda with respect to the Japanese market.
Catalent would then become eligible for potential development, regulatory and commercial milestone payments, as well as royalties on potential sales. We have also committed to contribute research funding to Catalent for discovery and preclinical development work.
NBE would then become eligible for potential development, regulatory and commercial milestone payments, as well as royalties on potential sales. We have also committed to contribute research funding to NBE for discovery and preclinical development work. • Aurigene.
NBE In September 2020, we entered into a collaboration and license agreement with NBE to discover and develop multiple ADCs for oncology applications by leveraging NBE’s unique expertise and proprietary platforms in ADC discovery, 24 Table of Contents including NBE’s SMAC-Technology and novel payloads.
In September 2020, we entered into a collaboration and license agreement with NBE to discover and develop multiple ADCs for oncology applications by leveraging NBE’s unique expertise and proprietary platforms in ADC discovery, including NBE’s SMAC-Technology and novel payloads.
Each party is responsible for supplying finished drug product for the 22 Table of Contents applicable clinical trial, and responsibility for the payment of costs for each such trial will be determined on a trial-by-trial basis.
Each party is responsible for supplying finished drug product for the applicable clinical trial, and responsibility for the payment of costs for each such trial will be determined on a trial-by-trial basis.
For a discussion of workplace safety measures we have taken, including as a result of the COVID-19 pandemic, see “—Environmental, Health and Safety.” Beyond compensation and benefits, we also value career development for all employees, and we offer a tuition reimbursement program, as well as professional development courses ranging from technical training, competency-based workshops and leadership development programs facilitated by external partners who are experts in their respective fields.
For a discussion of workplace safety measures we have taken, see “—Environmental, Health and Safety.” Beyond compensation and benefits, we also value career development for all employees, and we offer a tuition reimbursement program, as well as professional development courses ranging from technical training, competency-based workshops and leadership development programs facilitated by external partners who are experts in their respective fields.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWhile we have had success in adapting our development strategy for the cabozantinib franchise to address the competitive landscape, including through evaluation of therapies that combine ICIs with other targeted agents, it is uncertain whether current and future clinical trials, including those evaluating cabozantinib in combination with an ICI in HCC, NSCLC and mCRPC, will lead to regulatory approvals, or whether physicians will prescribe regimens containing cabozantinib instead of competing product combinations in approved indications.
Biggest changeEven if our current and future clinical trials, including those evaluating cabozantinib in combination with an ICI in mCRPC or evaluating zanzalintinib in combination with an ICI in CRC and RCC, produce positive results sufficient to obtain marketing approval by the FDA and other global regulatory authorities, it is uncertain whether physicians will choose to prescribe regimens containing our products instead of competing products and product combinations in approved indications. 38 Table of Co ntents If we are unable to maintain or increase our sales, marketing, market access and product distribution capabilities for our products, we may be unable to maximize product revenues, which could have a material adverse impact on our business, financial condition and results of operations.
These events may include: • lack of acceptable efficacy or a tolerable safety profile; • negative or inconclusive clinical trial results that require us to conduct further testing or to abandon projects; • discovery or commercialization by our competitors of other compounds or therapies that show significantly improved safety or efficacy compared to cabozantinib or our other product candidates; • our inability to identify and maintain a sufficient number of trial sites; • lower-than-anticipated patient registration or enrollment in our clinical testing; • additional complexities posed by clinical trials evaluating cabozantinib or our other product candidates in combination with other therapies, including extended timelines to provide for collaboration on clinical development planning, the failure by our collaboration partners to provide us with an adequate and timely supply of product that complies with the applicable quality and regulatory requirements for a combination trial • reduced staffing or shortages in laboratory supplies and other resources necessary to complete the trials; • failure of our third-party contract research organizations or investigators to satisfy their contractual obligations, including deviating from any trial protocols; and • withholding of authorization from regulators or institutional review boards to commence or conduct clinical trials or delays, variations, suspensions or terminations of clinical research for various reasons, including noncompliance with regulatory requirements or a determination by these regulators and institutional review boards that participating patients are being exposed to unacceptable health risks.
These events may include: • lack of acceptable efficacy or a tolerable safety profile; • negative or inconclusive clinical trial results that require us to conduct further testing or to abandon projects; • discovery or commercialization by our competitors of other compounds or therapies that show significantly improved safety or efficacy compared to cabozantinib or our other product candidates; • our inability to identify and maintain a sufficient number of clinical trial sites; • lower-than-anticipated patient registration or enrollment in our clinical testing; • additional complexities posed by clinical trials evaluating cabozantinib, zanzalintinib or our other product candidates in combination with other therapies, including extended timelines to provide for collaboration on clinical development planning, the failure by our collaboration partners to provide us with an adequate and timely supply of product that complies with the applicable quality and regulatory requirements for a combination trial • reduced staffing or shortages in laboratory supplies and other resources necessary to complete the trials; • failure of our third-party contract research organizations or investigators to satisfy their contractual obligations, including deviating from any trial protocols; and • withholding of authorization from regulators or institutional review boards to commence or conduct clinical trials or delays, variations, suspensions or terminations of clinical research for various reasons, including noncompliance with regulatory requirements or a determination by these regulators and institutional review boards that participating patients are being exposed to unacceptable health risks.
If these third parties do not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines, or if the third parties must be replaced or if the quality or accuracy of the data they generate or provide is compromised due to their failure to adhere to our clinical trial or data security protocols or regulatory requirements or for other reasons, our preclinical development activities or clinical trials may be extended, delayed, suspended or terminated, and we may not be able to obtain regulatory approval for or commercialize cabozantinib beyond currently approved indications or obtain regulatory approval for our other product candidates.
If these third parties do not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines, or if the third parties must be replaced or if the quality or accuracy of the data they generate or provide is compromised due to their failure to adhere to our clinical trial or data security protocols or regulatory requirements or for other reasons, our preclinical development activities or clinical trials may be extended, delayed, suspended or terminated, and we may not be able to obtain regulatory approval for or commercialize cabozantinib beyond currently approved indications or obtain regulatory approval for zanzalintinib or our other product candidates.
It is possible that MSN, Teva or other companies, following FDA approval of an ANDA or 505(b)(2) NDA, could introduce generic or otherwise competitor versions of our marketed products before our patents expire if they do not infringe our patents or if it is determined that our patents are invalid or unenforceable, and we expect that generic cabozantinib products would be offered at a significantly lower price compared to our marketed cabozantinib products.
It is possible that MSN, Teva, Cipla or other companies, following FDA approval of an ANDA or 505(b)(2) NDA, could introduce generic or otherwise competitor versions of our marketed products before our patents expire if they do not infringe our patents or if it is determined that our patents are invalid or unenforceable, and we expect that generic cabozantinib products would be offered at a significantly lower price compared to our marketed cabozantinib products.
The entrance of generic competitors and legislative and regulatory action designed to reduce barriers to the development, approval and adoption of generic drugs in the U.S. could limit the revenue we derive from our products, most notably CABOMETYX, which could have a material adverse impact on our business, financial condition and results of operations.
The timing of the entrance of generic competitors to CABOMETYX and legislative and regulatory action designed to reduce barriers to the development, approval and adoption of generic drugs in the U.S. could limit the revenue we derive from our products, most notably CABOMETYX, which could have a material adverse impact on our business, financial condition and results of operations.
The duration and the cost of clinical trials vary significantly as a result of factors relating to the clinical trial, including, among others: the characteristics of the product candidate under investigation; the number of patients who ultimately participate in the clinical trial; the duration of patient follow-up; the number of clinical sites included in the trials; and the length of time required to enroll eligible patients.
The duration and the cost of clinical trials vary significantly as a result of factors relating to a particular clinical trial, including, among others: the characteristics of the product candidate under investigation; the number of patients who ultimately participate in the clinical trial; the duration of patient follow-up; the number of clinical sites included in the trial; and the length of time required to enroll eligible patients.
If there are further delays in or termination of the clinical testing of cabozantinib or our other product candidates due to any of the events described above or otherwise, our expenses could increase and our ability to generate revenues could be impaired, either of which could adversely impact our financial results.
If there are further delays in or termination of the clinical testing of cabozantinib, zanzalintinib or our other product candidates due to any of the events described above or otherwise, our expenses could increase and our ability to generate revenues could be impaired, either of which could adversely impact our financial results.
Our competitors may develop products and technologies that impair the relative value of our marketed products and any future product candidates. The biopharmaceutical industry is competitive and characterized by constant technological change and diverse offerings of products, particularly in the area of oncology therapies.
Our competitors may develop products and technologies that impair the relative value of our marketed products and any current and future product candidates. The biopharmaceutical industry is competitive and characterized by constant technological change and diverse offerings of products, particularly in the area of oncology therapies.
For example, we received Paragraph IV certification notice letters from MSN and Teva concerning the respective ANDAs that each had filed with the FDA seeking approval to market their respective generic versions of CABOMETYX tablets.
For example, we received Paragraph IV certification notice letters from MSN, Teva and Cipla concerning the respective ANDAs that each had filed with the FDA seeking approval to market their respective generic versions of CABOMETYX tablets.
The activities associated with the research, development and commercialization of the cabozantinib franchise and our other product candidates are subject to extensive regulation by the FDA and other regulatory agencies in the U.S., as well as by comparable regulatory authorities in other territories.
The activities associated with the research, development and commercialization of the cabozantinib franchise, zanzalintinib and our other product candidates are subject to extensive regulation by the FDA and other regulatory agencies in the U.S., as well as by comparable regulatory authorities in other territories.
We anticipate that for the foreseeable future, our ability to maintain or meaningfully increase cash flow to fund our business operations and growth will depend upon the continued commercial success of CABOMETYX, both alone and in combination with other therapies, as a treatment for the highly competitive indications for which it is approved, and possibly for other indications for which cabozantinib has been or is currently being evaluated in potentially label-enabling clinical trials, if warranted by the data generated from these trials.
We anticipate that for the foreseeable future, our ability to maintain or meaningfully increase cash flow to fund our business operations and growth will depend upon the continued commercial success of CABOMETYX, both alone and in combination with other therapies, as a treatment for the highly competitive indications for which it is approved, and possibly for other indications for which cabozantinib is currently being evaluated in potentially label-enabling clinical trials, if warranted by the data generated from these trials.
Therefore, regardless of the regulatory approach, the introduction of a generic version of cabozantinib would likely decrease our revenues derived from the U.S. sales of CABOMETYX and thereby materially harm our business, financial condition and results of operations.
Regardless of the regulatory approach, the introduction of a generic version of cabozantinib would likely decrease our revenues derived from the U.S. sales of CABOMETYX and thereby materially harm our business, financial condition and results of operations.
The amount of our net profits or losses will depend, in part, on: the level of sales of CABOMETYX and COMETRIQ in the U.S.; our achievement of development, regulatory and commercial milestones, if any, under our collaboration agreements; the amount of royalties from sales of CABOMETYX and COMETRIQ outside of the U.S. under our collaboration agreements; other collaboration revenues; and the level of our expenses, including those associated with our extensive drug discovery, clinical development and business development activities, both for the cabozantinib franchise and our earlier-stage product candidates, as well as our general business expansion plans.
The amount of our net profits or losses will depend, in part, on: the level of sales of CABOMETYX and COMETRIQ in the U.S.; our achievement of development, regulatory and commercial milestones, if any, under our collaboration agreements; the amount of royalties from sales of CABOMETYX and COMETRIQ outside of the U.S. under our collaboration agreements; other collaboration revenues; and the level of our expenses, including those associated with our extensive drug discovery, clinical development and business development activities, both for the cabozantinib franchise and our other product candidates, as well as our general business expansion plans.
In addition, we may encounter delays or rejections based upon changes in policy, which could cause delays in the approval or rejection of an application for cabozantinib or for our other product candidates.
In addition, we may encounter delays or rejections based upon changes in policy, which could cause delays in the approval or rejection of an application for cabozantinib or for zanzalintinib or our other product candidates.
For example, MSN and Teva have separately submitted ANDAs to the FDA requesting approval to market their respective generic versions of CABOMETYX tablets, and we have subsequently filed patent lawsuits against both companies. For a more detailed discussion of these litigation matters, see “Legal Proceedings” in Part I, Item 3 of this Annual Report on Form 10-K.
For example, MSN, Teva and Cipla have separately submitted ANDAs to the FDA requesting approval to market their respective generic versions of CABOMETYX tablets, and we have subsequently filed patent enforcement lawsuits against both companies. For a more detailed discussion of these litigation matters, see “Legal Proceedings” in Part I, Item 3 of this Annual Report on Form 10-K.
Congressional inquiries, hearings and proposed and enacted federal legislation and rules, as well as executive orders, designed to, among other things: reduce or limit the prices of drugs and make them more affordable for patients (including, for example, by tying the prices that Medicare reimburses for physician-administered drugs to the prices of drugs in other countries); reform the structure and financing of Medicare Part D pharmaceutical benefits; implement additional data collection and transparency reporting regarding drug pricing, rebates, fees and other remuneration provided by drug manufacturers; enable the government to negotiate prices under Medicare; revise rules associated with the calculation of average manufacturer price and best price under Medicaid; eliminate the AKS discount safe harbor protection for manufacturer rebate arrangements with Medicare Part D plan sponsors; create new AKS safe harbors applicable to certain point-of-sale discounts to patients and fixed fee administrative fee payment arrangements with pharmacy benefit managers; and revise the rebate methodology under the Medicaid Drug Rebate Program.
Congressional inquiries, hearings and proposed and enacted federal legislation and rules, as well as executive orders, designed to, among other things: reduce or limit the prices of drugs and make them more affordable for patients (including, for example, by tying drug prices to the prices of drugs in other countries); reform the structure and financing of Medicare Part D pharmaceutical benefits; implement additional data collection and transparency reporting regarding drug pricing, rebates, fees and other remuneration provided by drug manufacturers; enable the government to negotiate prices under Medicare; revise rules associated with the calculation of average manufacturer price and best price under Medicaid; eliminate the AKS discount safe harbor protection for manufacturer rebate arrangements with Medicare Part D plan sponsors; create new AKS safe harbors applicable to certain point-of-sale discounts to patients and fixed fee administrative fee payment arrangements with pharmacy benefit managers; and revise the rebate methodology under the Medicaid Drug Rebate Program.
