Exelixis, Inc. (NASDAQ:EXEL) Q3 2025 Earnings Call Transcript

Exelixis, Inc. (NASDAQ:EXEL) Q3 2025 Earnings Call Transcript November 4, 2025

Exelixis, Inc. beats earnings expectations. Reported EPS is $0.78, expectations were $0.68.

Operator: Good day, ladies and gentlemen, and welcome to the Exelixis’ Third Quarter 2025 Financial Results Conference Call. My name is Sherry, and I’ll be your operator for today. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to your host for today, Ms. Susan Hubbard, Executive Vice President of Public Affairs and Investor Relations. Please proceed.

Susan Hubbard: Thank you, Sherry, and thank you all for joining us for the Exelixis’ Third Quarter 2025 Financial Results Conference Call. Joining me on today’s call are Mike Morrissey, our President and CEO; and Chris Senner, our Chief Financial Officer; Dana Aftab, our Executive Vice President of Research and Development; and P.J. Haley, our Executive Vice President of Commercial, who will review our progress for the Third Quarter 2025 ended October 3, 2025. During the call today, we will refer to financial measures not calculated according to generally accepted accounting principles. Please refer to today’s press release, which is posted on our website for an explanation of our reasons for using such non-GAAP measures as well as tables deriving these measures from our GAAP results.

During the course of this presentation, we will be making forward-looking statements regarding future events and the future performance of the company. This includes statements about possible developments regarding discovery, product development, regulatory, commercial, financial and strategic matters, potential growth opportunities and government drug pricing policies and initiatives. Actual events or results could, of course, differ materially. We refer you to the documents we file from time to time with the SEC, which, under the heading Risk Factors, identify important factors that cause actual results to differ materially from those expressed by the company verbally and in writing today, including, without limitations, risks and uncertainties related to product commercial success, market competition, regulatory review and approval processes, conducting clinical trials, compliance with applicable regulatory requirements, our dependence on collaborative partners and the level of cost associated with discovery, product development, business development and commercialization activities.

And with that, I’ll turn the call over to Mike.

Michael Morrissey: All right. Thank you, Susan, and thanks to everyone for joining us on the call today. Exelixis had a strong third quarter, building on our progress from the first half of 2025. Accelerating R&D momentum coupled with flawless commercial execution has the potential to transform our business as we bring new treatment options to patients and build value for shareholders. The entire Exelixis team is committed to building a best-in-class multi-franchise oncology business, and all corporate activities are aligned on a single focus to improve the standard of care for patients with cancer. Our future success will be accelerated by increasing the number of cancer patients served with current and future Exelixis medicines and the impact we have on their disease.

The cabozantinib business has never been stronger and we’re pleased to see zanzalintinib move to center stage with our first big clinical success in CRC. Key highlights for the third quarter include: first, continued robust performance of the cabozantinib U.S. business with strong growth in demand and revenue from our commercial activities, cabozantinib maintained its leadership position as the top TKI for RCC and importantly, shows consistent growth in the first-line segment. U.S. Cabo franchise net product revenues grew approximately 14% year-over-year to $543 million in the third quarter 2025 compared to $478 million in the third quarter of 2024. Global Cabo franchise and their product revenues generated by Exelixis and our partners were approximately $739 million in the third quarter of 2025 compared with $653 million in the third quarter of 2024.

We’re excited by the broad adoption of cabo for the recently approved net indications and have already built a leading position in the oral second-line plus NET segment with a greater than 40% new patient share based on market research. Cabo demand in neuroendocrine tumors grew about 50% and contributed approximately 6% of our third quarter business. With the strong foundation, we expect to exceed $100 million in revenue for the net indication in 2025. Based on our early success in the net launch, and with other GI opportunities on the horizon, we’re expediting the full build-out of our GI sales team starting in fourth quarter 2025 to accelerate the growth of the CABINET indication before zanza comes to the forefront. We think this enhancement could be an important component of our growth narrative in 2026 and speaks to the confidence we have in both cabo and zanza as we closed out 2025.

P.J. will provide more information and commentary about our third quarter franchise performance and encouraging dynamics of the net launch in his prepared remarks. Second, zanzalintinib is rapidly advancing as our next oncology franchise opportunity and the focus of seven ongoing and soon to start pivotal trials. We’ve continued to prioritize zanza with existing and new indications and combinations as potentially the most promising and expeditious path to a second Exelixis oncology franchise and one that we believe can eclipse the size, scope and impact of our cabozantinib business. Importantly, we’re engaged in numerous clinical trial discussions for zanza that could expand the scope and reach of our zanza pivotal trial efforts. We’re thrilled with the positive results for STELLAR-303 and CRC and intend to file in this indication with regulators as quickly as possible.

We understand the nuances of the CRC market in the U.S. and believe we can effectively navigate the intricacies of this complicated disease and the current competitive dynamics pending approval. I’ll remind everyone of the important messages from the full data set presented at ESMO and published simultaneously in Lancet. Zanza in combination with atezo, but to the first clinical success in a non-MSI-high third-line plus CRC population when compared against a contemporary standard of care. I want to reiterate that four other checkpoint containing regimens failed to achieve this goal. Market research underscores that late-line CRC patients are interested in utilizing immune checkpoint inhibition to attack the disease head on. So the zanza-atezo combo could represent a meaningful advance.

