Exelixis, Inc. (Exelixis, we, our or us) is an oncology-focused biotechnology company that strives to accelerate the discovery, development and commercialization of new medicines for difficult-to-treat cancers. Our drug discovery and development capabilities and commercialization platform are the foundations upon which we intend to bring to market novel, effective and tolerable therapies to provide cancer patients with additional treatment options.

Since we were founded in 1994, 4 products resulting from our discovery efforts have progressed through clinical development, received regulatory approval and established a commercial presence in various geographies around the world. NaN are derived from cabozantinib, our flagship molecule, an inhibitor of multiple tyrosine kinases including MET, AXL, VEGF receptors and RET. Our cabozantinib products are: CABOMETYX® (cabozantinib) tablets approved for advanced renal cell carcinoma (RCC), both alone and in combination with Bristol Myers Squibb Company’s OPDIVO® (nivolumab), and for previously treated hepatocellular carcinoma;carcinoma (HCC); and COMETRIQ® (cabozantinib) capsules approved for progressive, metastatic medullary thyroid cancer. For these types of cancer, cabozantinib has become or is becoming a standard of care. Beyond these approved indications, cabozantinib is currently the focus of a broad clinical development program and is being investigated both alone and in combination with other therapies in a wide variety of cancers.

The other 2 products resulting from our discovery efforts are: COTELLIC® (cobimetinib), an inhibitor of MEK, approved as part of a combination regimenmultiple regimens to treat advanced melanoma and marketed under a collaboration with Genentech, Inc. (a member of the Roche Group) (Genentech); and MINNEBRO® (esaxerenone), an oral, non-steroidal, selective blocker of the mineralocorticoid receptor, approved for the treatment of hypertension in Japan and licensed to Daiichi Sankyo Company, Limited (Daiichi Sankyo).

The accompanying Condensed Consolidated Financial Statements include the accounts of Exelixis and those of our wholly-owned subsidiaries. These entities’ functional currency is the U.S. dollar. All intercompany balances and transactions have been eliminated.

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the U.S. for interim financial information and pursuant to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In our opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of our financial statements for the periods presented have been included. Operating results for the three months ended March 31, 20202021 are not necessarily indicative of the results that may be expected for the year ending December 31, 20202021 or for any future period. The accompanying Condensed Consolidated Financial Statements and Notes thereto should be read in conjunction with our Consolidated Financial Statements and Notes thereto for the year ended December 31, 2019,2020, included in our Annual Report on Form 10-K filed withsubmitted to the SEC on February 25, 2020.10, 2021.

We operate in 1 business segment that focuses on the discovery, development and commercialization of new medicines for difficult-to-treat cancers. Our Chief Executive Officer, as the chief operating decision-maker, manages and allocates resources to our operations on a total consolidated basis. Consistent with this decision-making process, our Chief

All of our long-lived assets are located in the U.S. See “Note 2. Revenues” for enterprise-wide disclosures about product sales, revenues from major customers and revenues by geographic region.

The preparation of the accompanying Condensed Consolidated Financial Statements conforms to accounting principles generally accepted in the U.S., which requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenues and expenses, and related disclosures. On an ongoing basis, we evaluate our significant estimates. We base our estimates on historical experience and on various other market-specific and other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially from those estimates.

Certain prior period amounts in the 2020 preliminary fee noticeaccompanying Condensed Consolidated Financial Statements have been reclassified to conform to the current period presentation. Such reclassifications did not impact previously reported total revenues, income from the Internal Revenue Serviceoperations, net income, total assets, total liabilities or total stockholders’ equity.

Our foreign currency forward contracts are generally short-term in duration. Given the short duration of which $8.6 millionthe forward contracts, amounts recorded generally are not significant. We account for our derivative instruments as either assets or liabilities on our Condensed Consolidated Balance Sheets and $4.4 million was recordedmeasure them at fair value. Derivatives not designated as hedging instruments are adjusted to fair value through earnings in other current liabilities, and $4.8 million and $1.6 million was recordedincome (expense), net in other long-term liabilities.the Condensed Consolidated Statements of Income.

There were no new accounting pronouncements issued since our filing of the Annual Report on Form 10-K for the year ended December 31, 2020, which could have a significant effect on our condensed consolidated financial statements.

Revenues consisted of the following (in thousands):

Net product revenues by product were as follows (in thousands):

The activities and ending reserve balances for each significant category of discounts and allowances, which constitute variable consideration, were as follows (in thousands):

The allowance for chargebacks, and discounts for prompt payment isand other are recorded as a reduction of trade receivables, net and the remaining reserves are recorded as rebates and fees due to customers or as other current liabilities in the accompanying Condensed Consolidated Balance Sheets.