The trading price of our common stock has been highly volatile, and it may remain highly volatile or fluctuate substantially due to factors such as the following, many of which we cannot control: • the announcement of FDA or other regulatory approval or non-approval, or delays in the FDA or other regulatory review process with respect to cabozantinib, our collaboration partners’ product candidates being developed in combination with cabozantinib, or our competitors’ product candidates; • the commercial performance of both CABOMETYX and COMETRIQ and the revenues we generate from those approved products, including royalties paid under our collaboration and license agreements; • adverse or inconclusive results or announcements related to our or our collaboration partners’ clinical trials or delays in those clinical trials; • the timing of achievement of our clinical, regulatory, partnering, commercial and other milestones for the cabozantinib franchise or any of our other programs or product candidates; • our ability to make future investments in the expansion of our pipeline through drug discovery, including future research collaborations, in-licensing arrangements and other strategic transactions; • our ability to obtain the materials and services, including an adequate product supply for any approved drug product, from our third-party vendors or do so at acceptable prices; • the timing and amount of expenses incurred for clinical development and manufacturing of cabozantinib; • actions taken by regulatory agencies, both in the U.S. and abroad, with respect to cabozantinib or our clinical trials for cabozantinib; • unanticipated regulatory actions taken by the FDA as a result of changing FDA standards and practices concerning the review of product candidates, including approvals at earlier stages of clinical development or with lesser developed data sets and expedited reviews; • the announcement of new products or clinical trial data by our competitors; • the announcement of regulatory applications, such as MSN’s and Teva’s respective ANDAs, seeking approval of generic versions of our marketed products; • quarterly variations in our or our competitors’ results of operations; • changes in our relationships with our collaboration partners, including the termination or modification of our agreements, or other events or conflicts that may affect our collaboration partners’ timing and willingness to develop, or if approved, commercialize our products and product candidates out-licensed to them; • the announcement of an in-licensed product candidate or strategic acquisition; • litigation, including intellectual property infringement and product liability lawsuits, involving us; • changes in earnings estimates or recommendations by securities analysts, or financial guidance from our management team, and any failure to achieve the operating results projected by securities analysts or by our management team; • the entry into new financing arrangements; • developments in the biopharmaceutical industry; • sales of large blocks of our common stock or sales of our common stock by our executive officers, directors and significant stockholders; • additions and departures of key personnel or board members; • the disposition of any of our technologies or compounds; and • general market, economic and political conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors.
The trading price of our common stock has been highly volatile, and it may remain highly volatile or fluctuate substantially due to factors such as the following, many of which we cannot control: • the announcement of FDA or other regulatory approval or non-approval, or delays in the FDA or other regulatory review process with respect to cabozantinib, zanzalintinib or our other product candidates, our collaboration partners’ product candidates being developed in combination with either cabozantinib, zanzalintinib or our other product candidates, or our competitors’ product candidates; • the commercial performance of both CABOMETYX and COMETRIQ and the revenues we generate from those approved products, including royalties paid under our collaboration and license agreements; • adverse or inconclusive results or announcements related to our or our collaboration partners’ clinical trials or delays in those clinical trials; • the timing of achievement of our clinical, regulatory, partnering, commercial and other milestones for the cabozantinib franchise, zanzalintinib or any of our other product candidates or programs; • our ability to make future investments in the expansion of our pipeline through drug discovery, including future research collaborations, in-licensing arrangements and other strategic transactions; • our ability to obtain the materials and services, including an adequate product supply for any approved drug product, from our third-party vendors or do so at acceptable prices; • the timing and amount of expenses incurred for clinical development and manufacturing of cabozantinib, zanzalintinib and our other product candidates; • actions taken by regulatory agencies, both in the U.S. and abroad, with respect to cabozantinib or our clinical trials for cabozantinib, zanzalintinib or our other product candidates; • unanticipated regulatory actions taken by the FDA as a result of changing FDA standards and practices concerning the review of product candidates, including approvals at earlier stages of clinical development or with lesser developed data sets and expedited reviews; • the announcement of new products or clinical trial data by our competitors; • the announcement of regulatory applications, such as MSN’s, Teva’s and Cipla’s respective ANDAs, seeking approval of generic versions of our marketed products; • quarterly variations in our or our competitors’ results of operations; • changes in our relationships with our collaboration partners, including the termination or modification of our agreements, or other events or conflicts that may affect our collaboration partners’ timing and willingness to develop, or if approved, commercialize our products and product candidates out-licensed to them; 53 Table of Co ntents • the announcement of an in-licensed product candidate or strategic acquisition; • litigation, including intellectual property infringement and product liability lawsuits, involving us; • changes in earnings estimates or recommendations by securities analysts, or financial guidance from our management team, and any failure to achieve the operating results projected by securities analysts or by our management team; • the entry into new financing arrangements; • developments in the biopharmaceutical industry; • sales of large blocks of our common stock or sales of our common stock by our executive officers, directors and significant stockholders; • additions and departures of key personnel or board members; • the disposition of any of our technologies or compounds; and • general market, macroeconomic and political conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors.
Outside the U.S., including major markets in the EU and Japan, the pricing and reimbursement of prescription pharmaceuticals is generally subject to governmental control.
Outside the U.S., including major markets in the EU and Japan, the pricing and reimbursement of prescription pharmaceuticals is generally subject to significant governmental control.
Due to general uncertainty in the current regulatory and healthcare policy environment, and specifically regarding positions that the Biden Administration may take with respect to these issues, we are unable to predict the impact of any legislative, regulatory, third-party payer or policy actions, including potential cost containment and healthcare reform measures.
Due to general uncertainty with respect to this litigation and in the current regulatory and healthcare policy environment, and specifically regarding positions that the Biden Administration may take with respect to these issues, we are unable to predict the impact of any legislative, regulatory, third-party payer or policy actions, including potential cost containment and healthcare reform measures.
As our operations continue to grow in these areas, we continue to expand our supply chain through secondary third-party contract manufacturers, distributors and suppliers. To establish and manage our supply chain requires a significant financial commitment, the creation of numerous third-party contractual relationships and continued oversight of these third parties to fulfill compliance with applicable regulatory requirements.
As our operations continue to grow in these areas, we continue to expand our supply chain through additional third-party contract manufacturers, distributors and suppliers. To establish and manage our supply chain requires a significant financial commitment, the creation of numerous third-party contractual relationships and continued oversight of these third parties to fulfill compliance with applicable regulatory requirements.
While the full impact of these provisions is unclear at this time, its provisions do have the potential to facilitate the development and future approval of generic versions of our products, introducing generic competition that could have a material adverse impact on our business, financial condition and results of operations.
While the full impact of these provisions is unclear at this time, its provisions do have the potential to facilitate the development and future approval and market success of generic versions of our products, introducing generic competition that could have a material adverse impact on our business, financial condition and results of operations.
Retaining and, where necessary, recruiting qualified clinical, commercial, scientific and pharmaceutical operations personnel will be critical to support activities related to advancing the development program for the cabozantinib franchise and our other product candidates, successfully executing upon our commercialization plan for the cabozantinib franchise and our proprietary research and development efforts.
Retaining and, where necessary, recruiting qualified clinical, commercial, scientific and pharmaceutical operations personnel will be critical to support activities related to advancing the development programs for the cabozantinib franchise and our other product candidates, successfully executing upon our commercialization plan for the cabozantinib franchise and our proprietary research and development efforts.
Both the ANDA and 505(b)(2) NDA processes are discussed in more detail above in “Item 1. Business—Government Regulation—FDA Review and Approval—Abbreviated FDA Approval Pathways and Generic Products” in this Annual Report on Form 10-K.
Both the ANDA and 505(b)(2) NDA processes are discussed above in “Item 1. Business—Government Regulation—FDA Review and Approval—Abbreviated FDA Approval Pathways and Generic Products” in this Annual Report on Form 10-K.
Furthermore, we rely on our collaboration partners to fund a significant portion of our clinical development programs.
Furthermore, we rely on our collaboration partners to fund a significant portion of our cabozantinib clinical development programs.
Recently, in part due to questions raised by the process underlying the approval of the Alzheimer’s disease drug Aduhelm ® , government authorities and other stakeholders have been scrutinizing the accelerated approval pathway, with some stakeholders advocating for reforms.
Recently, in part due to questions raised by the process underlying the approval of an Alzheimer’s disease drug, government authorities and other stakeholders have been scrutinizing the accelerated approval pathway, with some stakeholders advocating for reforms.
In addition, many countries 55 Table of Contents limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of the patent. Initiatives seeking compulsory licensing of life-saving drugs are also becoming increasingly prevalent in developing countries either through direct legislation or international initiatives.
In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of the patent. Initiatives seeking compulsory licensing of life-saving drugs are also becoming increasingly prevalent in developing countries either through direct legislation or international initiatives.
Even prior to the Aduhelm approval, FDA has held Oncologic Drugs Advisory Committee meetings to discuss accelerated approvals for which confirmatory trials have not verified clinical benefit. Such scrutiny, among other factors, has resulted in voluntary withdrawals of certain products and indications approved on an accelerated basis.
Even prior to this, the FDA has held Oncologic Drugs Advisory Committee meetings to discuss accelerated approvals for which confirmatory trials have not verified clinical benefit. Such scrutiny, among other factors, has resulted in voluntary withdrawals of certain products and indications approved on an accelerated basis.
In the event of any third party’s successful claim of patent infringement or misappropriation of trade secrets, we may lose valuable intellectual property rights or personnel, which could impede or prevent the achievement of our product development goals, or we may be required to pay damages and obtain one or more licenses from these third parties, subjecting us to substantial royalty payment obligations.
In the event of any third party’s successful claim of patent infringement or misappropriation of trade secrets, we may lose valuable intellectual property rights or personnel, which could impede or prevent the achievement of our product development goals, or we may be required to pay damages and obtain one or more licenses from these third parties, subjecting us to substantial 51 Table of Co ntents royalty payment obligations.
Should MSN, Teva or any other third parties receive FDA approval of an ANDA or a 505(b)(2) NDA with respect to cabozantinib, it is possible that such company or companies could introduce generic versions of our marketed products before our patents expire if they do not infringe our patents or if it is determined that our patents are invalid or unenforceable, and the resulting generic competition could have a material adverse impact on our business, financial condition and results of operations.
Should MSN, Teva, Cipla or any other third parties receive FDA approval of an ANDA or a 505(b)(2) NDA with respect to cabozantinib, it is possible that such 50 Table of Co ntents company or companies could introduce generic versions of our marketed products before our patents expire if they do not infringe our patents or if it is determined that our patents are invalid or unenforceable, and the resulting generic competition could have a material adverse impact on our business, financial condition and results of operations.
If our operations are found, or even alleged, to be in violation of the laws described above or other governmental regulations that apply to us, we, or our officers or employees, may be subject to significant penalties, including administrative civil and criminal penalties, damages, fines, regulatory penalties, the curtailment or restructuring of our operations, exclusion from participation in Medicare, Medicaid and other federal and state healthcare programs, imprisonment, reputational harm, additional reporting requirements and oversight, any of which would adversely affect our ability to sell our products and operate our business and also adversely affect our financial results.
If our operations are found, or even alleged, to be in violation of the laws described above or other governmental regulations that apply to us, we, or our officers or employees, may be subject to significant penalties, including administrative civil and criminal penalties, damages, fines, regulatory penalties, the curtailment or restructuring of our operations, exclusion from participation in Medicare, Medicaid and other federal and state healthcare programs, imprisonment, reputational harm, additional reporting requirements and oversight through a Corporate Integrity Agreement or other monitoring agreement, any of which would adversely affect our ability to sell our products and operate our business and also adversely affect our financial results.
The life sciences industry and specifically the 44 Table of Contents market for the sale, insurance coverage and distribution of pharmaceuticals has been a particular focus of these efforts and would likely be significantly affected by any major legislative or regulatory initiatives.
The life sciences industry and specifically the market for the sale, insurance coverage and distribution of pharmaceuticals has been a particular focus of these efforts and would likely be significantly affected by any major legislative or regulatory initiatives.
At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biotherapeutic product pricing, including restrictions on pricing or reimbursement at the state government level, limitations on discounts to patients, marketing cost disclosure and transparency measures, and, in some cases, policies to encourage importation from other countries (subject to federal approval) and bulk purchasing, including 45 Table of Contents the National Medicaid Pooling Initiative.
At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biotherapeutic product pricing, including restrictions on pricing or reimbursement at the state government level, limitations on discounts to patients, marketing cost disclosure and transparency measures, and, in some 40 Table of Co ntents cases, policies to encourage importation from other countries (subject to federal approval) and bulk purchasing, including the National Medicaid Pooling Initiative.
Although we have established timelines for manufacturing and clinical development of cabozantinib 48 Table of Contents and our other product candidates based on existing knowledge of our compounds in development and industry metrics, we may not be able to meet those timelines.
Although we have established timelines for manufacturing and clinical development of cabozantinib and our other product candidates based on existing knowledge of our compounds in development and industry metrics, we may not be able to meet those timelines.
There are also equivalent procedures in the EU permitting authorization of generic versions and biosimilars of medicinal products authorized in the EU once related data and market exclusivity periods have expired. The U.S. federal government has also taken numerous legislative and regulatory actions to expedite the development and approval of generic drugs and biosimilars.
There are also equivalent procedures in the EU permitting authorization of generic versions and biosimilars of medicinal products authorized in the EU once related data and market exclusivity periods have expired. 41 Table of Co ntents The U.S. federal government has also taken numerous legislative and regulatory actions to expedite the development and approval of generic drugs and biosimilars.
Moreover, if insurance coverage becomes more expensive, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. 58 Table of Contents Risks Related to Our Common Stock Our stock price has been and may in the future be highly volatile.
Moreover, if insurance coverage becomes more expensive, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. Risks Related to Our Common Stock Our stock price has been and may in the future be highly volatile.
Our dependence on our relationships with these research and in-licensing partners subjects us to numerous risks, including, but not limited to: • our research and in-licensing partners’ decision to terminate our relationship, or their failure to comply with the terms of our agreements, either intentionally or as a result of negligent performance; • disputes that may arise between us and our research and in-licensing partners that result in the delay or termination of research activities with respect to any in-licensed assets or supporting technology platforms; • the possibility that our research and in-licensing partners may experience financial difficulties that prevent them from fulfilling their obligations under our agreements; • our research and in-licensing partners’ failure to properly maintain or defend their intellectual property rights or their use of third-party intellectual property rights or proprietary information in such a way as to invite litigation that could jeopardize or invalidate our license to develop these assets or utilize technology platforms; • laws, regulations or practices imposed by countries outside the U.S. that could impact or inhibit scientific research or the development of healthcare products by foreign competitors or otherwise disadvantage healthcare products made by foreign competitors, as well as general political or economic instability in those countries, any of which could complicate, interfere with or impede our relationships with our ex-U.S. research, development and in-licensing partners; and • our research and in-licensing partners’ failure to comply with applicable healthcare laws, as well as established guidelines, laws and regulations related to GMP and GLP.