The absolute magnitude of the overall survival benefit in the ITT population with the zanza-atezo combination is notable, especially in the context of the offering the potential of a non-chemo containing regimen. We’re especially pleased with the magnitude of benefit in patients with prior bevacizumab treatment since the vast majority of CRC patients in the U.S. received bevacizumab as part of their first and/or second line treatment regimens. Tolerability and safety of the zanza-atezo combination is consistent with other TKI checkpoint combinations. The 303 trial continues to include survival events in the non-liver met subgroup and we expect to trigger the final analysis for non-liver met patients in midyear 2026. And again, as you’ll hear from Dana, seven ongoing and new zanza pivotal trials are in the queue to address important unmet medical needs for known and new indications across multiple lines of therapy.

The Exelixis early-stage pipeline continues to progress quickly with a range of new and potentially differentiated biologics and small molecules heading into and through early clinical evaluation. Dana will highlight these activities today at a high level, and you can expect additional details on these efforts along with our zanza pivotal trial update at our upcoming R&D Day on December 10. Finally, we continue to carefully manage capital allocation while advancing our R&D and commercial priorities. Our balance sheet and expected free cash flows remain strong and provide us with the opportunity to advance our pipeline priorities while we return cash to shareholders. We plan to repurchase shares when we believe they are undervalued, and we’re pleased that we have been authorized to repurchase an additional $750 million of our shares.

So with that, please see our press release issued an hour ago for our third quarter 2025 financial results and an extensive list of key corporate milestones achieved in the quarter. And I’ll now turn the call over to Chris.

Christopher Senner: Thanks, Mike. For the third quarter of 2025, the company reported total revenues of approximately $598 million, which included cabozantinib franchise NET product revenues of approximately $543 million. CABOMETYX net product revenues were approximately $540 million. Gross net for the cabozantinib franchise in the third quarter 2025 was 30.4%. During the quarter, we experienced higher deductions from revenue related to 340B discounts offset by lower Medicare and co-pay assistance expenses. We continue to project that our gross to net for the cabozantinib franchise will be approximately 30% for the year. Trade inventory at the end of the third quarter, 2025 was approximately 2 weeks on hand, which was lower when compared to the second quarter of 2025.

Total revenues also included approximately $54.8 million in collaboration revenues, which includes approximately $46.3 million in royalties earned from our partners, Ipsen and Takeda on their sales of cabozantinib in their respective territories. Our total operating expenses for the third quarter of 2025 were approximately $361 million compared to $355 million in the second quarter of 2025. The sequential increase in these operating expenses was primarily driven by a $19.8 million restructuring charge we took during the third quarter. The increase in restructuring expense was partially offset by lower SG&A expenses. Provision for income taxes for the third quarter of 2025 was approximately $58.8 million compared to a provision for income taxes of approximately $45.6 million for the second quarter of 2025.

The company reported GAAP net income of approximately $193.6 million or $0.72 per share basic and $0.69 per share diluted for the third quarter of 2025. The company also reported non-GAAP net income of approximately $217.9 million or $0.81 per share basic and $0.78 per share diluted. Non-GAAP net income excludes the impact of approximately $24 million of stock-based compensation expense net of related income tax effect. Cash and marketable securities for the quarter ended September 30, 2025, were approximately $1.6 billion. During the third quarter of 2025, we repurchased approximately $99 million of the company’s shares, resulting in the retirement of approximately 2.4 million shares at an average price per share of $41.69. As of the end of the third quarter 2025, we had approximately $105 million remaining under the $500 million stock repurchase plan authorized by the company’s Board in February 2025.

On October 31, 2025, the company’s Board authorized an additional share repurchase program totaling $750 million that expires at the end of 2026. We are updating our full year 2025 financial guidance, which is detailed on Slide 14 of our earnings presentation. We are narrowing our total revenue and net product revenue guidance to the upper end of our previously provided guidance ranges. We are projecting that total revenue will be between $2.3 billion and $2.35 billion, and our net product revenue will be between $2.1 billion and $2.15 billion. We are tightening our cost of goods guidance to be approximately 4% of net product revenues. We are lowering our R&D expense guidance range by $75 million to $850 million to $900 million. We are tightening our SG&A expense guidance range to be between $500 million and $525 million.

And finally, we are lowering our full year effective tax rate guidance to be between 17% and 18%. With that, I’ll turn the call over to Dana.

Dana Aftab: Thanks, Chris. First, I’d like to start by saying how excited I am to be leading the R&D organization. The energy and engagement across R&D is super high right now and the momentum that carried us into and through ESMO is continuing to drive our teams with an emphasis on execution and collaboration. Our focus in R&D is on maximizing the opportunities for our portfolio, including zanzalintinib and our earlier-stage pipeline of promising small molecules and biotherapeutics. As I mentioned, we have a lot of momentum coming out of ESMO, primarily driven by our presentation of the results from the STELLAR-303 trial comparing the combination of zanzalintinib plus atezolizumab versus regorafenib in patients with non-microsatellite instability high or non-MSI high colorectal cancer who have received multiple prior therapies.

