Exelixis, Inc. (EXEL) Q2 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call reveals strong financial performance, with increased revenues and optimistic guidance. The positive sentiment is reinforced by the strategic focus on new indications and the robust pipeline development. Share repurchases further enhance shareholder value. Despite some uncertainties in the Q&A, such as unclear timelines and conservative communication, the overall outlook is positive due to the promising growth prospects and strategic initiatives.

Key Financial Performance

Cabozantinib U.S. franchise net product revenues $520 million in Q2 2025, a 19% increase year-over-year from $438 million in Q2 2024. The growth was driven by strong commercial demand, negligible benefit from clinical trial sales, and significant gross-to-net headwinds.

Total revenues $568 million in Q2 2025, which includes cabozantinib franchise net product revenues of $520 million and collaboration revenues of $48.2 million. Collaboration revenues include $43.4 million in royalties from Ipsen and Takeda.

Gross-to-net for cabozantinib franchise 30.2% in Q2 2025, higher than Q1 2025 due to increased 340B volume, which now accounts for over 24% of total volume, up 4 percentage points from Q2 2024.

Operating expenses $355 million in Q2 2025, down from $369 million in Q1 2025. The decline was due to lower manufacturing costs for drug development candidates, clinical trial costs, and general and administrative costs.

Provision for income taxes $45.6 million in Q2 2025, slightly lower than $46.1 million in Q1 2025. The One Big Beautiful Bill Act provided a federal tax cash benefit of $147 million for previously unamortized domestic R&D expenditures.

GAAP net income $184.8 million in Q2 2025, or $0.68 per share basic and $0.65 per share diluted.

Non-GAAP net income $212.6 million in Q2 2025, or $0.78 per share basic and $0.75 per share diluted. This excludes $28 million of stock-based compensation expense net of related income tax effect.

Cash and marketable securities $1.4 billion as of June 30, 2025.

Stock repurchase $302 million worth of shares repurchased in Q2 2025, retiring approximately 7.5 million shares at an average price of $40.10 per share.

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Operating Highlights

Cabozantinib U.S. business: Strong growth in demand and revenue, with net product revenues growing 19% year-over-year to $520 million in Q2 2025. Recently approved indications contributed to 4% of net product revenue.

Zanzalintinib: Advancing as the next oncology franchise with positive top-line results from STELLAR-303 in colorectal cancer. Decision made to not advance STELLAR-305 in head and neck cancer due to commercial and competitive considerations.

Early-stage pipeline: Advancing new biologics and small molecules, including XL309, XB010, XB628, and XB371, into clinical evaluation.

European market expansion: Ipsen received European Commission approval for neuroendocrine tumor (NET) indications, expected to add to royalty streams.

Revenue performance: Total revenues of $568 million in Q2 2025, with $520 million from cabozantinib franchise. Collaboration revenues included $48.2 million, with $43.4 million from royalties.

Cost management: Operating expenses decreased to $355 million in Q2 2025 from $369 million in Q1 2025, driven by lower manufacturing and clinical trial costs.

Stock repurchase: Repurchased $302 million of shares in Q2 2025, with $204 million remaining under the authorized plan.

Capital allocation: Focused on advancing R&D and commercial priorities while managing capital allocation. Decision to prioritize high-probability opportunities like zanzalintinib over less promising trials.

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Risk or Challenges

Regulatory and Approval Risks: The company faces risks related to regulatory review and approval processes for its drugs, including potential delays or rejections in obtaining approvals for new indications or drugs.

Market Competition: Exelixis operates in a highly competitive oncology market, facing pressures from existing and emerging therapies, including generic alternatives in the neuroendocrine tumor (NET) market.

Clinical Trial Risks: The company has experienced challenges in clinical trials, such as the decision to halt the STELLAR-305 trial due to commercial and competitive considerations, which could impact future drug development timelines and opportunities.

Supply Chain and Manufacturing Costs: Higher manufacturing costs for drug development candidates and variability in clinical trial sales could affect financial performance.

Economic and Pricing Pressures: The company is experiencing increased gross-to-net deductions, particularly due to higher 340B volume, which now accounts for over 24% of total volume, potentially impacting profitability.

Capital Allocation and Financial Risks: Exelixis must carefully manage capital allocation to balance R&D investments, share repurchases, and business development activities, which could strain financial resources if not managed effectively.

Dependence on Collaboration Partners: The company relies on partners like Ipsen and Takeda for royalties and collaboration revenues, which could be affected by partner performance or market dynamics.

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Guidance & Outlook

Cabozantinib Franchise Growth: The cabozantinib franchise is expected to continue its strong growth trajectory, with a focus on expanding its market share in neuroendocrine tumors (NETs) and renal cell carcinoma (RCC). The company anticipates further revenue contributions from the recent approval of cabozantinib for NETs in Europe.

Zanzalintinib Development: Zanzalintinib is advancing as the next oncology franchise, with multiple pivotal trials underway. Positive top-line results from the STELLAR-303 trial in colorectal cancer (CRC) are expected to lead to regulatory filings. Additional trials, such as STELLAR-304 in non-clear cell RCC, are progressing, with results anticipated in the first half of 2026.