Our dependence on our relationships with these research and in-licensing partners subjects us to numerous risks, including, but not limited to: • our research and in-licensing partners’ decision to terminate our relationship, or their failure to comply with the terms of our agreements, either intentionally or as a result of negligent performance; • disputes that may arise between us and our research and in-licensing partners that result in the delay or termination of research activities with respect to any in-licensed assets or supporting technology platforms; • the possibility that our research and in-licensing partners may experience financial difficulties that prevent them from fulfilling their obligations under our agreements; • the possibility that our research and in-licensing partners may be acquired and that any acquiring entity may not honor our partners’ research commitments or otherwise fail to continue fulfilling their obligations under our agreements; • our research and in-licensing partners’ failure to properly maintain or defend their intellectual property rights or their use of third-party intellectual property rights or proprietary information in such a way as to invite litigation that could jeopardize or invalidate our license to develop these assets or utilize technology platforms; • laws, regulations or practices imposed by countries outside the U.S. that could impact or inhibit scientific research or the development of healthcare products by foreign competitors or otherwise disadvantage healthcare products made by foreign competitors, as well as general political or economic instability in those countries, any of which could complicate, interfere with or impede our relationships with our ex-U.S. research, development and in-licensing partners; and 46 Table of Co ntents • our research and in-licensing partners’ failure to comply with applicable healthcare laws, as well as established guidelines, laws and regulations related to GMP and GLP.
Both Congress and the FDA are considering, and have enacted, 46 Table of Contents various legislative and regulatory proposals focused on drug competition, including legislation focused on drug patenting and provision of drug to generic applicants for testing.
Both Congress and the FDA are considering, and have enacted, various legislative and regulatory proposals focused on drug competition, including legislation focused on drug patenting and provision of drug to generic applicants for testing.
We cannot eliminate the risk of accidental contamination or discharge, or any resultant injury from these materials, and we may face liability under applicable laws for any injury or contamination that results from our use or the use by our collaboration partners or other third parties of these materials.
We cannot eliminate the risk of 52 Table of Co ntents accidental contamination or discharge, or any resultant injury from these materials, and we may face liability under applicable laws for any injury or contamination that results from our use or the use by our collaboration partners or other third parties of these materials.
Pricing for pharmaceutical products in the U.S. has come under increasing attention and scrutiny by federal and state governments, legislative bodies and enforcement agencies. This may result in actions that have the effect of reducing our revenue or harming our business or reputation. There continue to be U.S.
Pricing for pharmaceutical products in the U.S. has come under increasing attention and scrutiny by federal and state governments, legislative bodies and enforcement agencies. Initiatives arising from this scrutiny may result in changes that have the effect of reducing our revenue or harming our business or reputation. There continue to be U.S.
Further, our 43 Table of Contents competitors may be more effective at in-licensing and developing new commercial products that could render our products, and those of our collaboration partners, obsolete and noncompetitive.
Further, our competitors may be more effective at in-licensing and developing new commercial products that could render our products, and those of our collaboration partners, obsolete and noncompetitive.
While we cannot know the final form or timing of any such legislative, regulatory and/or administrative measures, some of the pending and enacted legislative proposals or executive rulemaking if implemented without successful legal challenges, would likely have a significant and far-reaching impact on the biopharmaceutical industry and therefore also likely have a material adverse impact on our business, financial condition and results of operations.
In addition, we cannot know the final form or timing of any other legislative, regulatory and/or administrative measures, and some of these pending and enacted legislative proposals or executive rulemaking, if implemented without successful legal challenges, would likely have a significant and far-reaching impact on the biopharmaceutical industry and therefore also likely have a material adverse impact on our business, financial condition and results of operations.
Even if the FDA or a comparable authority in another jurisdiction approves cabozantinib for one or more new indications, such approval may be limited, imposing significant restrictions on the indicated uses, conditions for use, labeling, distribution, and/or production of the product and could impose requirements for post-marketing studies, including additional research and clinical trials, all of which may result in significant expense and limit our and our collaboration partners’ ability to commercialize cabozantinib in one or more new indications.
Even if the FDA or a comparable authority in another jurisdiction approves cabozantinib for one or more new indications or approves one of our other product candidates, including zanzalintinib, for use, such approval may be limited, imposing significant restrictions on the indicated uses, conditions for use, labeling, distribution, and/or production of the 44 Table of Co ntents product and could impose requirements for post-marketing studies, including additional research and clinical trials, all of which may result in significant expense and limit our and our collaboration partners’ ability to commercialize cabozantinib, zanzalintinib or our other product candidates in any new indications.
Risks Related to Financial Matters and Capital Requirements Our profitability could be negatively impacted if expenses associated with our extensive clinical development, business development and commercialization activities, both for the cabozantinib franchise and our earlier-stage product candidates, grow more quickly than the revenues we generate.
Risks Related to Financial Matters Our profitability could be negatively impacted if expenses associated with our extensive clinical development, business development and commercialization activities, both for the cabozantinib franchise and our other product candidates, grow more quickly than the revenues we generate.
Even if we and our collaboration partners receive the required regulatory approvals to market cabozantinib for additional indications, we and our collaboration partners may not be able to commercialize CABOMETYX effectively and successfully in these additional indications.
Even if the required regulatory approvals to market CABOMETYX for additional indications are achieved, we and our collaboration partners may not be able to commercialize CABOMETYX effectively and successfully in these additional indications.
We may be unable to expand our discovery and development pipeline, which could limit our growth and revenue potential. Our business is focused on the discovery, development and commercialization of new medicines for difficult-to-treat cancers.
Risks Related to Growth of Our Product Portfolio and Research and Development We may be unable to expand our discovery and development pipeline, which could limit our growth and revenue potential. Our business is focused on the discovery, development and commercialization of new medicines for difficult-to-treat cancers.
Failure to complete post-marketing requirements of the FDA in connection with a specific approval in accordance with the timelines and conditions set forth by the FDA could significantly increase costs or delay, limit or ultimately restrict the commercialization of cabozantinib in that indication.
Failure to complete post-marketing requirements of the FDA in connection with a specific approval in accordance with the timelines and conditions set forth by the FDA could significantly increase costs or delay, limit or ultimately restrict the commercialization of cabozantinib, zanzalintinib or another product candidate in the approved indication.
Although we reported net income of $231.1 million and $111.8 million for the years ended December 31, 2021 and 2020, respectively, we may not be able to maintain or increase profitability on a quarterly or annual basis, and we are unable to predict the extent of future profits or losses.
Although we reported net income of $182.3 million and $231.1 million for the fiscal years ended December 31, 2022 and 2021, respectively, we may not be able to maintain or increase profitability on a quarterly or annual basis, and we are unable to predict the extent of future profits or losses.
If enacted, we and any third parties we may engage may be unable to adapt to any changes implemented as a result of such measures, and we may have difficulties in sustaining profitability or otherwise experience a material adverse impact on our business, financial condition and results of operations.
If enacted, we and any third parties we might engage may be unable to adapt to any changes implemented as a result of such measures, and we could face difficulties in maintaining or increasing profitability or otherwise experience a material adverse impact on our business, financial condition and results of operations.
In addition, through our third-party contract manufacturers and data service providers, we continue to provide serialized commercial products as required to comply with the DSCSA.
In addition, through our third-party contract manufacturers and data service providers, we continue to provide serialized commercial products as required to comply with the DSCSA and its foreign equivalents where applicable.
We expect to continue to spend substantial amounts to fund the continued development of the cabozantinib franchise for additional indications and the commercialization of our approved products.
We expect to continue to spend substantial amounts to fund the continued development of the cabozantinib franchise for additional indications and of our other product candidates, as well as the commercialization of our approved products.
Even if these scientific advisors and contractors with whom we have engaged intend to meet their contractual obligations, their ability to perform services may be impacted by increased demand for such services from other companies or by other external factors, such as reduced capacity to perform services, as we experienced in the early stages of the COVID-19 pandemic.
Even if these scientific advisors and contractors with whom we have engaged intend to meet their contractual obligations, their ability to perform services may be impacted by increased demand for such services from other companies or by other external factors, such as reduced capacity to perform services.
If third-party payers do not provide coverage or reimbursement for CABOMETYX or COMETRIQ, our revenues and results of operations will suffer.
If third-party payers do not provide or increase limitations on coverage or reimbursement for CABOMETYX or COMETRIQ, our revenues and results of operations may suffer.
We have experienced and expect to continue to experience growth in the number of our employees and in the scope of our operations, in particular as we continue to expand the cabozantinib franchise into new indications and grow our pipeline of product candidates.
We have experienced and expect to continue to experience growth in the number of our employees and in the scope of our operations, in particular as we continue to grow our pipeline of product candidates.
Furthermore, responding to any such allegation and/or defending against any such enforcement actions can be time-consuming and would require significant financial and personnel resources.
Furthermore, responding to any such allegation or investigation 48 Table of Co ntents and/or defending against any such enforcement actions can be time-consuming and would require significant financial and personnel resources.
Although we have not yet experienced significant production delays or seen significant impairment to our supply chain as a result of the COVID-19 pandemic, our third-party contract manufacturers, distributors and suppliers could experience operational delays due to facility closures and other hardships as a result of the COVID-19 pandemic or otherwise, which could impact our supply chain by potentially causing delays to or disruptions in the supply of our commercial or clinical products or product candidates.
Although we have not yet experienced significant production delays or seen significant impairment to our supply chain as a result of the COVID-19 pandemic or the ongoing Russo-Ukrainian War, our third-party contract manufacturers, distributors and suppliers could experience operational delays due to lack of capacity or resources, facility closures and other hardships as a result of these types of global events, which could impact our supply chain by potentially causing delays to or disruptions in the supply of our preclinical, clinical or commercial products.
Our expected future expenses in particular may also be increased by inflationary pressures, whether resulting from the effects of the COVID-19 pandemic or otherwise, which could increase the costs of outside services, labor, raw materials and finished drug product.
Our expected future expenses in particular may also be increased by inflationary pressures, which could increase the costs of outside services, labor, raw materials and finished drug product.
Upcoming legislative and policy changes in the EU are aimed at increasing cooperation between the EU Member States. Such initiatives, particularly the HTA adopted in December 2021, may further impact the price and reimbursement status of CABOMETYX and COMETRIQ in the future.
Recent legislative changes and ongoing policy changes in the EU are aimed at increasing cooperation between the EU Member States. Such initiatives, particularly the HTA Regulation adopted in December 2021, may further impact the price and reimbursement status of CABOMETYX and COMETRIQ when it enters into application 2025.
Should one or all of our collaboration partners decline to support future planned clinical trials, we will be entirely responsible for financing the further development of the cabozantinib franchise or our other product candidates and, as a result, we may be unable to execute our current business plans, which could have a material adverse impact on our business, financial condition and results of operations.
Should one or all of our collaboration partners decline to support future planned clinical trials, we will be entirely responsible for financing the further development of the cabozantinib franchise or our other product candidates and, as a result, we may be unable to execute our current business plans, which could have a material adverse impact on our business, financial condition and results of operations. 43 Table of Co ntents We may not be able to pursue the further development of the cabozantinib franchise, zanzalintinib or our other product candidates or meet current or future requirements of the FDA or regulatory authorities in other jurisdictions in accordance with our stated timelines or at all.
If any of these risks materialize, we may not receive collaboration revenues or otherwise realize anticipated benefits from such collaborations, and our product development efforts and prospects for growth could be delayed or disrupted, all of which could have a material adverse impact on our business, financial condition and results of operations. 52 Table of Contents Our growth potential is dependent in part upon companies with which we have entered into research collaborations, in-licensing arrangements and similar business development relationships.
If any of these risks materialize, we may not receive collaboration revenues or otherwise realize anticipated benefits from such collaborations, and our product development efforts and prospects for growth could be delayed or disrupted, all of which could have a material adverse impact on our business, financial condition and results of operations.
For example, the CCPA went into operation in 2020 and affords California residents expanded privacy rights and protections, including civil penalties for violations and statutory damages under a private right of action for data security breaches. These protections will be expanded by the CPRA, which will be operational in most key respects on January 1, 2023.
For example, the CPRA went into operation in 2020 and affords California residents expanded privacy rights and protections, including civil penalties for violations and statutory damages under a private right of action for data security breaches.
Through collaboration with the biopharmaceutical industry, academia and other stakeholders, the FDA’s goal for this initiative is to advance an oncology dose-finding and dose optimization paradigm that emphasizes dose selections that maximize efficacy as well as safety and tolerability. In support of this initiative, FDA may request sponsors of oncology product candidates to conduct dose optimization studies pre- or post-approval.
Through collaboration with the biopharmaceutical industry, academia and other stakeholders, the FDA’s goal for this initiative is to advance an oncology dose-finding and dose optimization paradigm that emphasizes dose selections that maximize efficacy as well as safety and tolerability.
Likewise, as a result of significant changes in U.S. or global political and economic conditions, policies governing foreign trade and healthcare spending and delivery, or future potential U.S. federal government shutdowns, the financial markets could continue to experience significant volatility that could also continue to negatively impact the 59 Table of Contents markets for biotechnology and pharmaceutical stocks.
Likewise, as a result of significant changes in U.S. or global political and macroeconomic conditions, including historically high inflation, as well as policies governing foreign trade and healthcare spending and delivery, or the ongoing Russo-Ukrainian War, the financial markets could continue to experience significant volatility that could also continue to negatively impact the markets for biotechnology and pharmaceutical stocks.
If any of the events described above were to occur with such programs or compounds, the likelihood of receipt of milestones and royalties under such collaboration agreements could decrease. 49 Table of Contents The regulatory approval processes of the FDA and comparable foreign regulatory authorities are lengthy, uncertain and subject to change, and may not result in regulatory approvals for additional cabozantinib indications or for our other product candidates, which could have a material adverse impact on our business, financial condition and results of operations.
The regulatory approval processes of the FDA and comparable foreign regulatory authorities are lengthy, uncertain and subject to change, and may not result in regulatory approvals for additional cabozantinib indications or for our other product candidates, which could have a material adverse impact on our business, financial condition and results of operations.
If we are unable to manage our growth effectively, including as a result of the COVID-19 pandemic or otherwise, or we are unsuccessful in recruiting qualified management personnel, there could be a material adverse impact on our business, financial condition and results of operations.
We continue to increase our management personnel to oversee our expanding operations, and recruiting and retaining qualified individuals is difficult. If we are unable to manage our growth effectively, or we are unsuccessful in recruiting qualified management personnel, there could be a material adverse impact on our business, financial condition and results of operations.
To expand our early-stage product pipeline, we have augmented our drug discovery activities with multiple research collaborations and in-licensing arrangements with other companies.
Our growth potential is dependent in part upon companies with which we have entered into research collaborations, in-licensing arrangements and similar business development relationships. To expand our early-stage product pipeline, we have augmented our drug discovery activities with multiple research collaborations and in-licensing arrangements with other companies.
If our collaboration partners are unable or unwilling to invest the resources necessary to commercialize CABOMETYX successfully in the EU, Japan and other international territories where it has been approved, this could reduce the amount of revenue we are due to receive under these collaboration agreements, thus resulting in harm to our business and operations.