As a brief reminder, the trial has dual primary endpoints designed to assess survival outcomes more broadly in the intention to treat or ITT population and more specifically in the population of patients without liver metastases, which we refer to as the NLM patients or population. The study met one of its dual primary endpoints, demonstrating a 20% reduction in the risk of death with the combination in the ITT population at the final analysis with a stratified hazard ratio of 0.80, a 95% confidence interval of 0.69 to 0.93 and a p-value of 0.0045. At a median follow-up of 18 months, the median overall survival in the ITT population was 10.9 months with the combination of zanza plus atezo versus 9.4 months with rego. The survival benefit with the combination was demonstrated early and was consistent throughout the Kaplan-Meier curve.

The overall survival benefit with the zanza plus atezo combination was observed across all pre-specified subgroups with similar hazard ratios observed in key subgroups, including liver involvement, prior treatment with anti-VEGF therapy, geographic region and RAS mutation status. Data pertaining to the other dual primary endpoint of overall survival in the NLM population were immature at the data cutoff, but a prespecified interim analysis showed a trend in overall survival favoring the zanza plus atezo combination with a median of 15.9 months with the combination and 12.7 months with rego. With a median follow-up of 16.8 months, the stratified hazard ratio for this analysis was 0.79 with a 95% confidence interval of 0.61 to 1.03 and a p-value of 0.0875.

The trial will proceed to the planned final analysis for this endpoint, which our current projections indicate will be triggered around midyear 2026. The safety profile of the combination was consistent with other TKI/IO combinations with no new safety signals. And finally, we were thrilled to have the trial results published in the Lancet simultaneously with the ESMO presentation. Needless to say, we are very excited about these results, which are highly impactful for a number of reasons. First, prior to the STELLAR-303 readout, there were 4 Phase III clinical trials in colorectal cancer that evaluated immunotherapy-containing regimens, all of which failed to show an overall survival benefit versus the standard of care in non-MSI-high patients, which comprise 95% of the overall colorectal cancer population.

As the first and only Phase III trial to show an overall survival benefit compared to a standard of care in these patients, we believe STELLAR-303 demonstrates clear clinical differentiation of zanza from other TKIs and IO partners investigated in this space. As a reminder, in addition to VEGF receptors, zanza simultaneously targets the TAM kinases and MET, which have been shown in preclinical models to drive the ability of tumors to evade antitumor immunity. We believe this differentiated mechanism of action is a key factor in the clinical differentiation of zanza compared to other kinase inhibitors investigated in this space and really underscores the franchise potential for zanza. Second, it’s certainly worth noting that to date, no other regimen has demonstrated a higher median overall survival in this setting.

Again, in STELLAR-303, the combination of zanza plus atezo showed median overall survival values of 10.9 months in the ITT population and 10.5 months in patients who had received prior bevacizumab. And while we are conscious of the caveats associated with cross-trial comparisons, it’s relative to observe that prior to STELLAR-303, the SUNLIGHT trial showed median overall survivals for TAS-102 plus bev of 10.8 months in the ITT population and only 9 months in the bev pretreated population. We believe these are important data points to note, given that the majority of patients in the U.S. are receiving bev in earlier lines of treatment. And last but not least, being an immunotherapy-containing chemo-free regimen, if approved, zanza in combination with atezo could be an opportunity to switch mechanisms to a TKI/IO regimen after receiving chemo plus bev, which we have heard from investigators and key opinion leaders is an important potential choice for patients.

Thus, we certainly believe that the combination of zanza plus atezo has the potential for a very meaningful impact in this high unmet need population. That conviction has been driving our internal teams to work nonstop preparing for a potential NDA filing, which we intend to submit this December, pending the government reopening for business. We also intend to complete data collection and analysis for the dual primary endpoint of overall survival in the NLM population, which we anticipate will occur around midyear 2026. Moving on to STELLAR-304. This is our pivotal study evaluating the combination of zanza plus nivolumab versus sunitinib in patients who have not yet received systemic therapy for their locally advanced or metastatic non-clear cell renal cell carcinoma.

Based on the current event rate, we are anticipating top line results around midyear 2026. And if positive, those results could lead to the second NDA filing for zanzalintinib. Regarding other clinical development activity for zanza, earlier this year, we initiated STELLAR-311, our Phase III trial evaluating zanza compared to everolimus as a first oral therapy in patients with neuroendocrine tumors, and that study is proceeding on schedule. Progress also continues with regard to the Phase II umbrella study being conducted by Merck in which the combination of zanza plus belzutifan is being evaluated in patients with previously treated metastatic RCC and two pivotal studies that Merck is running in clear cell renal cell carcinoma, evaluating zanza in combination with belz, and we anticipate these studies could start near the end of this year.

Regarding the next wave of pivotal studies for zanza, we expect to start two additional trials in 2026, one focused on patients with recurrent meningioma and one specifically investigating the adjuvant setting in colorectal cancer, where patients have been treated with surgery and chemotherapy but have a high risk of recurrence. Given the demonstrated clinical differentiation we’ve seen with zanza and its potential to be the TKI of choice for combinations with IO, we’re continuing to assess the landscape for additional opportunities for zanza development, and we look forward to sharing more details of these important opportunities as we get closer to launching the trials. Now shifting to our earlier — early clinical pipeline. We have four molecules in this space that are currently in clinical development, namely XL309, XB010, XB628 and XB371.

And the Phase I studies for these early molecules are progressing well. In terms of new development candidates, we are continuing to advance exciting new small molecule and ADC programs, and I look forward to sharing more details about our early pipeline programs at the R&D Day event we’re planning for December 10 this year. So with that, I’ll turn the call over to P.J.

