EXELIXIS, INC. - Annual Report: 2020 (Form 10-K)

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*	Trial conducted through our IST program.

†	Trial conducted through collaboration with NCI-CTEP.

§	Trial sponsored by the European Organization for Research and Treatment of Cancer.

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*	Trial conducted through our IST program.

†	Trial conducted through collaboration with NCI-CTEP.

§	Trial sponsored by the European Organization for Research and Treatment of Cancer.

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•	patients with advanced non-squamous NSCLC without a defined tumor genetic alteration (EGFR, ALK, ROS1, or BRAF) who have not received prior therapy with an ICI;

•	patients with NSCLC without a defined tumor genetic alteration who have progressed following treatment with an ICI;

•	patients with NSCLC with an EGFR mutation who have progressed following treatment with an EGFR-targeting TKI for metastatic disease;

•	patients with UC who have progressed following treatment with an ICI;

•	patients with mCRPC who have previously received enzalutamide and/or abiraterone acetate without prior docetaxel for mCRPC and experienced radiographic disease progression in soft tissue;

•	patients with mCRPC who have previously received enzalutamide and/or abiraterone acetate with prior docetaxel therapy for mCRPC;

•	patients with mCRPC who have previously received enzalutamide and/or abiraterone acetate without prior docetaxel therapy for mCRPC;

•	patients with RCC with clear cell histology who have not had prior systemic anticancer therapy;

•	patients with RCC with non-clear cell histology who have not had prior systemic anticancer therapy for inoperable, locally advanced, recurrent or metastatic disease;

•	patients with UC who have progressed on or after platinum-containing chemotherapy;

•	patients with UC who are ineligible for cisplatin-based chemotherapy and have not received prior systemic chemotherapy for inoperable, locally advanced or metastatic disease;

•	patients with UC who are eligible for cisplatin-based chemotherapy and have not received prior systemic chemotherapy for inoperable, locally advanced or metastatic disease;

•	patients with triple-negative breast cancer who have progressed following treatment with at least one prior systemic therapy for inoperable, locally advanced, recurrent or metastatic disease;

•	patients with epithelial ovarian cancer who have platinum-resistant or refractory disease;

•	patients with endometrial cancer who have progressed following treatment with at least one prior systemic therapy for inoperable, locally advanced, recurrent or metastatic disease;

•	patients with advanced HCC who have a Child-Pugh score of A and have not had prior systemic anticancer therapy for inoperable, locally advanced, recurrent or metastatic disease;

•	patients with gastric or gastroesophageal junction adenocarcinoma who have progressed following treatment with platinum-containing or fluoropyrimidine-containing chemotherapy for inoperable locally advanced, recurrent or metastatic disease;

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•	patients with colorectal adenocarcinoma who have progressed following treatment with systemic chemotherapy that contained fluoropyrimidine in combination with oxaliplatin or irinotecan for metastatic disease;

•	patients with head and neck cancer of squamous cell histology who have progressed following treatment with platinum-containing chemotherapy for inoperable locally advanced, recurrent or metastatic disease; and

•	patients with DTC who are radio-refractory or deemed ineligible for treatment with iodine-131.

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•	nonclinical laboratory and animal tests, some of which must be conducted in accordance with Good Laboratory Practice;

•	submission of an IND, which must become effective before human clinical trials may begin;

•	adequate and well-controlled human clinical trials 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 a supplemental New Drug Application (sNDA), for approval of a new indication if the product is already approved for another indication;

•	for biological 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 for their compliance with GMP and Good Clinical Practice (GCP), respectively;

•	if FDA convenes an advisory committee, satisfactory completion of the advisory committee review; and

•	FDA approval of the NDA or sNDA, or BLA or sBLA.

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Phase 1 - Studies, which involve the initial introduction of a new drug product candidate into humans, are initially conducted in a limited number of subjects to test the product candidate for safety, tolerability, absorption, metabolism, distribution and excretion in healthy humans or patients. In rare cases, a Phase 1 study that is designed to assess effectiveness may serve as the basis for FDA marketing approval of a drug or for a label expansion. For instance, at FDA’s discretion, a product may receive approval based on a Phase 1b study if

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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. Multiple phase 2 clinical trials may be conducted by the sponsor to obtain information prior to beginning larger and more expensive phase 3 clinical trials. 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. In some cases, a sponsor may decide to run what is referred to as a “phase 2b” evaluation, which is a second, confirmatory phase 2 trial that could, if positive, serve as a pivotal trial in the approval of a product candidate.