If our collaboration partners are unable or unwilling to invest the resources necessary to commercialize CABOMETYX successfully in the EU, Japan and other international territories where it has been approved, this could reduce the amount of revenue we are due to receive under these collaboration agreements, thus resulting in harm to our business and operations. 45 Table of Co ntents Our clinical, regulatory and commercial collaborations with major companies make us reliant on those companies for their continued performance and investments, which subjects us to a number of risks.
In addition, there are pending federal and state-level legislative proposals that would significantly expand government-provided health insurance coverage, ranging from establishing a single-payer, national health insurance system to more limited “buy-in” options to existing public health insurance programs, each of which could have a significant impact on the healthcare industry.
In addition, there have been, and may in the future be, initiatives at both the federal and state level that could significantly modify the terms and scope of government-provided health insurance coverage, ranging from changes to some or all of the provisions of the PPACA to establishing a single-payer, national health insurance system to more limited “buy-in” options to existing public health insurance programs, any of which could have a significant impact on the healthcare industry.
Should we fail to provide adequate privacy or data security protections or maintain compliance with these laws and regulations, including the CCPA, CPRA and GDPR, we could be subject to sanctions or other penalties, litigation, an increase in our cost of doing business and questions concerning the validity of our data processing activities, including clinical trials.
Should we fail to provide adequate privacy or data security protections or maintain compliance with these laws and regulations, including the CCPA, as amended by the CPRA, as well as the GDPR, we could be subject to sanctions or other penalties, litigation, an increase in our cost of doing business and questions concerning the validity of our data processing activities, including clinical trials. 49 Table of Co ntents Risks Related to Our Information Technology and Intellectual Property Data breaches, cyber-attacks and other failures in our information technology operations and infrastructure could compromise our intellectual property or other sensitive information, damage our operations and cause significant harm to our business and reputation.
Risks Related to Growth of Our Product Portfolio and Research and Development Clinical testing of cabozantinib for new indications, or of new product candidates, is a lengthy, costly, complex and uncertain process that may fail ultimately to demonstrate safety and efficacy data for those products sufficiently differentiated to compete in our highly competitive market environment.
If our drug discovery efforts, including research collaborations, in-licensing arrangements and other business development activities, do not result in suitable product candidates, our business and prospects for growth could suffer. 42 Table of Co ntents Clinical testing of cabozantinib for new indications, or of new product candidates, is a lengthy, costly, complex and uncertain process that may fail ultimately to demonstrate safety and efficacy data for those products sufficiently differentiated to compete in our highly competitive market environment.
In addition, the Further Consolidated Appropriations Act, 2020, which incorporated the framework from the CREATES legislation, purports to promote competition in the market for drugs and biotherapeutic products by facilitating the timely entry of lower-cost generic and biosimilar versions of those drugs and biotherapeutic products, including by allowing ANDA, 505(b)(2) NDA or biosimilar developers to obtain access to branded drug and biotherapeutic product samples.
In addition, the Further Consolidated Appropriations Act, 2020, which incorporated the framework from the CREATES legislation, allowed ANDA, 505(b)(2) NDA or biosimilar developers to obtain access to branded drug and biotherapeutic product samples.
The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not currently known to us or that we deem immaterial also may impair our business operations. If any of the following risks or such other risks actually occur, our business and the value of your investment in our company could be harmed.
The risks and uncertainties described below are 37 Table of Co ntents not the only ones we face. Additional risks and uncertainties not currently known to us or that we deem immaterial also may impair our business operations.
Any delay could limit our ability to generate revenues, cause us to incur additional expense and cause the market price of our common stock to decline significantly. Our partners under our collaboration agreements may experience similar risks with respect to the compounds we have out-licensed to them.
Any delay could limit our ability to generate revenues, cause us to incur additional expense and cause the market price of our common stock to decline significantly.
We are also reliant on laboratory materials manufactured and distributed from areas impacted by both the COVID-19 pandemic and other natural disasters, for which supply has become limited. If we are unable to obtain the requisite materials to conduct our planned drug discovery activities, we may be required to redirect the focus of, or even suspend, such activities.
We are also reliant on laboratory materials manufactured and distributed from areas that continue to be impacted by both the COVID-19 pandemic and other natural disasters, for which supply has become limited.
If we are unable to maintain or increase our sales, marketing, market access and product distribution capabilities for our products, we may be unable to maximize product revenues, which could have a material adverse impact on our business, financial condition and results of operations.
If we are unable to maintain or scale our commercial function appropriately, we may not be able to maximize product revenues, which could have a material adverse impact on our business, financial condition and results of operations. If we are unable to obtain or maintain coverage and reimbursement for our products from third-party payers, our business will suffer.
Accordingly, both inadvertent disruptions to this infrastructure and cyber-attacks could cause us to incur significant remediation or litigation costs, result in product development delays, disrupt critical business operations, expend key information technology resources and divert the attention of management. 54 Table of Contents Although the aggregate impact of cyber-attacks on our operations and financial condition has not been material to date, we and our third-party service providers have frequently been the target of threats of this nature and expect them to continue.
Accordingly, both inadvertent disruptions to this infrastructure and cyber-attacks could cause us to incur significant remediation or litigation costs, result in product development delays, disrupt critical business operations, expend key information technology resources and divert the attention of management.
Federal and state governments in the U.S. are considering legislative and regulatory proposals to change the U.S. healthcare system in ways that could affect our ability to continue to commercialize CABOMETYX and COMETRIQ profitably.
Federal and state governments in the U.S. are considering legislative and regulatory proposals to change the U.S. healthcare system in ways that could affect our ability to continue to commercialize CABOMETYX and COMETRIQ profitably. Similarly, among policy makers and payers, there is significant interest in promoting such changes with the stated goals of containing healthcare costs and expanding patient access.
If we are unable to raise additional funds when we need them, we may be unable to expand our product offerings and maintain business growth, which could have a material adverse impact on our business, financial condition and results of operations.
If we are unable to manage our growth, there could be a material adverse impact on our business, financial condition and results of operations, and our prospects may be adversely affected.
If these costs exceed our current expectations, or we fail to achieve anticipated revenue targets, the market value of our common stock may decline. If additional capital is not available to us when we need it, we may be unable to expand our product offerings and maintain business growth.
If these costs exceed our current expectations, or we fail to achieve anticipated revenue targets, the market value of our common stock may decline.
Therefore, if any state or the federal government initiates an enforcement action against us, our business may be impaired, and even if we are ultimately successful in our defense, litigating these actions could result in substantial costs and divert the attention of management. 47 Table of Contents Enhanced governmental and private scrutiny over, or investigations or litigation involving, pharmaceutical manufacturer patient assistance programs and donations to patient assistance foundations created by charitable organizations could negatively impact our business practices, harm our reputation, divert the attention of management and increase our expenses .
Therefore, if any state or the federal government initiates an enforcement action against us, our business may be impaired, and even if we are ultimately successful in our defense, litigating these actions could result in substantial costs and divert the attention of management.
These federal and state healthcare laws and regulations govern drug marketing practices, including off-label promotion.
These federal and state healthcare laws and regulations govern drug marketing practices, including off-label promotion, and also impact our current and future business arrangements with third parties, including various healthcare entities.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe currently anticipate that the term will begin in the first quarter of 2022. We believe these leased facilities are sufficient to accommodate our current and near-term needs.
Biggest changeAlso in 2022, we established a presence for Exelixis East in the Greater Philadelphia area and signed intermediate-term office and laboratory space. We believe these leased facilities are sufficient to accommodate our current and near-term needs.
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Item 2. Properties Our corporate headquarters is located in Alameda, California, where we lease a total of 254,690 square feet of space. We took possession of an additional 25,749 square feet of space in 2021. The lease expires in October 2031. We have two five-year options to extend the lease.
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Item 2. Properties Our corporate headquarters is located in Alameda, California, where we lease approximately 610,000 square feet of office and laboratory space under multiple leases. Approximately 100,000 square feet of leased laboratory space in Alameda is under construction and anticipated to be available for operations in 2025.
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In October 2019, we entered into a build-to-suit lease agreement (the Build-to-Suit Lease) for approximately 220,000 square feet of additional office facilities adjacent to our current corporate headquarters. The term of the Build-to-Suit Lease is for a period of 242 months, which will begin on the substantial completion of the building and tenant improvements by the lessor.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe may also from time to time become a party or subject to various other legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business. Some of these proceedings have involved, and may involve in the future, claims that are subject to substantial uncertainties and unascertainable damages. Item 4.
Biggest changeWe have not yet responded to this Paragraph IV certification notice letter but are evaluating it and will vigorously defend our cabozantinib intellectual property estate. We may also from time to time become a party or subject to various other legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business.
Item 3. Legal Proceedings In September 2019, we received a notice letter regarding an ANDA submitted to the FDA by MSN, requesting approval to market a generic version of CABOMETYX tablets. MSN’s initial notice letter included a Paragraph IV certification with respect to our U.S.
Item 3. Legal Proceedings MSN I ANDA Litigation In September 2019, we received a notice letter regarding an ANDA submitted to the FDA by MSN, requesting approval to market a generic version of CABOMETYX tablets. MSN’s initial notice letter included a Paragraph IV certification with respect to our U.S.
Patent No. 9,809,549 is invalid and would not be infringed by MSN if its generic version of CABOMETYX tablets were approved by the FDA. U.S. Patent No. 9,809,549 is not listed in the Orange Book. On April 7, 2021, we filed our response to MSN’s First Amended Answer and Counterclaims, denying, among other things, that U.S.
Patent No. 9,809,549 (salt and polymorphic forms) is invalid and would not be infringed by MSN if its generic version of CABOMETYX tablets were approved by the FDA. U.S. Patent No. 9,809,549 is not listed in the Orange Book. On April 7, 2021, we filed our response to MSN’s First Amended Answer and Counterclaims, denying, among other things, that U.S.
Patent No. 8,497,284 would also infringe certain claims of each patent, if those claims are not found to be invalid. Then, on October 12, 2021, pursuant to a separate stipulation between us and MSN, the Delaware District Court entered an order dismissing MSN’s counterclaims with respect to U.S. Patent No. 9,809,549.
Patents No. 7,579,473 and 8,497,284 would also infringe certain claims of each patent, if those claims are not found to be invalid. Then, on October 12, 2021, pursuant to a separate stipulation between us and MSN, the Delaware District Court entered an order dismissing MSN’s counterclaims with respect to U.S. Patent No. 9,809,549.
On June 17, 2021, we filed a complaint in the Delaware District Court for patent infringement against Teva, along with Teva Parent, asserting infringement of U.S. Patent Nos. 9,724,342, 10,034,873 and 10,039,757 arising from Teva’s ANDA filing with the FDA. On August 27, 2021, Teva filed its answer and counterclaims to the complaint, alleging that the asserted claims of U.S.
On June 17, 2021, we filed a complaint in the Delaware District Court for patent infringement against Teva, asserting infringement of U.S. Patents No. 9,724,342, 10,034,873 and 10,039,757 arising from Teva’s ANDA filing with the FDA. On August 27, 2021, Teva filed its answer and counterclaims to the complaint, alleging that the asserted claims of U.S.
On May 22, 2020, MSN filed its response to the complaint, alleging that the asserted claims of the ‘473 Patent and U.S. Patent No. 8,497,284 are invalid and not infringed. On March 23, 2021, MSN filed its First Amended Answer and Counterclaims (amending its prior filing from May 22, 2020), seeking, among other things, a declaratory judgment that U.S.
On May 22, 2020, MSN filed its response to the complaint, alleging that the asserted claims of U.S. Patents No. 7,579,473 and 8,497,284 are invalid and not infringed. On March 23, 2021, MSN filed its First Amended Answer and Counterclaims (amending its prior filing from May 22, 2020), seeking, among other things, a declaratory judgment that U.S.
Patent No. 8,497,284, if those claims are not found to be invalid, and (ii) upon approval, MSN’s commercial manufacture, use, sale or offer for sale within the U.S., and importation into the U.S., of MSN’s ANDA product prior to the expiration of the ‘473 Patent and U.S.
Patents No. 7,579,473 and 8,497,284, if those claims are not found to be invalid, and (ii) upon approval, MSN’s commercial manufacture, use, sale or offer for sale within the U.S., and importation into the U.S., of MSN’s ANDA product prior to the expiration of U.S.
Teva’s notice letters included a Paragraph IV certification with respect to our U.S. Patent Nos. 9,724,342 (formulations), 10,034,873 (methods of treatment) and 10,039,757 (methods of treatment), which are listed in the Orange Book and expire in 2033, 2031 and 2031, respectively. Teva’s notice letters did not provide a Paragraph IV certification against any additional CABOMETYX patents.
Teva’s notice letters included a Paragraph IV certification with respect to our U.S. Patents No. 9,724,342 (formulations), 10,034,873 (methods of treatment) and 10,039,757 (methods of treatment), which are listed in the Orange Book. Teva’s notice letters did not provide a Paragraph IV certification against any additional CABOMETYX patents.
On May 11, 2020, we filed a complaint in the Delaware 60 Table of Contents District Court for patent infringement against MSN asserting infringement of the ‘473 Patent and U.S. Patent No. 8,497,284 arising from MSN’s amended ANDA filing with the FDA. Neither of our complaints have alleged infringement of U.S. Patent Nos. 9,724,342, 10,034,873 and 10,039,757.
On May 11, 2020, we filed a complaint in the Delaware District Court for patent infringement against MSN asserting infringement of U.S. Patents No. 7,579,473 and 8,497,284 arising from MSN’s amended ANDA filing with the FDA. Neither of our complaints have alleged infringement of U.S. Patents No. 9,724,342, 10,034,873 and 10,039,757.
Patent Nos. 8,877,776 (salt and polymorphic forms), 9,724,342 (formulations), 10,034,873 (methods of treatment) and 10,039,757 (methods of treatment), which are listed in the Orange Book for CABOMETYX. MSN’s initial notice letter did not provide a Paragraph IV certification against the ’473 Patent (composition of matter) or U.S.
Patents No. 8,877,776 (salt and polymorphic forms), 9,724,342 (formulations), 10,034,873 (methods of treatment) and 10,039,757 (methods of treatment), which are listed in the Orange Book, for CABOMETYX. MSN’s initial notice letter did not provide a Paragraph IV certification against U.S. Patents No. 7,579,473 (composition of matter) or 8,497,284 (methods of treatment), each of which is listed in the Orange Book.
Patent No. 9,809,549 is invalid or would not be infringed. On October 1, 2021, pursuant to a stipulation between us and MSN, the Delaware District Court entered an order that (i) MSN’s submission of its ANDA constitutes infringement of certain claims relating to the ‘473 Patent and U.S.
On October 1, 2021, pursuant to a stipulation between us and MSN, the Delaware District Court entered an order that (i) MSN’s submission of its ANDA constitutes infringement of certain claims relating to U.S.
The ANDA now requests approval to market a generic version of CABOMETYX tablets prior to expiration of four previously-unasserted CABOMETYX patents that are now listed in the Orange Book: U.S. Patent Nos. 11,091,439 (salt and polymorphic forms) 11,091,440 (formulations) and 11,098,015 (methods of treatment).