P. Haley: Thank you, Dana. The CABOMETYX business remained strong in the third quarter of 2025. And importantly, the launch in neuroendocrine tumors is off to a great start. Cabo continued to show growth in terms of revenue, demand and new patient starts and notably performed well relative to the competition. The team continued to execute at an extremely high level with CABOMETYX continuing to be the #1 prescribed TKI in renal cell carcinoma as well as the #1 TKI plus IO combination in first-line RCC. The prescription data in the oral TKI market basket of cabo, lenvatinib, axitinib, sunitinib and pazopanib convey the strength of cabo relative to the competition. Looking at the TRx comparison of Q3 2024 to Q3 2025, CABOMETYX grew 4 share points from 42% to 46%.

Importantly, CABOMETYX was the only product in the market basket to grow market share year-over-year. CABOMETYX TRx volume grew 21% in Q3 2025 relative to Q3 2024, outpacing the growth rate of the market basket, which was 13%. Importantly, CABOMETYX RCC business remains strong and continues to grow. The new indications for previously treated NETs are providing our experienced sales team great access to customers, and we’re able to discuss both the CABINET data as well as the RCC CheckMate -9ER 5-year follow-up data with relevant physicians. The 9ER data presented at ASCO GU in February resonate with RCC space and help our team continue to drive differentiation from the competition in first-line RCC. In fact, CABOMETYX plus nivolumab first-line new patient market share in the third quarter was the highest it has ever been.

This momentum bodes well for future growth in terms of new patient starts and total demand as more first-line patients receive incremental refills and volume as we look forward into 2026. Turning to neuroendocrine tumors. Our market research and feedback from customers demonstrate that prescribers are excited for a new treatment option for their neuroendocrine tumor patients, the first broadly applicable new oral small molecule therapy in 9 years. Physicians are responding positively to the broad net label in the contemporary trial design and perceive the efficacy and tolerability of the cabo data as favorable relative to the other small molecule therapies in the space. Prescribers are using cabo broadly across patient and tumor characteristics, including patients with neuroendocrine tumors arising in the pancreas, GI tract and lung across all tumor grades, functional and SSTR status and those who have received prior treatment with Lutathéra.

The recent ESMO presentation of the lung subset data from the CABINET study continues to elucidate the cabo data in a segment of patients accounting for approximately 20% of NET who have a high unmet need, many of which test SSTR negative. Turning to new patient market share for second-line plus neuroendocrine tumors in Q3. We are pleased that CABOMETYX has rapidly become the market leader in this segment with greater than 40% new patient share for oral therapies. This share is very encouraging so early in the launch, and we believe that new patient share should continue to increase. Over time, as more patients start therapy with cabo and receive refills, we believe demand will continue to grow. Neuroendocrine tumor demand contributed approximately 6% of total demand for cabo in Q3, and we expect that contribution to increase going forward.

Demand in neuroendocrine tumors increased by over 50% in Q3 relative to Q2. Finally, market research continues to indicate that CABOMETYX is viewed as the best-in-class oral therapy in neuroendocrine tumors. This perception is typically a leading indicator of prescribing behavior and gives us confidence that CABOMETYX new patient market share will continue to increase in coming quarters. This research finding aligns well with the anecdotal feedback our experienced sales team is receiving from their customers, many of whom are saying they will prescribe cabo for their NET patients once they progress and need a different systemic therapy. Taken together, the data and customer feedback give us a high degree of confidence in the growth of CABOMETYX in neuroendocrine tumors.

If we look at the cabo neuroendocrine tumor business, the revenue for 2025 is vectoring towards exceeding $100 million. This trajectory, taken together with the market uptake and enthusiasm provides great momentum for the business heading into 2026. As we think about building on and expanding our GI franchise, we are thrilled with the results of STELLAR-303. Pending regulatory approval, we believe that these data will provide Exelixis with a compelling commercial opportunity in colorectal cancer, one of the big four tumors. Many physicians cite the availability of an immune checkpoint inhibitor for a broader population is important for their patients. They also view zanza as differentiated given the data and the fact that the combination of zanza plus atezo was successful in a cold tumor where other TKI plus ICI combinations have failed.

With all the appropriate caveats for cross-trial comparisons, the median OS for zanza of 10.9 months is on par with Lonsurf plus Avastin bevacizumab from the SUNLIGHT study. However, in the SUNLIGHT study, patients who had received prior bev had a median OS of only 9 months. The bev pretreated group will be relevant for the U.S. population as approximately 75% of patients have received bev before reaching the third-line setting, and most of these patients have received bev in both the first- and second-line settings. Exelixis has had numerous successful launches with cabo. We are excited to expand on the commercial capabilities we have built over the last decade and to build on our GI franchise, where we already have experience in hepatocellular carcinoma and neuroendocrine tumors.

As you know, we already have a significant GU presence. And for zanzalintinib, we would envision growing our GI infrastructure to a size and scale similar to our GU team. As Mike mentioned, we are expediting the build-out of our GI sales team as we see a great opportunity to continue to drive growth in the NET indication. Additionally, having a full GI team in place will provide important experience selling cabo as well as forming relationships with accounts to be ready for zanza. The incremental sales representatives will enable us to have greater reach in the community setting, which is a segment where our team has typically excelled. This build-out speaks to our confidence and excitement of CABOMET opportunity as well as zanzalintinib. In closing, we are pleased with the cabo business, both in RCC and NETs. In neuroendocrine tumors, prescribers see CABOMETYX as a more favorable choice versus other previously approved small molecule therapies.