•	Phase 3 - When earlier phase evaluations provide preliminary evidence suggesting that a dosage range of the product is effective and has an acceptable safety profile, phase 3 trials are performed to gather the additional information about effectiveness and safety that is needed to evaluate the overall benefit-risk relationship of the drug and to provide an adequate basis for physician labeling.

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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.

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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. Drugs designated as breakthrough therapies are also eligible for accelerated approval. The FDA will seek to ensure the sponsor of a breakthrough therapy product candidate receives: intensive guidance on an efficient drug development program; intensive involvement of senior managers and experienced staff on a proactive, collaborative and cross-disciplinary review; and rolling review.

•	Priority review is designed to shorten the review period for drugs that treat serious conditions and that, if approved, would offer significant advances in safety or effectiveness or would provide a treatment where no adequate therapy exists. Under priority review, the FDA aims to take action on application within six months as compared to a standard review time of 10 months.

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Accelerated approval provides for an earlier approval for a new drug that is intended to treat a serious or life-threatening disease or condition and that fills an unmet medical need based on a surrogate endpoint, or a certain intermediate clinical endpoint, reasonably likely to predict clinical benefit. As a condition of approval, the FDA may require that a sponsor of a product candidate receiving accelerated approval perform post-marketing clinical trials to confirm the clinically meaningful outcome as predicted by the surrogate marker trial.

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•	efficacy, safety and reliability of cabozantinib;

•	timing and scope of regulatory approval;

•	the speed at which we develop cabozantinib for the treatment of additional tumor types beyond its approved indications;

•	our ability to complete clinical development and obtain regulatory approvals for cabozantinib;

•	our ability to manufacture and sell commercial quantities of cabozantinib product to the market;

•	our ability to successfully commercialize cabozantinib and secure coverage and adequate reimbursement in approved indications;

•	product acceptance by physicians and other health care providers;

•	the level of our collaboration partners’ investments in the resources necessary to successfully commercialize cabozantinib in territories where it is approved outside of the U.S.;

•	skills of our employees and our ability to recruit and retain skilled employees;

•	protection of our intellectual property, including our ability to enforce our intellectual property rights against potential generic competition; and

•	the availability of substantial capital resources to fund development and commercialization activities.

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•	the federal AKS, which governs our business activities, including our marketing practices, medical educational programs, pricing policies, and relationships with healthcare providers or other entities;

•	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;

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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, or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;

•	federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;

•	HIPAA and its implementing regulations, which impose certain requirements relating to the privacy, security and transmission of individually identifiable health information on covered entities and business associates that access such information on behalf of a covered entity;

•	state law equivalents of each of the above federal laws;

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the PPACA Open Payments program, which requires certain manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program, with specific exceptions, to report annually to the government information related to certain payments and other transfers of value to physicians (as defined by such law) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members;

•	state and local laws and regulations that require drug manufacturers to file reports relating to marketing activities, payments and other remuneration and items of value provided to healthcare professionals and entities, as well as state and local laws requiring the registration of pharmaceutical sales representatives; and

•	state pharmaceutical price and price reporting laws and regulations that require us to provide notice of price increases or the introduction of new high-cost products, and/or file complex ancillary reports concerning prices and pricing and discount practices.

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•	lack of 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, including in China as a result of the recent coronavirus outbreak;

•	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;

•	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, 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.

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•	the commercial success of both CABOMETYX and COMETRIQ and the revenues we generate from those approved products;

•	costs associated with maintaining our expanded sales, marketing, market access, medical affairs and product distribution capabilities for CABOMETYX and COMETRIQ;

•	the achievement of stated regulatory and commercial milestones and royalties paid under our collaboration agreements with Ipsen and Takeda;

•	the commercial success of and revenues generated by products marketed under our collaboration and license agreements;

•	future clinical trial results;

•	the level of our investments in the expansion of our pipeline through internal drug discovery and business development activities;

•	the number and size of clinical trials we conduct and the cost of drug supply for such clinical trials evaluating our products with other therapeutic agents;

•	trends and developments in the pricing of oncologic therapeutics in the U.S. and abroad, especially in the EU;

•	scientific developments in the market for oncologic therapeutics and the timing of regulatory approvals for competing oncologic therapies; and

•	the filing, maintenance, prosecution, defense and enforcement of patent claims and other intellectual property rights.