In particular, the January 11, 2022 amended ANDA requested approval to market a generic version of CABOMETYX tablets prior to expiration of three previously-unasserted CABOMETYX patents that are now listed in the Orange Book: U.S. Patents No. 11,091,439 (crystalline salt forms), 11,091,440 (pharmaceutical composition) and 11,098,015 (methods of treatment).
In our complaints, we are seeking, among other relief, an order that the effective date of any FDA approval of MSN’s ANDA be a date no earlier than the expiration of all of the ‘473 Patent, U.S. Patent No. 8,497,284 and U.S.
In our MSN II complaints, we are seeking, among other remedies, equitable relief enjoining MSN from infringing the asserted patents, as well as an order that the effective date of any FDA approval of MSN’s ANDA would be a date no earlier than the expiration of all of U.S.
On September 17, 2021, we filed an answer to Teva’s counterclaims. We are seeking, among other relief, an order that the effective date of any FDA approval of Teva’s ANDA be a date no earlier than the expiration of all of U.S.
Patent No. 11,298,349 arising from Teva’s amended ANDA filing with the FDA. We are seeking, among other relief, an order that the effective date of any FDA approval of Teva’s ANDA be a date no earlier than the expiration of all of U.S.
Patent No. 8,497,284 (methods of treatment), each of which is listed in the Orange Book. On October 29, 2019, we filed a complaint in the Delaware District Court for patent infringement against MSN asserting infringement of U.S. Patent No. 8,877,776 arising from MSN’s ANDA filing with the FDA.
On October 29, 2019, we filed a complaint in the Delaware District Court for patent infringement against MSN asserting infringement of U.S. Patent No. 8,877,776 arising from MSN’s ANDA filing with the FDA. On November 20, 2019, MSN filed its response to the complaint, alleging that the asserted claims of U.S. Patent No. 8,877,776 are invalid and not infringed.
In particular, the ANDA requested approval to market a generic version of CABOMETYX tablets prior to expiration of two previously unasserted CABOMETYX patents: the ‘473 Patent and U.S. Patent No. 8,497,284.
On May 5, 2020, we received notice from MSN that it had amended its ANDA to include additional Paragraph IV certifications. In particular, the May 5, 2020 amended ANDA requested approval to market a generic version of CABOMETYX tablets prior to expiration of two previously unasserted CABOMETYX patents: U.S. Patents No. 7,579,473 and 8,497,284.
Patent Nos. 9,724,342, 10,034,873 and 10,039,757, the latest of which expires on July 9, 2033, and equitable relief enjoining Teva from infringing these patents. On February 8, 2022, the parties filed a stipulation to stay all proceedings, which was granted by the Delaware District Court on February 9, 2022. The stipulation and order were filed under seal.
Patents No. 9,724,342, 10,034,873, 10,039,757 and 11,298,349, the latest of which expires on July 9, 2033, and equitable relief enjoining Teva from infringing these patents.
On November 20, 2019, MSN filed its response to the complaint, alleging that the asserted claims of U.S. Patent No. 8,877,776 are invalid and not infringed. On May 5, 2020, we received notice from MSN that it had amended its ANDA to include additional Paragraph IV certifications.
Patent No. 11,298,349 arising from MSN’s further amendment of its ANDA filing with the FDA. On August 9, 2022, MSN filed its response to the complaint, alleging that the asserted claims of U.S. Patent No. 11,298,349 are invalid and not infringed and amended its challenges to U.S.
We have 45 days from the receipt of the January 11, 2022 notice to file a patent infringement claim against MSN relating to the newly challenged patents. In May 2021, we received notice letters from Teva regarding an ANDA Teva submitted to the FDA, requesting approval to market a generic version of CABOMETYX tablets.
Patents No. 11,091,439, 11,091,440, 11,098,015 and 11,298,349, the latest of which expires on February 10, 2032. A bench trial for MSN II has been scheduled for October 2023. Teva ANDA Litigation In May 2021, we received notice letters from Teva regarding an ANDA Teva submitted to the FDA, requesting approval to market a generic version of CABOMETYX tablets.
Patent No. 8,877,776, the latest of which expires on October 8, 2030, and equitable relief enjoining MSN from infringing these patents. A bench trial has been scheduled for May 2022. On January 11, 2022, we received notice from MSN that it had further amended its ANDA to assert additional Paragraph IV certifications.
Patents No. 11,091,439, 11,091,440 and 11,098,015 are invalid and not infringed. On June 7, 2022, we received notice from MSN that it had further amended its ANDA to assert an additional Paragraph IV certification.
Removed
Patent Nos. 9,724,342, 10,034,873 and 10,039,757 are invalid and not infringed, and on August 23, 2021, we and Teva entered into a stipulation wherein Teva Parent was dismissed without prejudice from this lawsuit and agreed to be bound by any stipulation, judgment, order or decision rendered as to Teva, including any appeals and any order granting preliminary or permanent injunctive relief against Teva.
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Patent No. 9,809,549 is invalid or would not be infringed. The two lawsuits comprising the MSN I litigation, numbered Civil Action Nos. 19-02017 and 20-00633, were consolidated in April 2021.
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Mine Safety Disclosures Not applicable. 61 Table of Contents PART II
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In our MSN I complaints, we sought, among other relief, an order that the effective date of any FDA approval of MSN’s ANDA be a date no earlier than the expiration of all of U.S. Patents No. 7,579,473, 8,497,284 and 8,877,776, the latest of which expires on October 8, 2030, and equitable relief enjoining MSN from infringing these patents.
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In an effort to streamline the case, the parties narrowed their assertions. On April 8, 2022, MSN withdrew its validity challenge to U.S. Patent No. 8,877,776. On April 14, 2022, we agreed not to assert U.S. Patent No. 8,497,284 at trial and MSN, correspondingly, agreed to withdraw its validity challenges to U.S.
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Patent No. 8,497,284, as well as claims 1-4 and 6-7 of U.S. Patent No. 7,579,473. As a result of this narrowing, the trial addressed two issues: (1) infringement of claim 1 of the U.S. Patent No. 8,877,776; and (2) validity of claim 5 of the U.S. Patent No. 7,579,473.
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A bench trial for MSN I occurred in May 2022, and on January 19, 2023, the Delaware District Court issued a ruling rejecting MSN’s invalidity challenge to U.S. Patent No. 7,759,473. The Delaware District Court also ruled that MSN’s proposed ANDA product does not infringe U.S.
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Patent No. 8,877,776 and entered judgment that the effective date of any final FDA approval of MSN’s ANDA shall not be a date earlier than August 14, 2026, the expiration date of U.S. Patent No. 7,759,473. This ruling in MSN I does not impact our separate and ongoing MSN II lawsuit.
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At this time, we are evaluating the next course of action, but we intend to vigorously defend our intellectual property rights, including through potential appeal. 55 Table of Co ntents MSN II ANDA Litigation On January 11, 2022, we received notice from MSN that it had further amended its ANDA to assert additional Paragraph IV certifications.
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On February 23, 2022, we filed a complaint in the Delaware District Court for patent infringement against MSN asserting infringement of U.S. Patents No. 11,091,439, 11,091,440 and 11,098,015 arising from MSN’s further amendment of its ANDA filing with the FDA. On February 25, 2022, MSN filed its response to the complaint, alleging that the asserted claims of U.S.
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As currently amended, MSN’s ANDA now requests approval to market a generic version of CABOMETYX tablets prior to expiration of a previously-unasserted CABOMETYX patent that is now listed in the Orange Book: U.S. Patent No. 11,298,349 (pharmaceutical composition). On July 18, 2022, we filed a complaint in the Delaware District Court for patent infringement against MSN asserting infringement of U.S.
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Patents No. 11,091,439, 11,091,440 and 11,098,015 to allege that these patents are not enforceable based on equitable grounds. The two lawsuits comprising the MSN II litigation, numbered Civil Action Nos. 22-00228 and 22-00945, were consolidated in October 2022 and involve Exelixis patents that are different from those asserted in the MSN I litigation described above.
Added
On June 21, 2022, pursuant to a stipulation between us and MSN, the Delaware District Court entered an order that (i) MSN’s submission of its ANDA constitutes infringement of certain claims relating to U.S.
Added
Patents No. 11,091,439, 11,091,440 and 11,098,015, if those claims are not found to be invalid, and (ii) upon approval, MSN’s commercial manufacture, use, sale or offer for sale within the U.S., and importation into the U.S., of MSN’s ANDA product prior to the expiration of U.S.
Added
Patents No. 11,091,439, 11,091,440 and 11,098,015 would also infringe certain claims of each patent, if those claims are not found to be invalid.
Added
Patents No. 9,724,342, 10,034,873 and 10,039,757 are invalid and not infringed. On September 17, 2021, we filed an answer to Teva’s counterclaims. On July 29, 2022, we received notice from Teva that it had amended its ANDA to assert an additional Paragraph IV certification.
Added
As amended, Teva’s ANDA now requests approval to market a generic version of CABOMETYX tablets prior to expiration of a previously-unasserted CABOMETYX patent that is now listed in the Orange Book: U.S. Patent No. 11,298,349 (pharmaceutical composition). On September 2, 2022, we filed a complaint in the Delaware District Court for patent infringement against Teva, asserting infringement of U.S.
Added
On September 30, 2022, the parties filed a stipulation to consolidate the two lawsuits, numbered Civil Action Nos. 21-00871 and 22-01168, and to stay all proceedings, which was granted by the Delaware District Court on October 3, 2022.
Added
Following a similar order granted by the Delaware District Court on February 9, 2022 to stay all proceedings with respect to Civil Action No. 21-00871, this case remained administratively closed, and Civil Action No. 22-01168 was administratively closed on October 3, 2022. 56 Table of Co ntents Other On February 6, 2023, we received a notice letter regarding an ANDA submitted to the FDA by Cipla, including a Paragraph IV certification with respect to our U.S.
Added
Patents No. 8,877,776 (salt and polymorphic forms), 9,724,342 (formulations), 10,039,757 (methods of treatment), 11,098,015 (methods of treatment), 11,091,439 (crystalline salt forms), 11,091,440 (pharmaceutical composition) and 11,298,349 (pharmaceutical composition). Cipla’s ANDA requests approval to market a generic version of CABOMETYX tablets prior to the expiration of the aforementioned patents.
Added
Some of these proceedings have involved, and may involve in the future, claims that are subject to substantial uncertainties and unascertainable damages. Item 4. Mine Safety Disclosures Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe graph assumes that $100 was invested on December 31, 2016 in each of our common stock, the Nasdaq Composite Index and the Nasdaq Biotechnology Index and assumes reinvestment of any dividends. The stock price performance on the following graph is not necessarily indicative of future stock price performance.
Biggest changeThe graph assumes that $100 was invested on December 31, 2017 in each of our common stock, the Nasdaq Composite Total Return Index and the Nasdaq Biotechnology Total Return Index and assumes reinvestment of any dividends. The stock price performance on the following graph is not necessarily indicative of future stock price performance.
Unregistered Sales of Equity Securities There were no unregistered sales of equity securities by us during the year ended December 31, 2021. Repurchases of Equity Securities There were no repurchases of our common stock during the year ended December 31, 2021.
Unregistered Sales of Equity Securities There were no unregistered sales of equity securities by us during the year ended December 31, 2022. Repurchases of Equity Securities There were no repurchases of our common stock during the year ended December 31, 2022.
Performance This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of ours under the Securities Act of 1933, as amended. 62 Table of Contents The following graph compares, for the five-year period ended December 31, 2021, the cumulative total return for our common stock, the Nasdaq Composite Index and the Nasdaq Biotechnology Index.
Performance This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of ours under the Securities Act of 1933, as amended. 57 Table of Co ntents The following graph compares, for the five-year period ended December 31, 2022, the cumulative total return for our common stock, the Nasdaq Composite Index and the Nasdaq Biotechnology Index.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock has traded on the Nasdaq Global Select Market under the symbol “EXEL” since April 11, 2000. Holders On February 7, 2022, there were 347 holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock has traded on the Nasdaq Global Select Market under the symbol “EXEL” since April 11, 2000. Holders On January 30, 2023, there were 339 holders of record of our common stock.
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Year Ended December 31, 2016 2017 2018 2019 2020 2021 Exelixis, Inc. 100 204 130 114 135 123 Nasdaq Composite Total Return 100 130 125 173 250 305 Nasdaq Biotechnology Total Return 100 122 109 136 175 175 Item 6. Reserved 63 Table of Contents
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Year Ended December 31, 2017 2018 2019 2020 2021 2022 Exelixis, Inc. 100 64 56 66 60 53 Nasdaq Composite Total Return 100 96 134 192 235 159 Nasdaq Biotechnology Total Return 100 99 116 148 146 132

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeMilestone revenues, which are allocated between license revenues and collaboration services revenues, were $133.8 million for the year ended December 31, 2021, as compared to $86.5 million for 2020. • Milestone revenues for the year ended December 31, 2021 included: (1) $100.0 million related to a commercial sales milestone from Ipsen upon their achievement of $400.0 million of net sales of cabozantinib in the related Ipsen license territory over four consecutive quarters, (2) $11.9 million related to a $12.5 million regulatory milestone Ipsen achieved upon submission of a variation application to the EMA for CABOMETYX as a treatment for patients with previously treated, RAI-refractory DTC and (3) $18.9 million in connection with a $20.0 million milestone achieved following Takeda’s first commercial sale in Japan of CABOMETYX in combination with OPDIVO for the treatment of patients with curatively unresectable or metastatic RCC; • Milestone revenues for the year ended December 31, 2020 included: (1) $25.7 million in connection with a $31.0 million milestone achieved upon Takeda’s first commercial sale of CABOMETYX for the treatment of patients with curatively unresectable or metastatic RCC in Japan; (2) $19.0 million in connection with a $20.0 million development milestone from Ipsen for the initiation of a phase 3 pivotal trial; (3) $9.3 million in connection with a $10.0 million milestone for Takeda’s and Ono’s submission of a supplemental application to the Japanese MHLW for Manufacturing and Marketing Approval of CABOMETYX in combination with OPDIVO for the treatment of patients with unresectable, advanced or metastatic RCC; (4) $14.0 million in connection with a $15.0 million milestone achieved upon Takeda’s first commercial sale of CABOMETYX for the treatment of patients with advanced HCC; and (5) $14.0 million in connection with $15.0 million in milestones from Takeda for the initiation of two phase 3 pivotal clinical trials that were deemed probable of being achieved in 2021.