We receive payments from our collaboration partners based on billing schedules established in each contract. Amounts are recorded as accounts receivable when our right to consideration is unconditional. We may also recognize revenue in advance of the contractual billing schedule and such amounts are recorded net of any allowance for credit losses, as a contract asset when recognized. Contract assets, which are presented in prepaid expenses and other current assets in the accompanying Condensed Consolidated Balance Sheets, were $0 and $1.1 million as of March 31, 2020 and December 31, 2019, respectively. We may be required to defer recognition of revenue for upfront and milestone payments until we perform our obligations under these arrangements, and such amounts are recorded as deferred revenue upon receipt or when due. Contract liabilities were $15.4 million and $6.6 million as of March 31, 2020 and December 31, 2019, respectively. The current portion of the contract liabilities, which are presented in other current liabilities in the accompanying Condensed Consolidated Balance Sheets, were $1.3 million and $0 as of March 31, 2020 and December 31, 2019, respectively. The remainder of the contract liabilities are presented in long-term portion of deferred revenue in the accompanying Condensed Consolidated Balance Sheets. For those contracts that have multiple performance obligations, contract assets and liabilities are reported on a net basis at the contract level. Contract assets and liabilities were as follows (in thousands):

During the three months ended March 31, 20202021 and 2019,2020, we recognized $1.6$2.5 million and $1.3$1.6 million, respectively, in revenues that were included in the beginning deferred revenuerevenues balance for those years.periods.

During the three months ended March 31, 20202021, and 2019,2020, we recognized $18.8$27.8 million and $25.3$18.8 million, respectively, in revenues for performance obligations satisfied in previous periods. Such revenues were primarily related to

We have established multiple collaborations with leading pharmaceutical companies for the commercialization and further development of our cabozantinib franchise. Additionally, in linewe have entered into several research collaborations and in-licensing arrangements to further enhance our early-stage pipeline and expand our ability to discover, develop and commercialize novel therapies with our business strategy prior to the commercializationgoal of our first product, COMETRIQ, weproviding new treatment options for cancer patients and their physicians. We also entered into other collaborations with leading pharmaceutical companies for other compounds and programs in our portfolio. Under these collaborations, we are generally entitled to receive milestone and royalty payments, and for certain collaborations, payments for product supply services, development cost reimbursements, and/or profit-sharing payments. See “Note 2. Revenues” for additional information on revenues recognized under our collaboration agreements during the three months ended March 31, 2020 and 2019.

See “Note 3. Collaboration Agreements” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 20192020, or as further described below, for a description ofadditional information on each of our collaboration agreements.agreements and in-licensing arrangements.

Revenues under the collaboration agreement with Ipsen were as follows (in thousands):

In January 2017, we entered into a collaboration and license agreement with Takeda, which was subsequently amended effective March 2018, and May 2019 and September 2020 to, among other things, modify the amount of reimbursements we are eligible to receive for costs associated with our required pharmacovigilance activities, andmodify the amount of milestones we are eligible to receive. Underreceive, and modify certain cost sharing obligations related to the Japan-specific development costs associated with CONTACT-01 and CONTACT-02 clinical trials. Pursuant to this collaboration and license agreement, as amended, 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.

As of March 31, 2020, $18.52021, $42.5 million of the transaction price was allocated to our research and development services was related to performance obligations that hadhas not yet been satisfied.

In October 2002, we established a product development and commercialization collaboration agreement with GSK. We areGSK, that required us to pay a 3% royalty to GSK on the worldwide net sales of any product incorporating cabozantinib by us and our collaboration partners. As disclosed in Note 2, we received notification that, effective January 1, 2021, Royalty Pharma acquired from GSK all rights, title and interest in royalties on net product sales containing cabozantinib for non-U.S. markets for the full term of the royalty and for the U.S. market through September 2026, after which time U.S. royalties will revert back to GSK. Royalties earned by GSK and Royalty Pharma in connection with theour sales of cabozantinib are included in cost of goods sold for sales by us and as a reduction of collaboration services revenues for sales by our collaboration partners. Such royalties were $8.1$10.1 million and $7.3$8.1 million during the three months ended March 31, 20202021 and 2019,2020, respectively.

In December 2006, we out-licensed the development and commercialization of cobimetinib to Genentech under a worldwide collaboration agreement. In November 2015, the U.S. Food and Drug Administration (FDA) approved cobimetinib, under the brand name COTELLIC, in combination with Genentech’s ZelborafZELBORAF® (vemurafenib) as afor the treatment forof patients with BRAF V600E or V600K mutation-positive advanced melanoma. COTELLIC in combination with ZelborafZELBORAF has also been approved in the European Union and multiple additional countries for use in the same indication. In July 2020, the FDA also approved COTELLIC for use in combination with ZELBORAF and TECENTRIQ® (atezolizumab) for the treatment of patients with BRAF V600 mutation-positive advanced melanoma in previously untreated patients. License revenues under the collaboration agreement with Genentech were as follows (in thousands):

A reconciliation of cash, cash equivalents, and restricted cash equivalents reported within ourin the accompanying Condensed Consolidated Balance Sheets to the amount reported within the accompanying Condensed Consolidated Statements of Cash Flows was as follows (in thousands):

Restricted cash equivalents consistedare used to collateralize letters of credit and consist of money-market funds and certificates of deposit with original maturities of 90 days or less used to collateralize letters of credit.less. The classification of restricted cash equivalents are classified as other long-term isassets based upon the remaining term of the underlying restriction.

Interest receivable was $5.4$3.6 million and $6.2$4.5 million as of March 31, 20202021 and December 31, 2019,2020, respectively, and is included in prepaid expenses and other current assets in the accompanying Condensed Consolidated Balance Sheets.

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. The fair value and gross unrealized losses on investmentdebt securities available-for-sale in an unrealized loss position were as follows (in thousands):