Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 2, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 000-30235 EXELIXIS, INC. (Exact name of registrant as specified in its charter) Delaware 04-3257395 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number) 1851 Harbor Bay Parkway Alameda, CA 94502 (650) 837-7000 (Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock $.001 Par Value per Share EXEL The Nasdaq Stock Market LLC Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days). Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ As of April 26, 2021, there were 313,387,205 shares of the registrant’s common stock outstanding. Table of Contents EXELIXIS, INC. QUARTERLY REPORT ON FORM 10-Q INDEX Page PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) 3 Condensed Consolidated Balance Sheets 3 Condensed Consolidated Statements of Income 4 Condensed Consolidated Statements of Comprehensive Income (Loss) 4 Condensed Consolidated Statements of Stockholders’ Equity 5 Condensed Consolidated Statements of Cash Flows 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 19 Item 3. Quantitative and Qualitative Disclosures About Market Risk 32 Item 4. Controls and Procedures 32 PART II - OTHER INFORMATION Item 1. Legal Proceedings 33 Item 1A. Risk Factors 33 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 51 Item 3. Defaults Upon Senior Securities 51 Item 4. Mine Safety Disclosures 52 Item 5. Other Information 52 Item 6. Exhibits 52 SIGNATURES 2 Table of Contents PART I - FINANCIAL INFORMATION Item 1. Financial Statements EXELIXIS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) (unaudited) March 31, 2021 December 31, 2020 ASSETS Current assets: Cash and cash equivalents $ 370,209 $ 319,217 Short-term investments 815,285 887,319 Trade receivables, net 177,673 160,875 Inventory 24,757 20,973 Prepaid expenses and other current assets 46,341 57,011 Total current assets 1,434,265 1,445,395 Long-term investments 328,860 330,751 Property and equipment, net 78,453 67,384 Deferred tax assets, net 160,598 156,711 Goodwill 63,684 63,684 Other long-term assets 124,682 73,408 Total assets $ 2,190,542 $ 2,137,333 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 13,821 $ 23,632 Accrued compensation and benefits 37,945 51,189 Accrued clinical trial liabilities 59,762 52,251 Rebates and fees due to customers 31,468 20,683 Accrued collaboration liabilities 13,461 12,456 Other current liabilities 56,880 44,447 Total current liabilities 213,337 204,658 Long-term portion of deferred revenues 9,760 3,755 Long-term portion of operating lease liabilities 52,837 49,086 Other long-term liabilities 3,421 721 Total liabilities 279,355 258,220 Commitments and contingencies Stockholders’ equity: Preferred stock, $0.001 par value, 10,000 shares authorized and no shares issued — — Common stock, $0.001 par value; 400,000 shares authorized; issued and outstanding: 313,262 and 311,627 at March 31, 2021 and December 31, 2020, respectively 313 312 Additional paid-in capital 2,354,103 2,321,895 Accumulated other comprehensive income 2,740 4,476 Accumulated deficit (445,969) (447,570) Total stockholders’ equity 1,911,187 1,879,113 Total liabilities and stockholders’ equity $ 2,190,542 $ 2,137,333 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 3 Table of Contents EXELIXIS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts) (unaudited) Three Months Ended March 31, 2021 2020 Revenues: Net product revenues $ 227,212 $ 193,880 License revenues 27,528 20,879 Collaboration services revenues 15,490 12,156 Total revenues 270,230 226,915 Operating expenses: Cost of goods sold 13,198 9,289 Research and development 159,288 101,877 Selling, general and administrative 102,351 62,940 Total operating expenses 274,837 174,106 Income (loss) from operations (4,607) 52,809 Interest income 2,682 7,220 Other income (expense), net (90) 6 Income (loss) before income taxes (2,015) 60,035 Provision for (benefit from) income taxes (3,616) 11,423 Net income $ 1,601 $ 48,612 Net income per share: Basic $ 0.01 $ 0.16 Diluted $ 0.00 $ 0.15 Weighted-average common shares outstanding: Basic 312,473 305,388 Diluted 321,287 315,839 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. EXELIXIS, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) (unaudited) Three Months Ended March 31, 2021 2020 Net income $ 1,601 $ 48,612 Other comprehensive income (loss): Net unrealized losses on available-for-sale debt securities, net of tax impact of $499 and $941, respectively (1,736) (3,291) Comprehensive income (loss) $ (135) $ 45,321 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 4 Table of Contents EXELIXIS, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands) (unaudited) Three Months Ended March 31, 2021 Accumulated Common Stock Additional Other Total Paid-in Comprehensive Accumulated Stockholders’ Shares Amount Capital Income Deficit Equity Balance at December 31, 2020 311,627 $ 312 $2,321,895 $ 4,476 $ (447,570) $ 1,879,113 Net income — — — — 1,601 1,601 Other comprehensive loss — — — (1,736) — (1,736) Issuance of common stock under equity incentive plans 1,635 1 4,201 — — 4,202 Stock transactions associated with taxes withheld on equity awards — — (6,646) — — (6,646) Stock-based compensation — — 34,653 — — 34,653 Balance at March 31, 2021 313,262 $ 313 $2,354,103 $ 2,740 $ (445,969) $ 1,911,187 Three Months Ended March 31, 2020 Accumulated Common Stock Additional Other Total Paid-in Comprehensive Accumulated Stockholders’ Shares Amount Capital Income (loss) Deficit Equity Balance at December 31, 2019 304,831 $ 305 $2,241,947 $ 3,069 $ (559,351) $ 1,685,970 Net income — — — — 48,612 48,612 Other comprehensive loss — — — (3,291) — (3,291) Issuance of common stock under equity incentive plans 949 1 4,171 — — 4,172 Stock transactions associated with taxes withheld on equity awards — — (1,793) — — (1,793) Stock-based compensation — — 13,982 — — 13,982 Balance at March 31, 2020 305,780 $ 306 $2,258,307 $ (222) $ (510,739) $ 1,747,652 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 5 Table of Contents EXELIXIS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Three Months Ended March 31, 2021 2020 Net income $ 1,601 $ 48,612 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 3,227 2,175 Stock-based compensation 34,653 13,982 Non-cash lease expense 1,221 1,174 Deferred taxes (3,388) 10,128 Other, net 6,578 (888) Changes in operating assets and liabilities: Trade receivables, net (17,690) (18,270) Inventory (2,090) (4,695) Prepaid expenses and other assets 1,872 (2,863) Deferred revenue 13,422 8,850 Accounts payable and other liabilities 138 (2,131) Net cash provided by operating activities 39,544 56,074 Cash flows from investing activities: Purchases of property, equipment and other (13,557) (2,961) Purchases of investments (331,612) (251,505) Proceeds from maturities and sales of investments 407,424 287,086 Net cash provided by investing activities 62,255 32,620 Cash flows from financing activities: Proceeds from issuance of common stock under equity incentive plans 2,791 3,938 Taxes paid related to net share settlement of equity awards (5,441) (1,793) Net cash (used in) provided by financing activities (2,650) 2,145 Net increase in cash, cash equivalents and restricted cash equivalents 99,149 90,839 Cash, cash equivalents and restricted cash equivalents at beginning of period 320,772 268,137 Cash, cash equivalents and restricted cash equivalents at end of period $ 419,921 $ 358,976 Supplemental cash flow disclosures: Non-cash operating activities: Right-of-use assets obtained in exchange for lease obligations $ 4,893 $ 576 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.