Additionally, the competition in the oral segment of the NET market are generic therapies, which puts CABOMETYX at a significant advantage with a full commercial organization energized and supporting the launch. All of this taken together drives our conviction that the NET market will be a substantial opportunity for the CABOMETYX business. We are pleased that CABOMETYX plus nivolumab has achieved the regimen with the highest market share ever in first-line RCC setting as this sets up the brand for continued growth in kidney cancer. And with that, I will turn the call back over to Mike.

Michael Morrissey: All right. Thanks, P.J. We will wrap up here with a big shout out to the Exelixis’ team to thank everyone for helping make our third quarter so successful. I’m pleased to see our collective commitment, focus and urgency continue at a high level as we advance our priorities across discovery, development and commercial activities. On a personal note, after more than 35 years in the biopharma industry, Susan Hubbard, our EVP, Public Affairs and Investor Relations, has decided to retire to pursue her passions outside of her profession. We are incredibly fortunate that Susan joined us in 2014 with her depth of experience and broad expertise in both clinical and commercial. She provided strong leadership and guidance to help us navigate all the twists and turns we’ve encountered over the years as we grew into the company we are today.

And I personally, again, I’m very grateful for Susan as she’s been my go-to thought partner for framing the Exelixis’ narrative to all our various stakeholders, and we wish her all the best. Susan will be with us through the end of the year, and I’m confident our Investor Relations and public affairs teams are well equipped for the future. Moving forward into 2026, Andrew Peters, currently Senior Vice President, Strategy, will add Investor Relations to his responsibilities reporting to Chris Senner. This is a natural move for Andrew, who joined Exelixis in 2018 following 12 years as a biopharma equity research analyst. To both Susan and Andrew. So we’ll close here, and we look forward to updating you on our progress in the future, and thank you for your continued support and interest in Exelixis.

And we’re happy to now open the call for questions.

Q&A Session

Operator: [Operator Instructions] And our first question will come from the line of Silvan Tuerkcan with Citizens.

Silvan Tuerkcan: Congratulations on all the progress. Maybe if you could just summarize the post-ESMO feedback that you had on the zanzalintinib results and how they match up with those points that you unveiled today regarding how you plan to position this product in the market.

Michael Morrissey: Yes. Thanks, Silvan. Yes, P.J., do you want to start with that one and then maybe Dana and I can provide some color commentary as needed.

P. Haley: Sure. Thanks for the question, Silvan. We’ve conducted extensive market research with the data that was presented at ESMO, which has really been very positive. Physicians are seeing the overall survival benefit as very important. They’re certainly seeing the fact that we’re bringing an IO to bear in one of the biggest tumors, one of the big four tumors, as I said, where IO hasn’t been available where TKI plus IO has filled in the past is also very important to physicians as well as the fact that this is a chemo-free option. So what we’ve seen, as I think about this market, and as we see the market now, it’s a very fragmented market. As you look at it, about 1/3 of the market is Lonsurf-bev, 1/3 of the third line plus market is TKI and the final 1/3 of that market is really sort of a smattering of different chemos as well as various targeted therapies.

So fragmented market really is one that provides opportunity should we be approved in the setting. And our market research clearly indicates it will take market share from all the competitors in the space. So that’s been certainly very positive as well. And as I mentioned, we’re excited to build out our GI franchise capabilities, our sales team as we’re — the NET launch is going well. This gives us the opportunity to reach further in the community and continue to drive uptake in NET as well as to be really fully prepared and optimized should we have the opportunity to launch zanza in the near future. So just very exciting all around.

Operator: One moment for our next question. And that will come from the line of Sean Laaman with Morgan Stanley.

Unknown Analyst: This is Catherine on for Sean. We had one looking at zanza and nccRCC ahead of the readout for STELLAR-304 in midyear ’26, could you help provide more color on why sunitinib is the right control given the various histologic subtypes that make up this population?

Dana Aftab: Thanks for the question. This is Dana. Yes, so the comparator in 304 is sunitinib, which is a standard of care in this setting. We think it’s a highly relevant comparator, especially given the overlap in target profile with zanza. And it’s used quite extensively, especially ex U.S., but a number of patients in the U.S. are also treated with this. So it’s a standard of care and thus is a good comparator to go with a Phase III pivotal trial.

Operator: One moment for our next question. And that will come from the line of Paul Choi with Goldman Sachs.

Unknown Analyst: This is Karishma on for Paul. Congrats on the quarter. So given the performance in the STELLAR-303 initial cut of data from ESMO, help us level set expectations for the NLM cut coming out early next year? And particularly, we were interested in the idea of powering with relation to the study given that Lonsurf-bev had approximately 500 patients in their Phase III study. Can you speak to your decision to enroll roughly 900 patients in STELLAR-303 and the overall implications?

Michael Morrissey: Yes, it’s kind of hard to hear your question with all the background noise. So Dana, can you navigate that one.