Biggest changeMilestone revenues by fiscal year included the following: • For the year ended December 31, 2022, $25.8 million in revenues was recognized in connection with two regulatory milestones totaling $27.0 million upon the approval by the EC and Health Canada, of cabozantinib as a monotherapy for the treatment of adult patients with locally advanced or metastatic DTC, refractory or not eligible to RAI who have progressed during or after prior systemic therapy. • For the year ended December 31, 2021, milestone revenues included: (1) $100.0 million related to a commercial sales milestone from Ipsen upon their achievement of $400.0 million of net sales of cabozantinib in the related Ipsen license territory over four consecutive quarters; (2) $11.9 million related to a $12.5 million regulatory milestone Ipsen achieved upon submission of a variation application to the EMA for CABOMETYX as a treatment for patients with previously treated, RAI-refractory DTC; and (3) $18.9 million in connection with a $20.0 million milestone achieved following Takeda’s first commercial sale in Japan of CABOMETYX in combination with OPDIVO for the treatment of patients with curatively unresectable or metastatic RCC.
To develop and commercialize CABOMETYX and COMETRIQ outside the U.S., we have entered into license agreements with Ipsen and Takeda. We granted to Ipsen the rights to develop and commercialize cabozantinib outside of the U.S. and Japan, and to Takeda the rights to develop and commercialize cabozantinib in Japan.
To develop and commercialize CABOMETYX and COMETRIQ outside the U.S., we have entered into license agreements with Ipsen and Takeda. We granted to Ipsen the rights to develop and commercialize cabozantinib outside of the U.S. and Japan, and to Takeda we granted the rights to develop and commercialize cabozantinib in Japan.
Collaborations and Business Development Activities—Cabozantinib Commercial Collaborations—Performance Obligations and Transaction Prices for our Ipsen and Takeda Collaborations” in the “Notes to Consolidated Financial Statements— Performance Obligations and Transaction Prices for our Ipsen and Takeda Collaborations ” contained in Part II, Item 8 of this Annual Report on Form 10-K for a discussion on the allocation of transaction price which impacts the proportion of milestone revenues allocated to license revenues and collaboration services revenues.
Collaborations and Business Development Activities—Cabozantinib Commercial Collaborations— Performance Obligations and Transaction Prices for our Ipsen and Takeda Collaborations ” in the “Notes to Consolidated Financial Statements" contained in Part II, Item 8 of this Annual Report on Form 10-K for a discussion on the allocation of transaction price which impacts the proportion of milestone revenues allocated to license revenues and collaboration services revenues.
Both Ipsen and Takeda also contribute financially and operationally to the further global development and commercialization of the cabozantinib franchise in other potential indications, and we continue to work closely with them on these activities.
Both Ipsen and Takeda also contribute financially and operationally to the further global development and commercialization of the cabozantinib franchise in other potential indications, and we work closely with them on these activities.
In 2021, capital expenditures primarily consisted of investments in leasehold improvements and equipment related to an expansion of laboratory facilities at our corporate campus and technology infrastructure investments to support our digital transformation initiatives.
Capital expenditures primarily consisted of investments in leasehold improvements and equipment related to an expansion of laboratory facilities at our corporate campus and technology infrastructure investments to support our digital transformation initiatives.
We update our estimates every quarter to reflect actual claims and other current information. Actual rebates and chargebacks claimed for prior periods have varied from our estimates by less than 1% of the amount deducted from gross product revenues for the years ended December 31, 2021 and 2020. Our current estimates may differ significantly from actual results.
We update our estimates every quarter to reflect actual claims and other current information. Actual rebates and chargebacks claimed for prior periods have varied from our estimates by less than 1% of the amount deducted from gross product revenues for the years ended December 31, 2022 and 2021. Our current estimates may differ significantly from actual results.
In designing XL092, we sought to build upon our experience with cabozantinib, retaining a similar target profile while improving key characteristics, including the pharmacokinetic half-life. To date, we have initiated two large phase 1b clinical trials studying XL092: STELLAR-001 and STELLAR-002.
In designing zanzalintinib, we sought to build upon our experience with cabozantinib, retaining a similar target profile while improving key characteristics, including the pharmacokinetic half-life. To date, we have initiated two large phase 1b clinical trials studying zanzalintinib: STELLAR-001 and STELLAR-002.
The other two products resulting from our discovery efforts are: COTELLIC, an inhibitor of MEK, approved as part of multiple combination regimens to treat specific forms of advanced melanoma and marketed under a collaboration with Genentech; and MINNEBRO, an oral, non-steroidal, selective blocker of the mineralocorticoid receptor, approved for the treatment of hypertension in Japan and licensed to Daiichi Sankyo.
The other two products resulting from our discovery efforts are: COTELLIC, an inhibitor of MEK, approved as part of multiple combination regimens to treat specific forms of advanced melanoma and marketed under a collaboration with Genentech; and MINNEBRO, an oral, non-steroidal, selective blocker of MR, approved for the treatment of hypertension in Japan and licensed to Daiichi Sankyo.
Discounts and allowances as a percentage of gross revenue have increased over time as the number of patients participating in government programs has increased and as the discounts given and rebates paid to government payers have also increased.
Discounts and allowances as a percentage of gross revenues have increased over time as the number of patients participating in government programs has increased and as the discounts given and rebates paid to government payers have also increased.
We recognize product revenues net of discounts and allowances that are described in “Note 1. Organization and Summary of Significant Accounting Policies” to our “Notes to Consolidated Financial Statements” included in Part II, Item 8 72 Table of Contents of this Annual Report on Form 10-K.
We recognize product revenues net of discounts and allowances that are described in “Note 1. Organization and Summary of Significant Accounting Policies” to our “Notes to Consolidated Financial Statements” included in Part II, Item 8 of this Annual Report on Form 10-K.
The first compound to enter the clinic following our re-initiation of drug discovery activities in 2017 was XL092, a next-generation oral TKI that targets VEGF receptors, MET, AXL, MER and other kinases implicated in cancer’s growth and spread.
Pipeline Activities Zanzalintinib The first compound to enter the clinic following our re-initiation of drug discovery activities in 2017 was zanzalintinib, a next-generation oral TKI that targets VEGF receptors, MET, AXL, MER and other kinases implicated in cancer’s growth and spread.
STELLAR-001 is a phase 1b clinical trial evaluating XL092, both as a monotherapy and in combination with either atezolizumab or Merck KGaA’s and Pfizer’s avelumab.
STELLAR-001 is a phase 1b clinical trial evaluating zanzalintinib, both as a monotherapy and in combination with either atezolizumab or Merck KGaA’s and Pfizer’s avelumab.
We project our license revenues may decrease in fiscal 2022, as compared to fiscal 2021, as a result of the anticipated achievement of fewer milestones in 2022, partially offset by an increase in royalty revenues related to an increase in product sales by Ipsen and Takeda.
We project our license revenues may decrease in fiscal year 2023, as compared to fiscal year 2022, as a result of the anticipated achievement of fewer milestones in 2023, partially offset by an increase in royalty revenues related to an increase in product sales by Ipsen and Takeda.
Even if we and our collaboration partners receive the required regulatory approvals to market cabozantinib for additional indications, we and our collaboration partners may not be able to commercialize CABOMETYX effectively and successfully in these additional indications. In addition, CABOMETYX will only continue to be commercially successful if private third-party and government payers continue to provide coverage and reimbursement.
Even if the required regulatory approvals to market CABOMETYX for additional indications are achieved, we and our collaboration partners may not be able to commercialize CABOMETYX effectively and successfully in these additional indications. In addition, CABOMETYX will only continue to be commercially successful if private third-party and government payers continue to provide coverage and reimbursement.
Th e effective tax rate for the year ended December 31, 2021 differed from the U.S. federal statutory rate of 21% primarily due to non-deductible executive compensation, partially offset by excess tax benefits related to the exercise of certain stock options during the period and the generation of federal tax credits.
The effective tax rate for the year ended December 31, 2021 differed from the U.S. federal statutory ra te of 21% primarily due to non-deductible executive compensation, partially offset by excess tax benefits related to the exercise of certain stock options during the period and the generation of federal tax credits.
Cabozantinib is an inhibitor of multiple tyrosine kinases including MET, AXL, VEGF receptors and RET and has been approved by the FDA and in 61 other countries as: CABOMETYX tablets approved for advanced RCC, both alone and in combination with OPDIVO, for previously treated HCC and, currently by the FDA, for previously treated, RAI-refractory DTC; and COMETRIQ capsules approved for progressive MTC.
Cabozantinib is an inhibitor of multiple tyrosine kinases including MET, AXL, VEGF receptors and RET and has been approved by the FDA and in 62 other countries as: CABOMETYX tablets, both alone and in combination with BMS’ OPDIVO for advanced RCC, for previously treated HCC and, currently by the FDA and EC, for previously treated, RAI-refractory DTC and COMETRIQ capsules approved for progressive, metastatic MTC.
In particular, for the foreseeable future, we expect our ability to generate sufficient cash flow to fund our business operations and growth will depend upon the continued commercial success of CABOMETYX, both alone and in combination with other therapies, as a treatment for the highly competitive indications for which it is approved, and possibly for other indications for which cabozantinib has been or is currently being evaluated in potentially label-enabling clinical trials, if warranted by the data generated from these trials.
In particular, for the foreseeable future, we expect our ability to generate sufficient cash flow to fund our 65 Table of Co ntents business operations and growth will depend upon the continued commercial success of CABOMETYX, both alone and in combination with other therapies, as a treatment for the highly competitive indications for which it is approved, and possibly for other indications for which cabozantinib is currently being evaluated in potentially label-enabling clinical trials, if warranted by the data generated from these trials.
ADCs in particular present a unique opportunity for new cancer treatments, given their capabilities to deliver anti-cancer payload drugs to targets with increased precision while minimizing impact on healthy tissues, and have been validated by the multiple regulatory approvals for the commercial sale of ADCs in the past several years.
ADCs in particular present a unique opportunity for new cancer treatments, given their capabilities to deliver anti-cancer payload drugs to targets with increased precision while minimizing impact on healthy tissues. This biotherapeutic approach has been validated by multiple regulatory approvals for the commercial sale of ADCs in the past several years.
We also earned royalty revenues on ex-U.S. net sales of COTELLIC by Genentech of $4.1 million for the year ended December 31, 2021, as compared to $5.1 million for 2020.
We also earned royalty revenues on ex-U.S. net sales of COTELLIC by Genentech of $4.8 million for the year ended December 31, 2022, as compared to $4.1 million for 2021.
In connection with efforts to expand our product pipeline, we may be unsuccessful in discovering new drug candidates or identifying appropriate candidates for in-licensing or acquisition. Some of these challenges and risks are specific to our business, and others are common to companies in the biopharmaceutical industry with development and commercial operations.
In connection with efforts to expand our product pipeline, we may be unsuccessful in discovering new drug candidates or identifying appropriate candidates for in-licensing or acquisition. Some of these challenges and risks are specific to our business, others are common to companies in the biopharmaceutical industry with development and commercial operations, and an additional category are macroeconomic, affecting all companies.
Letters of Credit We have obtained standby letters of credit related to our lease obligations and certain other obligations with combined credit limits of $16.7 million and $1.6 million as of December 31, 2021 and 2020, respectively.
Letters of Credit We have obtained standby letters of credit related to our lease obligations and certain other obligations with combined credit limits of $1.5 million and $16.7 million as of December 31, 2022 and 2021, respectively.
Cost of Goods Sold The cost of goods sold and our gross margins were as follows (dollars in thousands): Year Ended December 31, Percent Change 2021 2020 Cost of goods sold $ 52,873 $ 36,272 46 % Gross margin % 95 % 95 % Cost of goods sold is related to our product revenues and consists of a 3% royalty payable on U.S. net sales of any product incorporating cabozantinib, as well as the cost of inventory sold, indirect labor costs, write-downs related to expiring, excess and obsolete inventory, and other third-party logistics costs.
Cost of Goods Sold The cost of goods sold and our gross margins were as follows (dollars in thousands): Year Ended December 31, Percent Change 2022 2021 Cost of goods sold $ 57,909 $ 52,873 10 % Gross margin % 96 % 95 % Cost of goods sold is related to our product revenues and consists of a 3% royalty payable on U.S. net sales of any product incorporating cabozantinib, as well as the cost of inventory sold, indirect labor costs, write-downs related to expiring, excess and obsolete inventory, and other third-party logistics costs.
Utilizing its regulatory expertise and established international oncology marketing network, Ipsen has continued to execute on its 64 Table of Contents commercialization plans for CABOMETYX, having received regulatory approvals and launched in multiple territories outside of the U.S., including in the EU, the U.K. and Canada, as a treatment for advanced RCC and for HCC in adults who have previously been treated with sorafenib.
Utilizing its 59 Table of Co ntents regulatory expertise and established international oncology marketing network, Ipsen has continued to execute on its commercialization plans for CABOMETYX, having received regulatory approvals and launched in multiple territories outside of the U.S., including in the EU, the United Kingdom and Canada, as a treatment for advanced RCC and for HCC in adults who have previously been treated with sorafenib.
Investing Activities The changes in cash flows from investing activities primarily relates to the timing of marketable securities investment activity and capital expenditures. Our capital expenditures primarily consist of investments to expand our operations and acquire assets that further our research and development.
Investing Activities The changes in cash flows from investing activities primarily relates to the timing of marketable securities investment activity, acquisition of acquired in-process research and development technology and capital expenditures. Our capital expenditures primarily consist of investments to expand our operations and acquire assets that further support our research and development activities.
As of the date of this Annual Report, we are currently advancing more than 10 discovery programs and expect to progress up to five new development candidates into preclinical development during 2022.
As of the date of this Annual Report on Form 10-K, we are currently advancing more than 10 discovery programs and expect to progress up to five new development candidates into preclinical development during 2023.
This discussion and analysis generally addresses 2021 and 2020 items and year-over-year comparisons between 2021 and 2020. Discussions of 2019 items and year-over-year comparisons between 2020 and 2019 that are not included in this Annual Report on Form 10-K can be found in “Item 7.
Discussions of 2020 items and year-over-year comparisons between 2021 and 2020 that are not included in this Annual Report on Form 10-K can be found in “Item 7.
For a more detailed discussion of challenges and risks we face, including those relating to the COVID-19 pandemic, see “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K. 71 Table of Contents Results of Operations We have adopted a 52- or 53-week fiscal year policy that ends on the Friday closest to December 31st.
For a more detailed discussion of challenges and risks we face, see “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K. Results of Operations We have adopted a 52- or 53-week fiscal year policy that ends on the Friday closest to December 31st.
Achievement of our 2022 business objectives will also depend on our ability to maintain a competitive position with respect to the shifting landscape of therapeutic strategy for the treatment of cancer, which we may not be able to do.
Achievement of our business objectives will also depend on our ability to maintain a competitive position in the shifting landscape of therapeutic strategies for the treatment of cancer, which we may not be able to do.
Selling, general and administrative expenses consist primarily of personnel expenses, stock-based compensation, marketing costs and certain other administrative costs. The increase in selling, general and administrative expenses for the year ended December 31, 2021, as compared to 2020, was primarily related to increases in personnel expenses, marketing costs, legal costs, corporate giving and technology services.