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•	our inability to control the amount and timing of resources that our collaboration partners or potential future collaboration partners will devote to the development or commercialization of drug candidates or to their marketing and distribution;

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the possibility that collaboration partners may delay clinical trials, fail to supply us on a timely basis with the product required for a combination trial, deliver product that fails to meet appropriate quality and regulatory standards and results in a market recall or withdrawal, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a drug candidate, repeat or conduct new clinical trials or require a new formulation of a drug candidate for clinical testing;

•	disputes that may arise between us and our collaboration partners that result in the delay or termination of the research, development or commercialization of our drug candidates, or that diminish or delay receipt of the economic benefits we are entitled to receive under the collaboration, or that result in costly litigation or arbitration;

•	the possibility that our collaboration partners may experience financial difficulties;

•	our collaboration partners’ lack of success in their efforts to obtain regulatory approvals in a timely manner, or at all;

•	our collaboration partners’ failure to properly maintain or defend our intellectual property rights or their use of our intellectual property rights or proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property rights or expose us to potential litigation;

•	our collaboration partners’ failure to comply with the terms of our collaboration agreements and related ancillary agreements;

•	our collaboration partners’ failure to comply with applicable healthcare laws, as well as established guidelines, laws and regulations related to GMP, GCP, GDP and Good Pharmacovigilance Practice;

•	the possibility that our collaboration partners could independently move forward with competing drug candidates, developed either independently or in collaboration with others, including our competitors;

•	our inability to enter into additional collaboration arrangements with third parties in an area or field of exclusivity;

•	the possibility that future collaboration partners may require us to relinquish some important rights, such as marketing and distribution rights; and

•	the possibility that collaborations may be terminated or allowed to expire, which would delay, and may increase the cost of, development of our drug candidates.

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•	the announcement of FDA approval or non-approval, or delays in the FDA 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 cabozantinib or any of our other programs or product candidates;

•	our ability to make future investments in the expansion of our pipeline through internal drug discovery and business development activities;

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•	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 ANDA, 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;

•	the impairment of acquired goodwill and other assets;

•	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 biotechnology, biopharmaceutical or pharmaceutical 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;

•	significant fluctuations in interest rates or foreign currency exchange rates; and

•	general market, economic and political conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors.

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•	a prohibition on actions by our stockholders by written consent;

•	the ability of our Board of Directors to issue preferred stock without stockholder approval, which could be used to institute a “poison pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our Board of Directors; and

•	advance notice requirements for director nominations and stockholder proposals.

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(1)

Revenues for the years ended December 31, 2019 and 2018 are presented under Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), while revenues for the years ended December 31, 2017, 2016 and 2015 continue to be reported in accordance with our historic accounting under previous revenue recognition guidance, Accounting Standards Codification Topic 605: Revenue Recognition.

(2)	See “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this Annual Report on Form 10-K for additional discussion of our operating results.

(3)	Net income for the year ended December 31, 2018 included a $244.1 million income tax benefit related to the release of substantially all of the valuation allowance against our deferred tax assets.

(4)	The decreases in long-term obligations were primarily due to the repayment of the Secured Convertible Notes due 2018 held by entities associated with Deerfield Management Company, L.P. in 2017, the repayment of the $80.0 million term loan with Silicon Valley Bank in 2017, and the conversions and redemption in 2016 of the 4.25% convertible senior subordinated notes due 2019.

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•	In January 2019, the FDA approved CABOMETYX as a treatment for patients with HCC who have been previously treated with sorafenib.

•	In February 2019, following the FDA’s acceptance of our IND for XL092, a next-generation oral TKI, we initiated a phase 1 dose escalation trial, evaluating the pharmacokinetics, safety and tolerability of XL092 in patients with advanced solid tumors, with the primary objective of determining a dose for daily oral administration suitable for further evaluation.

•	In April 2019, Takeda applied to the Japanese MHLW for Manufacturing and Marketing Approval of CABOMETYX as a treatment for patients with unresectable and metastatic RCC.