Dana Aftab: Sure. So the study started out or the prior iteration before it was had dual primary end points. It had a single primary endpoint in patients with non-liver metastases. We — scientific rationale to look at that, especially with emerging data coming from the LEAP-017 trial and other studies showing that those patients without liver metastases seem to do better with IO. But as the trial evolves, and as we were accruing patients and events, we realized that we had an important opportunity to potentially bring the results in earlier with the ITT population, meaning with the strong contribution of events from the patients with liver metastases, it’s a much poor prognosis with those patients. They — the disease is much more aggressive.

They progress faster. They achieve events for overall survival faster. So that’s where we realized we really needed to change the trial so that we could get endpoints in both the non-liver mets and the full ITT population. So the result that we presented in Berlin a couple of weeks ago includes both — it’s a combined analysis of both liver mets and non-liver met the entire ITT population. That population is a little bit skewed toward non-liver mets patients in that we put a cap amount of patients with liver metastases that could enroll in the trial. So typically, a trial population that doesn’t manage liver mets, the way we did, we’ll be about 80% liver mets and 20% — 20% to 30% non-liver mets, we had about 38% non-liver mets. So that’s certainly changed the dynamics of the trial, but the results that we achieved was in the entire population.

So as we said, because the non-liver mets progressed a little more slowly, we expect to see results in that subgroup sometime next year around the middle of next year.

Operator: One moment for our next question. And that will come from the line of Asthika Goonewardene with Truist.

Asthika Goonewardene: I want to offer my congratulations on both the top and bottom line growth here, which are really impressive. So I have a question on this. Merck announced LITESPARK-011 was positive and one could assume that they’ll be putting effort into marketing belzu plus lenvatinib combination in second-line RCC patients. We all know that zanza is a better drug than lenvatinib, but there could be a lot of population overlap between LITESPARK-011 and the belzu/zanza cohort in [indiscernible]. So does that reduce the probability that Merck will want to pursue a pivotal second-line study with belzu and zanza? And then if I can sneak one in an extra in here. What was the clinical trial contribution for cabo sales in 3Q?

Michael Morrissey: Chris, take that second question, first.

Christopher Senner: Sure. So Asthika, it’s Chris. There were actually — there were no clinical trial sales in the quarter. .

Michael Morrissey: And yes, it’s Mike. The first question was a long drawn-out question, lots of twists and turns. We are confident that the Merck trials that we’ve been discussing for the last year will continue and start later this year. So I don’t want to say more than that to speculate– I don’t want to speculate on other people’s data, especially when there’s only a press release. We’re excited about that collaboration, and we’ll see that moving forward.

Operator: One moment for our next question. That will come from the line of Akash Tewari with Jefferies.

Anastasia Parafestas: This is Anastasia on for Akash. So do you see any risk to your STELLAR-303 trial approval given that Vinay was publicly apprehensive about the usefulness of CABINET?

Susan Hubbard: I’m sorry, do you mind repeating the question? I don’t think we got all that. .

Anastasia Parafestas: Yes, for sure. So do you see any risk to your STELLAR-303 trial, specifically its approval, given that Vinay has been publicly apprehensive about the usefulness of CABINET?

Michael Morrissey: Yes. I wouldn’t want to comment on that.

Operator: One moment for our next question. And that will come from the line of Andy Hsieh with William Blair.

Tsan-Yu Hsieh: Well, first and foremost, congrats on the illustrious Korea and the biopharma industry, you’ve been a mentor to so many of us and really happy for you and I’ll miss working with you dearly. So my question has to do with the NET population. Obviously, a very, very successful launch. And I’m just curious, as you look forward to the zanza Phase III trial, I’m curious about the strategy in terms of navigating the potential cannibalization as cabo is being used [indiscernible] potentially entrenching in the earlier lines by setting?

Michael Morrissey: P.J, go ahead.

P. Haley: Yes. Thanks for the question, Andy. In terms of NET, as you mentioned, we’re having — really pleased with the launch, how it’s going. I mentioned kind of 50% demand growth quarter-over-quarter, we’re pleased with and certainly the broad utilization across all the relevant demographics in the population. And kind of very early innings here as we’re still building new patient share and obviously, only approved at the very end of March, a lot of opportunity for these patients to get refilled and continue the business with regards to demand going forward. As we think about zanza in the long term, it’s just a very different study in terms of having an active comparator, and it’s really designed to position that very competitively and upfront in the market, but that’s far down the road. I think in the near term, there’s just so much room for cabo and NETs to really become a key player there.

Operator: One moment for our next question. And that will come from the line of Sudan Loganathan with Stephens.

Sudan Loganathan: Apologies if this was already asked in a different capacity. But I believe I heard that the other subgroup part of the dual primary endpoint for STELLAR-303 might only come to maturity, maybe sometime early next year. Yes with the NDA submission that you guys are planning for by year-end 2025, could we still expect like a broad label for CRC, including both subgroups to be in play? Or will there be some sort of rolling submission that needs to happen to include that cohort of the primary endpoint? And then just secondly, a follow-up, was the need for both subgroups being split up as a result of guidance from regulators to achieve having both of those non-liver mets and liver mets included on the initial label for zanza?