Early-Stage Pipeline: The company is advancing its early-stage pipeline, including promising candidates like XL309 and XB010, which are progressing through Phase I trials. New IND filings, such as XB371, are expected to contribute to future growth.

Capital Allocation and Business Development: Exelixis plans to carefully manage capital allocation to support R&D and commercial priorities. The company is focused on acquiring high-conviction assets and continuing share repurchases when undervalued.

Financial Guidance for 2025: The company is reiterating its full-year 2025 financial guidance and expects to update it as momentum builds in the second half of the year, particularly with the launch of new indications and additional revenue opportunities.

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Shareholder Return Plan

Share Repurchase Program: During the second quarter of 2025, Exelixis repurchased approximately $302 million of the company's shares, resulting in the retirement of approximately 7.5 million shares at an average price per share of $40.10. As of the end of the second quarter of 2025, the company had approximately $204 million remaining under the $500 million stock repurchase plan authorized by the Board in February 2025.

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Key Q&A

Q:What are the takeaways from the head and neck study and its implications for future studies?

A:Management emphasized that zanzalintinib is a franchise molecule with multiple areas for development. They are not sharing data at this time but will do so in the future.

Q:What is the outlook for the $3 billion peak revenue guidance for cabo and its market share in NET and RCC?

A:Management highlighted consistent growth in market share and revenue for cabo, particularly in RCC. They are optimistic about achieving similar success in NET, citing a 35% market share in the second-line oral market shortly after launch. They anticipate strong growth in NETs going forward.

Q:How does zanza position itself in the colorectal cancer landscape, and what is the importance of the NLM subset in STELLAR-303?

A:Management emphasized the significance of the OS benefit in colorectal cancer and noted that zanza would be the only other potential doublet available to patients if approved. They are awaiting data on the NLM subgroup and will share it in the future.

Q:Is the ITT data from STELLAR-303 clinically meaningful, and are there plans to advance zanza in earlier lines of CRC?

A:Management stated that OS is the gold standard for approval and that the combination of zanza and atezo demonstrated a statistically significant improvement in OS. They are interested in evaluating zanza in the adjuvant setting for high-risk patients.

Q:What are the pricing dynamics for cabozantinib, especially with respect to the 340B volume?

A:Management noted a 4% increase in 340B volume, which is a highly discounted segment, impacting gross-to-net. They project gross-to-net to be closer to 30%.

Q:What are the primary endpoints for STELLAR-304, and how does the control arm in STELLAR-303 compare to historical data?

A:STELLAR-304 has dual primary endpoints of PFS and ORR, and hitting either constitutes a positive study. Management did not provide specific details on the control arm in STELLAR-303 but will share data in the future.

Q:Why did the company decide not to proceed with the head and neck study?

A:The decision was based on the competitive landscape, regulatory environment, and prioritization of other areas for zanza development. Management reviewed the data and decided not to proceed to Phase III.

Q:What is the potential for zanza as a life cycle play to cabo in RCC and NET versus broader indications?

A:Management aims to maximize zanza's impact by targeting new indications and reinforcing its success in areas like CRC. They are prioritizing high PTS and high commercial potential opportunities.

Q:What is the epidemiology and duration of treatment for adjuvant CRC settings?

A:Management noted that high-risk post-adjuvant CRC patients have a recurrence risk measured in months. They are considering longer treatment durations for these patients.

Q:What is the contribution of components in STELLAR-303, and how important is it to demonstrate benefit in liver mets patients?

A:Management cited prior data showing the contribution of atezo to zanza in improving efficacy parameters. They emphasized the positive OS readout in the ITT population and are awaiting further data on liver mets patients.

Q:What is the revenue trajectory for NET and the breadth of prescribing among target physicians?

A:Management did not provide specific quarter-to-quarter guidance but expressed satisfaction with the broad prescribing base, including both academic and community settings.

Q:Does the dual endpoint in STELLAR-303 allow for approval in one patient population if the other is less favorable?

A:Yes, the dual primary endpoint design allows for approval if one endpoint is positive.

Q:What are the clinical trial revenues expected in the second half?

A:Management stated that clinical trial revenues are choppy and hard to predict.

Q:What was the decision-making process for the head and neck study?

A:The trial was designed with a gate, and management reviewed unblinded data. They decided to prioritize other indications and allocate resources accordingly.

Q:When will the ITT data from STELLAR-303 be presented?

A:Management did not specify a timeline but mentioned that they could present ITT data before the final NLM analysis.

Q:Review of Unclear Management Responses

A:Management avoided providing specific details on several topics, including the control arm in STELLAR-303, the exact timeline for presenting ITT data, and the specifics of the head and neck study data. They also used conservative language in discussing the clinical meaningfulness of ITT data and did not provide clear guidance on clinical trial revenues or the revenue trajectory for NET.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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EXEL Slides

Exelixis Q1 2025 slides: Revenue up 31%, raises FY guidance on CABOMETYX strength

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Exelixis Q2 2025 slides: cabozantinib franchise grows 19% YoY, NET launch gains traction

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EXEL Report

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