Selling, general and administrative expenses consist primarily of personnel expenses, stock-based compensation, marketing costs and certain other administrative costs. The increase in selling, general and administrative expenses for the year ended December 31, 2022, as compared to 2021, was primarily related to increases in personnel expenses, technology costs, rent expenses and marketing costs.
For these types of cancer, cabozantinib has become or is becoming an important drug in their selection of effective therapies.
For physicians treating these types of cancer, cabozantinib has become or is becoming an important medicine in their selection of effective therapies.
With respect to the Japanese market, Takeda received Manufacturing and Marketing Approvals in 2020 from the Japanese MHLW of CABOMETYX as a treatment of patients with curatively unresectable or metastatic RCC and as a treatment of patients with unresectable HCC who progressed after cancer chemotherapy. Most recently, in August 2021, Takeda and Ono Pharmaceutical Co., Ltd.
With respect to the Japanese market, Takeda received Manufacturing and Marketing Approvals in 2020 from the Japanese MHLW of CABOMETYX as a treatment of patients with curatively unresectable or metastatic RCC and as a treatment of patients with unresectable HCC who progressed after cancer chemotherapy.
Additionally, in January 2019, the FDA approved CABOMETYX for the treatment of patients with HCC who have been previously treated with sorafenib, and most recently, on September 17, 2021, the FDA approved CABOMETYX for the treatment of adult and pediatric patients 12 years of age and older with locally advanced or metastatic DTC that has progressed following prior VEGF receptor-targeted therapy and who are RAI-refractory or ineligible.
In addition to RCC, in January 2019, the FDA approved CABOMETYX for the treatment of patients with HCC previously treated with sorafenib, and then in September 2021, the FDA approved CABOMETYX for the treatment of adult and pediatric patients 12 years of age and older with locally advanced or metastatic DTC that has progressed following prior VEGF receptor-targeted therapy and who are RAI-refractory or ineligible.
(Ono), BMS’ development and commercialization partner in Japan, received Manufacturing and Marketing Approval from the Japanese MHLW of CABOMETYX in combination with OPDIVO as a treatment for unresectable or metastatic RCC.
In August 2021, Takeda and Ono Pharmaceutical Co., Ltd., BMS’ development and commercialization partner in Japan, received Manufacturing and Marketing Approval from the MHLW of CABOMETYX in combination with OPDIVO as a treatment for unresectable or metastatic RCC.
Royalty revenues for the year ended December 31, 2021 also included $7.9 million, as compared to $2.3 million for 2020, related to Takeda’s net sales of CABOMETYX, which have continued to grow since their first commercial sale of product in Japan in 2020.
Royalty revenues for the year ended December 31, 2022 also included $11.3 million, as compared to $7.9 million for 2021, related to Takeda’s net sales of CABOMETYX, which have continued to grow since their first commercial sale of product in Japan in 2020. Additionally, Takeda royalty revenues have increased for similar reasons noted above.
As of December 31, 2021, CABOMETYX is approved and commercially available in 61 countries outside of the U.S. 73 Table of Contents Our share of profits on the U.S. commercialization of COTELLIC under our collaboration agreement with Genentech was $8.1 million for the year ended December 31, 2021, as compared to $6.3 million for 2020.
As of December 31, 2022, CABOMETYX is approved and commercially available in 62 countries outside of the U.S. Our share of profits on the U.S. commercialization of COTELLIC under our collaboration agreement with Genentech was $7.7 million for the year ended December 31, 2022, as compared to $8.1 million for 2021.
In addition, we will continue to engage in business development initiatives with the goal of acquiring and in-licensing promising oncology platforms and assets and then further characterize and develop them utilizing our established preclinical and clinical development infrastructure.
We also continue to engage in business development initiatives aimed at acquiring and in-licensing promising oncology platforms and assets, with the goal of utilizing our established preclinical and clinical development infrastructure to further characterize and develop such platforms and assets.
The first of these studies to deliver results was CheckMate -9ER, and positive results from CheckMate -9ER served as the basis for the FDA’s, EC’s and MHLW’s approvals of CABOMETYX in combination with OPDIVO as a first-line treatment of patients with advanced RCC in January 2021, March 2021 and August 2021, respectively.
The first of these studies to deliver results was CheckMate-9ER, a phase 3 pivotal trial evaluating the combination of CABOMETYX and OPDIVO compared to sunitinib in previously untreated, advanced or metastatic RCC, and positive results from CheckMate-9ER served as the basis for the FDA’s, EC’s and MHLW’s approvals of CABOMETYX in combination with OPDIVO as a first-line treatment of patients with advanced RCC in January 2021, March 2021 and August 2021, respectively.
Ipsen royalty revenues were $97.2 million for the year ended December 31, 2021, as compared to $76.2 million for 2020.
Ipsen royalty revenues were $110.1 million for the year ended December 31, 2022, as compared to $97.2 million for 2021.
We project our fiscal 2022 gross margin to remain consistent with fiscal 2021. 74 Table of Contents Research and Development Expenses We do not track fully burdened research and development expenses on a project-by-project basis. We group our research and development expenses into three categories: (1) development; (2) drug discovery; and (3) other.
We project our gross margin in fiscal year 2023 will remain consistent with fiscal year 2022. Research and Development Expenses We do not track fully burdened research and development expenses on a project-by-project basis. We group our research and development expenses into three categories: (1) development; (2) drug discovery; and (3) other.
Our primary source of operating cash is cash collections from customers related to net product sales which we project will increase in 2022 compared to 2021 and cash collections from our commercial collaboration arrangements with Ipsen, Takeda and others related to royalties earned, the achievement of certain development, regulatory and commercial milestones as well as cash payments to us for cost reimbursements under certain of our development programs.
Our primary sources of operating cash are: cash collections from customers related to net product sales, which we project will increase in fiscal year 2023, as compared to fiscal year 2022; cash collections related to royalties earned from our commercial collaboration arrangements with Ipsen, Takeda and others and cash collections upon achievement of certain development, regulatory and commercial milestones; and cash collections for cost reimbursements under certain of our development programs.
The increase in cash, cash equivalents, restricted cash equivalent and investments at December 31, 2021, as compared to December 31, 2020, was primarily due to cash inflows generated by our operations, including collections of amounts due from customers, partially offset by operating cash payments for employee related expenditures, our development and discovery programs, and capital expenditures.
The increase in cash, cash equivalents, restricted cash equivalent and investments at December 31, 2022, as compared to December 31, 2021, was primarily due to cash inflows generated by our operations, including collections of amounts due from customers, and collection of a $100.0 million milestone payment from Ipsen, partially offset by operating cash payments for employee related expenditures, cash payments to support our development and discovery programs, cash payments for capital expenditures, lease payments and tax payments.
Collaboration services revenues were reduced by $14.3 million with respect to the 3% royalty we are required to pay on the net sales by Ipsen and Takeda of any product incorporating cabozantinib for the year ended December 31, 2021, as compared to $10.6 million for 2020.
Collaboration services revenues were reduced by $16.2 million and $14.3 million for the years ended December 31, 2022 and 2021, respectively, with respect to the 3% royalty we are required to pay on the net sales by Ipsen and Takeda of any product incorporating cabozantinib.
In addition, in March 2021, Ipsen and BMS received regulatory approval from the EC for CABOMETYX in combination with OPDIVO as a first-line treatment for patients with advanced RCC, and both Ipsen and BMS plan to submit applications to approve the combination in other territories beyond the EU.
In addition, in March 2021, Ipsen and BMS received regulatory approval from the EC for CABOMETYX in combination with OPDIVO as a first-line treatment for patients with advanced RCC, followed by additional regulatory approvals for the combination in other territories beyond the EU.
The increase in cost of goods sold for the year ended December 31, 2021, as compared to 2020, was the result of increases in royalty payments as a result of increased U.S. CABOMETYX sales and certain other period costs.
The increase in cost of goods sold for the year ended December 31, 2022, as compared to 2021, was primarily the result of increases in royalty payments as a result of increased U.S. CABOMETYX sales, which was partially offset by a decrease in certain period costs.
We are working to expand our oncology product pipeline through drug discovery efforts, which encompass our diverse small molecule and biotherapeutics programs exploring multiple modalities and mechanisms of action. In this regard, we conduct drug discovery activities with the goal of identifying new product candidates to advance into clinical trials.
We are expanding our oncology product pipeline through drug discovery efforts, which encompass both biotherapeutics and small molecule programs with multiple modalities and mechanisms of action, with the goal of identifying new product candidates to advance into clinical trials.
We project that our effective tax rate will be between 20% and 22% in 2022. 77 Table of Contents Liquidity and Capital Resources As of December 31, 2021, we had $1.9 billion in cash and investments, compared to $1.5 billion as of December 31, 2020.
We project that our effective tax rate will be between 20% and 22% in fiscal year 2023. Liquidity and Capital Resources As of December 31, 2022, we had $2.1 billion in cash, cash equivalents, restricted cash equivalents and investments, as compared to $1.9 billion as of December 31, 2021.
Collaboration Services Revenues Collaboration services revenues include the recognition of deferred revenues for the portion of upfront and milestone payments that have been allocated to research and development services performance obligations, development cost reimbursements earned under our collaboration agreements, and product supply revenues, which are net of product supply costs and the royalties we pay to Royalty Pharma on sales by Ipsen and Takeda of products containing cabozantinib.
Collaboration Services Revenues Collaboration services revenues include the recognition of deferred revenues for the portion of upfront and milestone payments that have been allocated to research and development services performance obligations, development cost reimbursements earned under our collaboration agreements, and product supply revenues, which are net of product supply costs and the royalties we pay to Royalty Pharma on sales by Ipsen and Takeda of products containing cabozantinib. 68 Table of Co ntents Development cost reimbursements were $60.3 million for the year ended December 31, 2022, as compared to $116.8 million for 2021.
We project that we may continue to spend significant amounts of cash to fund the continued development and commercialization of cabozantinib. In addition, we intend to continue to expand our oncology product pipeline through our drug discovery efforts, including additional research collaborations, in-licensing arrangements and other strategic transactions that align with our oncology drug development, and regulatory and commercial expertise.
In addition, we intend to continue to expand our oncology product pipeline through our drug discovery efforts, including additional research collaborations, in-licensing arrangements and other strategic transactions that align with our oncology drug development, and regulatory and commercial expertise.
We anticipate that the aggregate of our current cash and cash equivalents, short-term and long-term investments available for operations, net product revenues and collaboration revenues will enable us to maintain our short-term operations and execute our long-term plans.
We anticipate that the aggregate of our current cash and cash equivalents, short-term investments available for operations, net product revenues and collaboration revenues will enable us to maintain our operations for at least 12 months and thereafter for the foreseeable future.
Separately, our research and development objectives may be impeded by the challenges of scaling our organization to meet the demands of expanded drug development, unanticipated delays in clinical testing and the inherent risks and uncertainties associated with drug discovery operations, all of which may be increased as a result of the COVID-19 pandemic.
Separately, our research and development objectives may be impeded by the challenges of scaling our organization to meet the demands of expanded drug development, unanticipated delays in clinical testing and the inherent risks and uncertainties associated with drug discovery operations, especially on the global level.
Other research and development costs increased primarily related to technology services and related investments in support of digital transformation initiatives and an increase in allocated corporate costs, which were 75 Table of Contents partially offset by development cost reimbursements in connection with our collaboration arrangement with Roche.
Other research and development costs increased primarily related to technology costs, including our investments in digital transformation initiatives to support productivity and efficiency in our organization, and an increase in rent expenses, which were partially offset by development cost reimbursements in connection with our collaboration arrangement with Roche.
Building on preclinical and clinical observations that cabozantinib in combination with ICIs may promote a more immune-permissive tumor environment, we initiated numerous pivotal studies to further explore these combination regimens.
Moreover, these data sets may also prove valuable by informing our development plans for zanzalintinib. Building on preclinical and clinical observations that cabozantinib in combination with ICIs may promote a more immune-permissive tumor environment, we initiated numerous pivotal studies to further explore these combination regimens.
Drug discovery related license and other collaboration costs increased primarily due to increases in upfront license fees, including, in connection with our recent amended agreement with Iconic in the fourth quarter of 2021 for rights to additional compounds, and other increases in program initiation fees, development milestones, and research funding commitments related to business development activities.
Drug discovery-related license and other collaboration costs increased primarily due to increases in upfront license fees, including, in connection with our recent agreements with Sairopa and Catalent in the fourth quarter of 2022, and other increases in program initiation fees, development milestones, and research funding commitments related to collaboration agreements.
Provision for Income Taxes The provision for income taxes and the effective tax rates were as follows (dollars in thousands): Year Ended December 31, Percent Change 2021 2020 Provision for income taxes $ 63,091 $ 19,056 231 % Effective tax rate 21.4 % 14.6 % 47 % The increase in provision for income taxes for the year ended December 31, 2021, as compared to 2020, was primarily due to the increase in pre-tax income.
Provision for Income Taxes The provision for income taxes and the effective tax rates were as follows (dollars in thousands): Year Ended December 31, Percent Change 2022 2021 Provision for income taxes $ 52,070 $ 63,091 -17 % Effective tax rate 22.2 % 21.4 % 4 % The decrease in provision for income taxes for the year ended December 31, 2022, as compared to 2021, was primarily due to the decrease in pre-tax income.
These factors include enrollment in clinical trials for our drug candidates, preliminary data and final results from clinical trials, the potential indications for our drug candidates, the clinical and commercial potential for our drug candidates, and competitive dynamics. We also make our research and development decisions in the context of our overall business strategy.
These factors include enrollment in clinical trials for our drug candidates, preliminary data and final results from clinical trials, the potential market indications and overall clinical and commercial potential for our drug candidates, and competitive dynamics.
License Revenues License revenues include: (a) the recognition of the portion of milestone payments allocated to the transfer of intellectual property licenses for which it had become probable in the related period that the milestone would be achieved and a significant reversal of revenues would not occur in future periods; (b) royalty revenues and (c) the profit on the U.S. commercialization of COTELLIC from Genentech.
We project our discounts and allowances as a percentage of gross revenues may increase during fiscal year 2023 for similar reasons noted above. 67 Table of Co ntents License Revenues License revenues include: (a) the recognition of the portion of milestone payments allocated to the transfer of intellectual property licenses for which it had become probable, in the related period, that a milestone would be achieved and a significant reversal of revenues would not occur in future periods; (b) royalty revenues; and (c) the profit on the U.S. commercialization of COTELLIC from Genentech.
To facilitate the growth of these programs, we have established multiple research collaborations and in-licensing arrangements and entered into other strategic transactions that provide us with access to antibodies or other binders, which are the starting point for use with additional technology platforms that we employ to generate next-generation ADCs or multispecific antibodies.