Dana Aftab: Sure. Thanks for the question. This is Dana. So we can file and we will file based on the single hit on one of the dual primary endpoints in the ITT population. And I just want to clarify, the ITT population is not a subpopulation. It is the entire population of the trial. So that would give us, in our view, the broadest label. The NLM subgroup is a subpopulation within the trial. It’s just a — it’s a second dual endpoint — primary endpoint in the trial. So we’re proceeding with our filing. And as we said, we will be — we expect to get that in very soon,depending the government reopening for business.

Operator: One moment for our next question. That will come from the line of Yaron Werber with TD Cowen.

Unknown Analyst: Congrats on the quarter. This is Sarah on for Yaron. Quick question from us on your early-stage pipeline. I know you mentioned you have an R&D Day coming up, but if you could just give us a quick sneak peek of — you now have 4 Phase I programs. Can you maybe prioritize among them, which one you expect to transition next into pivotal development? And maybe if you could speak a little bit on XB371 in particular, which is your tissue factor TOPO1-ADC. Maybe just discuss a little bit how it’s differentiated from other TOPO1s.

Dana Aftab: Sure. Thanks for the question. I don’t want to preempt too much around what we’re going to say next month. What I can tell you is that 309 and 010 — 309 is our USP1 inhibitor, 010 is our 5T4 targeting ADC. Those have been in the clinic longer. So those have accrued more patients, obviously. XB628, our bispecific IO molecule targeting PD-L1 and NKG2A started its Phase I trial a few months ago. So that’s enrolled — that’s been enrolling well. And then 371, which is, as you mentioned, the tissue factor targeting ADC with the topoisomerase 1 inhibitor payload. That is our most recent IND filing. That Phase I trial is got up and running very recently, but it’s already enrolling patients. And what’s exciting about that molecule, since you asked specifically about what differentiates it, it utilizes a differentiated antibody that has no impact on the coagulation cascade and also has the tandem mechanism release linker that we licensed from Catalent to release the payload.

So it’s sort of a belt and suspenders approach for stabilizing the payload in circulation. So it requires both glucaronidase cleavage and then a tandem cleavage by a peptidase inside the cells for payload release. So we think that’s what differentiates it, plus we also feel that we are kind of ahead of any others in terms of investigating a molecule like this in the clinic.

Operator: One moment for our next question. And that will come from the line of Michael Schmidt with Guggenheim.

Michael Schmidt: I had one on zanza, specifically the opportunity based on the STELLAR-304 study. Just help us understand the size of this commercial opportunity in non-clear cell RCC. And how much CAP use is driven in non-clear cell right now? And then lastly, just the minor delay to mid-2026 from the first half. Is that based on event rate slowdown? Or is there something else going on there?

P. Haley: Yes. Michael, this is P.J. Certainly excited about the opportunity to get a readout from STELLAR-304 and then the potential to get zanza approved in the kidney cancer space. Obviously, a space we know really well. Non-clear cell accounts for approximately 20% to 25% of the patients in the space. And cabo has utilization there as do many other agents. But certainly, we think that a Phase III study having a positive result would really move the needle in that space to demonstrate with greater level of evidence and support benefit for patients.

Operator: One moment for our next question. That will come from the line of Jason Gerberry with Bank of America.

Jason Gerberry: Susan, you’ll be missed. My question is on the NET cabo launch. Just wondering a pretty impressive share of — I guess, second-line oral therapies. I was just curious, are orals getting a greater share relative to Lutathéra? Or is the dynamic between orals and Luta in second line relatively stable. And if I could just squeeze one in, the MSN patent appeal, is there a timeline on that?

P. Haley: Yes. With regards, this is P.J. Thanks for the question, Jason. As you mentioned, we’re very pleased with the NET launch. And as we look at the second line plus oral share, we’ve already exceeded 40% new patient share there, which we’re pleased with. As I mentioned, those are patients just coming on therapy. So we think certainly have room to benefit from the duration of therapy that those patients would achieve. And we think we can continue to — we believe we can continue to grow share in the space. With regards to Lutathéra in the second-line plus setting broadly, orals constitute a greater portion of that market. But where Lutathéra is utilized, cabo really is the preferred treatment post Lutathéra as ours is really the only study that had patients in it who were pretreated with Lutathéra, which is why that sort of broad study base in a contemporary setting is really benefiting us in the marketplace.

Michael Morrissey: Yes, Jason, it’s Mike. On the topic, don’t have anything to offer up on that today, okay?

Operator: One moment for our next question. And that will come from the line of Leonid Timashev with RBC.

Leonid Timashev: I wanted to ask a little bit on the mengioma opportunity. Just curious sort of how you’re thinking about the emerging investigator-sponsored data with cabo and how that applies to zanza and your confidence there? And then ultimately, what you think the size of that opportunity may be?

Dana Aftab: Sure. This is Dana. Thanks for the question. Regarding what was seen with cabo, so you probably know the story, but there’s a published case report where a patient with thyroid cancer treated with cabo had an angioma, and they noticed a very substantial reduction in the size of that tumor, and that’s not a common occurrence with targeted therapies. A number of different studies noted response rates for targeted therapies, especially VEGF or VEGFR targeted therapies in the single-digit range, 3% or less. So these investigators got very excited and launched an investigator-sponsored trial where they looked at a number of patients treated with cabo, and they saw response rates depending on the criteria that are used anywhere in the 25% to 75% range.

So that was quite exciting to us and showed the impact of the target profile of cabo. And as we’ve said, we feel that zanza is sort of a best-in-class molecule with a cabo-like target profile. So it’s a natural progression for us to look at for a white space targeting trial with zanza. So we’re very excited about that trial. And as I indicated, we expect that trial to get up and running in 2026.

Operator: One moment for your next question, and that will come from the line of Stephen Willey with Stifel.

Stephen Willey: Maybe a similar question just on the planned Phase III trial in post-chemoadjuvant CRC. And so I guess when I look at the STELLAR-303, the zanza dose intensity, I guess it was pretty low. And just curious if you’re intending to do any additional dose exploration work just to make sure that dose intensity doesn’t become a rate limiting factor in a setting where tolerability tends to be prioritized.

Dana Aftab: Yes. So this is Dana. I’ll take that. Yes, so in the — our plans for further exploration in colorectal, we’re really — this really comes from the result from STELLAR-303. It’s the first demonstration of a positive result in non-MSI-high patients with an IO-containing regimen. So it’s natural for us to want to bring that earlier in lines of therapy for patients. And this is some white space in colorectal cancer that we identified as high unmet need. So in patients with high risk of recurrence, the median disease-free survival is in the 6-month range. So we think we can get an answer from this study quite quickly. Now in terms of dose, it’s natural and as we’ve seen with other agents, for example, with cabo that as you move up earlier lines of therapy, you often will look at other doses.

So we certainly are intending to look at other doses with zanza. And just — I would just say stay tuned for more information around that when we finally kind of launch the trial and divulge more details.

Operator: One moment for our next question, and that will come from the line of Jay Olson with Opp Co.

Cheng Li: This is Cheng on the line for Jay. Congrats on the quarter. Also want to thank Susan for all the help in the past years and congrats on the retirement. Just like wondering about — as we are seeing like several bispecific programs are now actually being developed in the first-line CRC. So how are you thinking about the potential impact of those like novel agents? And how will that impact the later line uptake of the atezo plus zanza ? And if I could sneak in one clarification question, for the STELLAR-303, file based on ITT population, just wondering why couldn’t you file earlier because the top line results were like a few months ago?

Michael Morrissey: Yes. We’re having a hard time understating you. We’re filing — again, nobody is filing new NDAs right now with the government being closed. So to be aware of that and whether it be a new NDA or a new BLA, there’s no filings currently with the government shutdown. So just keep that in mind, and we’re hoping to file ASAP when the government reopens. In terms of the bispecifics and that emerging landscape, certainly interesting science, early clinical data, kind of hard to opine on how that’s going to change the marketplace without pivotal trials even being started, much less reading out. So I think we should just stay tuned on that and understand that it’s a moving landscape across the board. And obviously, data drives the process, and we’ll keep our data certainly moving as well, and we’ll always be able to layer in our data with whatever emerging data is available.

Operator: One moment for our next question, and that will come from the line of Ash Verma with UBS.

Ashwani Verma: So I just wanted to come back on the CRC market dynamic that you mentioned that [indiscernible] plus Teva is roughly 1/3 of this third-line market right now. But just the physician feedback that we’ve been getting is that, that is a growing part. So by the time that you get to the market with zanza- atezo, like what is your assumption that what — how much would that share be? And then yes, there is some sort of difference in the SUNLIGHT study based on the prior beva exposure, but has that been slowing down the adoption of that regimen?

P. Haley: Yes. Thanks for the question. I’ll say we’ve been conducting market research in CRC for quite some time. And I will say that what we’ve seen is that the share of the SUNLIGHT regimen has actually been relatively stable. So if that continues moving forward, the market certainly remains fragmented, as I said, about 1/3 SUNLIGHT, 1/3 TKI, 1/3 other, which really represents a great opportunity for us, particularly in that our research with numerous physicians, and we’re talking — when we do research, we’re talking to over 100 physicians in the community as well as academia to get a really good sample size. And we’re seeing — we’re hearing from them that we’ll get uptake in this third line plus setting and take share from all competitors.

So we’re optimistic about that. This is why we’re increasing — one of the reasons in addition to driving more NET with cabo, why we’re increasing our sales force because CRC is treated heavily in the community. This is a very common tumor type. So lots of prescribers here. So we’re going to get ahead of that and really be able to have a strong reach into the community setting.

Operator: One moment for our next question. And that will come from the line of Christopher Liu with Lucid Capital Markets.

Christopher Liu: Maybe one that is more around capital allocation and financial strategy. With the share buybacks that have already been done and that are planned, going forward, how are you thinking about incremental buybacks versus things like business development or clinical investment opportunities? And do you feel like there’s going to be a point where share buybacks would be less favored for some of these other potential value generators?

Christopher Senner: Yes, this is Chris. So generally, we think of capital allocation in the three elements, right? It’s R&D, it’s business development and share repurchases. And we think with the revenue growth we’re generating and with the continued prudent expense management, we’re including R&D expense in the $1 billion range, we think that we’ll be able to fund all three of those elements, and we’ll continue to invest in R&D and invest in BD and invest in share repurchase.

Operator: Thank you, at this time, there are no further questions. And so I will turn the call over to today’s host, Susan Hubbard. Ms. Hubbard?

Susan Hubbard: Thank you, Sherry, and thank you all for joining us today. We certainly welcome your follow-up calls with any additional questions you may have.

Operator: This concludes today’s program. Thank you all for participating. You may now disconnect.