To facilitate the growth of our various biotherapeutics programs, we have established multiple research collaborations and in-licensing arrangements and entered into other strategic transactions that provide us with access to antibodies, binders, payloads and conjugation technologies, which are the components employed to generate next-generation ADCs or multispecific antibodies.
The increase in research and development expenses for the year ended December 31, 2021, as compared to 2020, was primarily related to increases in license and other collaboration costs, personnel expenses, stock-based compensation and other research and development costs, partially offset by a decrease in clinical trial costs.
The increase in research and development expenses for the year ended December 31, 2022, as compared to 2021, was primarily related to increases in license and other collaboration costs, personnel expenses, consulting and outside services costs, clinical trial costs and other research and development costs.
For clinical trial expenses, the significant factors used in estimating accruals include the number of patients enrolled, the activities to be performed for each patient, the number of active clinical sites and the duration for which the patients will be enrolled in the trial.
For clinical trial expenses, the significant factors used in estimating accruals include the number of patients enrolled, the activities performed for each patient, the number of active clinical sites and the duration for which the patients will be enrolled in the trial. Certain of our in-licensing collaboration arrangements include contingent payments in the form of development, regulatory and commercial milestones.
We recognize stock-based compensation for PSUs over the requisite service period only for awards which we estimate will ultimately vest, which requires judgment as to the probability and timing of the achievement of the underlying performance goals.
As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future. We recognize stock-based compensation for PSUs over the requisite service period only for awards which we estimate will ultimately vest, which requires judgment as to the probability and timing of the achievement of the underlying performance goals.
The timing of cash generated from commercial collaborations and required for in-licensing collaborations related to upfront payments, initiation fees, milestone payments and cost reimbursements may vary from period to period. We also have cash requirements related to capital expenditures to support the planned growth of our business including investments in laboratory facilities and equipment.
The timing of cash generated from commercial collaborations and cash payments required for in-licensing collaborations relative to upfront license fee payments, research funding commitments, cost reimbursements, exercise of options payments and other contingent payments such as development milestone payments may vary from period to period. 72 Table of Co ntents We also have cash requirements related to capital expenditures to support the planned growth of our business including investments in laboratory facilities and equipment.
Recent Accounting Pronouncements For a description of the expected impact of recent accounting pronouncements, see “Note 1. Organization and Summary of Significant Accounting Policies” in the “Notes to Consolidated Financial Statements” contained in Part II, Item 8 82 Table of Contents of this Annual Report on Form 10-K.
Organization and Summary of Significant Accounting Policies” in the “Notes to Consolidated Financial Statements” contained in Part II, Item 8 of this Annual Report on Form 10-K.
For a more detailed discussion of this litigation matter, see “Legal Proceedings” in Part I, Item 3 of this Annual Report on Form 10-K. • In June 2021, we announced results from the phase 3 COSMIC-312 trial, in which the combination of cabozantinib and atezolizumab met one of the primary endpoints, demonstrating significant improvement in PFS versus sorafenib in patients with previously untreated advanced HCC at the planned primary analysis.
For a more detailed discussion of the MSN II litigation matter, see “Legal Proceedings” in Part I, Item 3 of this Annual Report on Form 10-K. • In March 2022, we announced results from the final OS analysis of COSMIC-312 trial, which showed neither improvement nor detriment in OS for cabozantinib in combination with atezolizumab versus sorafenib in patients with previously untreated advanced HCC.
Net cash used in investing activities decreased for the year ended December 31, 2021 as compared to 2020 primarily due to a net increase in cash proceeds from maturities and sales of investments, net of investment purchases partially offset by an increase in capital expenditures.
Net cash used in investing activities increased for the year ended December 31, 2022, as compared to 2021, primarily due to a decrease in cash proceeds from maturities and sales of investments, an increase in purchases of investments, and an increase in purchases of in-process research and development technology related to certain of our in-licensing collaboration arrangements, which were partially offset by a decrease in capital expenditures.
See “Results of Operations” below for a discussion of the detailed components and analysis of the amounts above. 70 Table of Contents Outlook, Challenges and Risks We will continue to face a number of challenges and risks that may impact our ability to execute on our 2022 business objectives, and some of these risks to our business have been or may be exacerbated by the COVID-19 pandemic.
See “Results of Operations” below for a discussion of the detailed components and analysis of the amounts above. Outlook, Challenges and Risks We will continue to face numerous challenges and risks that may impact our ability to execute on our business objectives.
Clinical trial costs decreased primarily due to lower costs associated with the COSMIC-312 and COSMIC-021 studies. In addition to reviewing the three categories of research and development expenses described above, we principally consider qualitative factors in making decisions regarding our research and development programs.
In addition to reviewing the three categories of research and development expenses described above, we principally consider qualitative factors in making decisions regarding our research and development programs.
Financing Activities The changes in cash flows from financing activities primarily relate to proceeds from employee stock programs and taxes paid related to net share settlement of equity awards.
Financing Activities The changes in cash flows from financing activities primarily relate to proceeds from employee stock programs and taxes paid related to net share settlement of equity awards. Net cash was provided by financing activities for the year ended December 31, 2022, as compared to net cash used in financing activities in the prior year ended December 31, 2021.
However, empirical data show that employees typically do not wait until the end of the contractual term of a nontransferable option to exercise. Accordingly, we are required to estimate the expected term of the option for input to an option-pricing model. Monte Carlo simulation models are used to determine grant date fair value of awards with market conditions.
However, empirical data show that employees typically do not wait until the end of the contractual term of a nontransferable option to exercise. 76 Table of Co ntents Accordingly, we are required to estimate the expected term of the option for input to an option-pricing model.
Our contractual obligations as of December 31, 2021 primarily consist of: Operating leases: We have certain lease agreements related to our corporate campus facilities, under which we are obligated to make minimum lease payments. As of December 31, 2021, we had $11.4 million of minimum lease payments due in one year and $289.1 million due over the remaining lease term.
Our contractual obligations as of December 31, 2022 primarily consist of: Operating leases: We have certain lease agreements related to our corporate campus facilities and other short term leases, under which we are obligated to make minimum lease payments.
COSMIC-021 is a broad phase 1b study evaluating the safety and tolerability of cabozantinib in combination with atezolizumab in patients with a wide variety of locally advanced or metastatic solid tumors.
To diversify our exploration of combinations with ICIs, we also initiated multiple trials evaluating cabozantinib in combination with Roche’s ICI, atezolizumab, beginning in 2017 with COSMIC-021, a broad phase 1b study evaluating the safety and tolerability of the cabozantinib and atezolizumab combination with atezolizumab in patients with a wide variety of locally advanced or metastatic solid tumors.
Cash provided by operating activities is derived by adjusting our net income for non-cash operating items such as deferred taxes, stock-based compensation, depreciation, non-cash lease expense, and changes in operating assets and liabilities, which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in our Consolidated Statements of Income.
Cash flow activities were as follows (in thousands): Year Ended December 31, 2022 2021 Net cash provided by operating activities $ 362,614 $ 400,804 Net cash used in investing activities $ (524,414) $ (42,884) Net cash provided by (used in) financing activities $ 586 $ (14,801) Operating Activities Cash provided by operating activities is derived by adjusting our net income for non-cash operating items such as deferred taxes, stock-based compensation, depreciation, non-cash lease expense, and changes in operating assets and 73 Table of Co ntents liabilities, which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in our Consolidated Statements of Income.
The terms of these arrangements typically include payment to us for one or more of the following: non-refundable, up-front license fees; development, regulatory and commercial milestone payments; product supply services; development cost reimbursements; profit sharing arrangements; and royalties on net sales of licensed products.
The terms of these arrangements typically include payment to us for one or more of the following: non-refundable, up-front license fees; development, regulatory and commercial milestone payments; product supply services; development cost reimbursements; profit sharing arrangements; and royalties on net sales of licensed products. 75 Table of Co ntents As part of the accounting for these arrangements, we must develop assumptions that require judgment to determine the standalone selling price for each performance obligation identified in the contract.
To better understand the individual contribution of the therapies, treatment arms in the expansion cohorts may include XL092 as a single-agent in addition to the ICI combination regimens.
To better understand the individual contribution of the therapies, treatment arms in the expansion cohorts may include zanzalintinib as a single agent in addition to the ICI combination regimens. We also initiated two phase 3 pivotal trials evaluating zanzalintinib in combination with ICIs in 2022.
We project our research and development expenses may increase in fiscal 2022 as compared to fiscal 2021, driven by our ongoing clinical evaluation of cabozantinib, the initiation of new clinical trials and expansion of ongoing clinical trials evaluating other product candidates in our pipeline, including ongoing and planned early-stage trials evaluating XL092, XB002, XL102 and XL114, and anticipated business development activities.
We project our research and development expenses may increase in fiscal year 2023, as compared to fiscal year 2022, primarily driven by an increase in personnel expenses to support our expanding discovery and development organization and an increase in clinical trial costs, including our ongoing clinical evaluation of cabozantinib in late-stage trials, the initiation of new clinical trials and expansion of ongoing clinical trials evaluating other product candidates in our pipeline, including STELLAR-303 and STELLAR-304 and planned initiation of multiple additional phase 3 pivotal trials evaluating zanzalintinib, and also our current early-stage trials evaluating zanzalintinib, XB002 and XL102, as well as anticipated business development activities.
Net cash provided by operating activities increased for the year ended December 31, 2021, as compared to 2020, primarily due to an increase in cash received on sales of our products, an increase in cash received from our commercial collaboration arrangements and net favorable changes in operating assets and liabilities, partially offset by an increase in cash paid for operating expenses.
Net cash provided by operating activities decreased for the year ended December 31, 2022, as compared to 2021, primarily due to an increase in cash paid for certain operating expenses primarily employee related expenses, collaboration related research and development payments and tax payments, partially offset by an increase in cash received on sales of our products and from our commercial collaboration arrangements, including the collection of a $100.0 million milestone payment from Ipsen.
For additional information on our specific research collaborations, in-licensing arrangements and other strategic transactions related to our small molecule and biotherapeutics programs, see “Business—Collaborations and Business Development Activities—Research Collaborations, In-licensing Arrangements and Other Business Development Activities” in Part I, Item 1 of this Annual Report on Form 10-K.
For additional information on these research collaborations and in-licensing arrangements related to our small molecule programs, see “Business—Collaborations and Business Development Activities—Research Collaborations and In-licensing Arrangements” in Part I, Item 1 of this Annual Report on Form 10-K. The most advanced compounds to emerge from these arrangements is XL102, our lead program targeting CDK7, in-licensed from Aurigene.
In the longer term, we may eventually face competition from potential manufacturers of generic versions of our marketed products, including the proposed generic versions of CABOMETYX tablets that are the subject of ANDAs submitted to the FDA by MSN and Teva, and the approval of either MSN’s or Teva’s ANDA could significantly decrease our revenues derived from the U.S. sales of CABOMETYX and thereby materially harm our business, financial condition and results of operations.
In the longer term, we may eventually face competition from potential manufacturers of generic versions of our marketed products, including the proposed generic versions of CABOMETYX tablets that are the subject of ANDAs submitted to the FDA by MSN, Teva and Cipla.
Organization and Summary of Significant Accounting Policies” in the “Notes to Consolidated Financial Statements” contained in Part II, Item 8 of this Annual Report on Form 10-K. 80 Table of Contents Revenue Recognition Net Product Revenues and Discounts and Allowances We recognize revenues when our customers obtain control of promised goods or services, in an amount that reflects the consideration to which we are entitled to in exchange for those goods or services.
Revenue Recognition Net Product Revenues and Discounts and Allowances We recognize revenues when our customers obtain control of promised goods or services, in an amount that reflects the consideration to which we are entitled to in exchange for those goods or services.
Cabozantinib Franchise On January 22, 2021, the FDA approved CABOMETYX in combination with OPDIVO as a first-line treatment of patients with advanced RCC. This regulatory milestone expands upon the FDA’s prior approvals of CABOMETYX as a monotherapy for previously treated patients with advanced RCC in April 2016 and for previously untreated patients with advanced RCC in December 2017.
Cabozantinib Franchise The FDA first approved CABOMETYX as a monotherapy for previously treated patients with advanced RCC in April 2016, and then for previously untreated patients with advanced RCC in December 2017.
In addition, we will continue to engage in business development initiatives with the goal of acquiring and in-licensing promising oncology platforms and assets and then further characterize and develop them utilizing our established preclinical and clinical development infrastructure.
In addition, we will continue to engage in business development initiatives with the goal of acquiring and in-licensing promising oncology platforms and assets and then further characterize and develop them utilizing our established preclinical and clinical development infrastructure. 2022 Business Updates and Financial Highlights During 2022, we continued to execute on our business objectives, generating significant revenues from operations and enabling us to continue to seek to maximize the clinical and commercial potential of our products and expand our product pipeline.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeSubstantially all of our investment portfolio consists of marketable securities with active secondary or resale markets to help ensure portfolio liquidity, and we have implemented guidelines limiting the term-to-maturity of our investment instruments. Due to the conservative and short-term nature of these instruments, we do not believe that we have a material exposure to interest rate risk.
Biggest changeThese investments are denominated in U.S. Dollars. All of our interest-bearing securities are subject to interest rate risk and could decline in value if interest rates fluctuate. Substantially all of our investment portfolio consists of marketable securities with active secondary or resale markets to help ensure portfolio liquidity, and we have implemented guidelines limiting the term-to-maturity of our investment instruments.
If market interest rates were to increase or decrease by one percentage point, the fair value of our investment portfolio would increase or decrease by an immaterial amount. Foreign Exchange Rate Risk Fluctuations in the exchange rates of the U.S. dollar and foreign currencies may have the effect of increasing or decreasing our revenues and expenses.
Foreign Exchange Rate Risk Fluctuations in the exchange rates of the U.S. dollar and foreign currencies may have the effect of increasing or decreasing our revenues and expenses.
Credit Risk We manage credit risk associated with our investment portfolio through our investment policy, which limits purchases to high-quality issuers and limits the amount of our portfolio that can be invested in a single issuer.
Credit Risk We manage credit risk associated with our investment portfolio through our investment policy, which limits purchases to high-quality issuers and limits the amount of our portfolio that can be invested in a single issuer. 77 Table of Co ntents Interest Rate Risk We invest our cash in a variety of financial instruments, principally securities issued by the U.S. government and its agencies, investment-grade corporate bonds and commercial paper, and money market funds.
Removed
Interest Rate Risk We invest our cash in a variety of financial instruments, principally securities issued by the U.S. government and its agencies, investment-grade corporate bonds and commercial paper, and money market funds. These investments are denominated in U.S. Dollars. All of our interest-bearing securities are subject to interest rate risk and could decline in value if interest rates fluctuate.
Added
Due to the conservative and short-term nature of these instruments, we do not believe that we have a material exposure to interest rate risk. If market interest rates were to increase or decrease by one percentage point, the fair value of our investment portfolio would increase or decrease by an immaterial amount.

Other EXEL 10-K year-over-year comparisons