•	In May 2019, we announced the initiation of COSMIC-313, a phase 3 pivotal trial evaluating the triplet combination of cabozantinib, nivolumab and ipilimumab versus the combination of nivolumab and ipilimumab in patients with previously untreated advanced intermediate- or poor-risk RCC, which will be conducted in collaboration with BMS.

•	In May 2019, following the Japanese MHLW’s approval, we announced that Daiichi Sankyo launched MINNEBRO as a treatment for patients with hypertension in Japan.

•	In May 2019, we announced an exclusive option and license agreement with Iconic to advance an innovative next-generation ADC program for cancer.

•	In June 2019, Genentech informed us that IMspire170, Genentech’s phase 3 pivotal trial evaluating the combination of cobimetinib with atezolizumab in patients with previously untreated BRAF V600 wild-type advanced melanoma, did not meet its primary endpoint.

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In July 2019, we announced an amendment to the protocol for COSMIC-021, the phase 1b trial of cabozantinib in combination with atezolizumab in patients with locally advanced or metastatic solid tumors, to expand patient enrollment in certain existing mCRPC and NSCLC cohorts and to add new expansion and exploratory cohorts in mCRPC (an aggregate of 24 total cohorts, with 20 expansion cohorts evaluating the combination of cabozantinib and atezolizumab and four exploratory cohorts evaluating cabozantinib or atezolizumab as single-agent therapies).

•	In July 2019, we announced an exclusive collaboration, option and license agreement with Aurigene to in-license as many as six programs to discover and develop small molecules as therapies for cancer.

•	In October 2019, Ipsen received regulatory approval from Health Canada for CABOMETYX for the first-line treatment of adults with advanced RCC.

•	In October 2019, we expanded our collaboration with Invenra focused on the discovery and development of multispecific antibodies for the treatment of cancer to include the development of novel binders against six additional targets which we can use to generate multispecific antibodies based on Invenra’s B-Body™ technology platform, or with other platforms and formats at our option.

•	In October 2019, we filed a patent infringement lawsuit against MSN, following receipt of a Paragraph IV certification notice letter from MSN that it had filed an ANDA with the FDA requesting approval to market a generic version of CABOMETYX tablets, following expiration of the ‘473 Patent, which expires on August 14, 2026. For a

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•	In November 2019, Daiichi Sankyo reported positive results from a phase 3 pivotal trial of esaxerenone in patients with diabetic nephropathy.

•	In November 2019, Ipsen received regulatory approval from Health Canada for CABOMETYX for treatment of patients with HCC who have been previously treated with sorafenib.

•	In December 2019, we announced that IMspire150, the phase 3 pivotal trial evaluating the combination of cobimetinib with atezolizumab and vemurafenib in patients with previously untreated BRAF V600 mutant melanoma, met its primary endpoint. Results will be presented at an upcoming medical meeting and discussed with healthcare authorities around the world, including the FDA and EMA.

•	In December 2019, we announced a joint clinical research agreement with Roche for the purpose of further evaluating the combination of cabozantinib with atezolizumab in patients with locally advanced or metastatic solid tumors, including in three planned phase 3 pivotal trials in advanced NSCLC, mCRPC and RCC.

•	In January 2020, we announced an amendment to the protocol for COSMIC-021 to further expand patient enrollment in an existing mCRPC cohort to up to 130 patients.

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In January 2020, clinically meaningful data from CheckMate 040, the phase 1/2 trial evaluating cabozantinib in combination with nivolumab and in combination with both nivolumab and ipilimumab in patients with previously treated or previously untreated advanced HCC, were presented at ASCO’s Gastrointestinal Cancers Symposium. For additional information on the CheckMate 040 results, see “Business—Cabozantinib Development Program—Trials Conducted under our Clinical Collaboration Agreements—Combination Studies with Bristol-Myers Squibb Company (BMS)” in Part I, Item 1 of this Annual Report on Form 10-K.

•	In January 2020, Takeda applied to the Japanese MHLW for approval to manufacture and sell CABOMETYX as a treatment for patients with unresectable HCC who progressed after prior systemic therapy in Japan.

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In February 2020, we presented clinically meaningful results from the mCRPC cohort of COSMIC-021 at ASCO’s Genitourinary Cancers Symposium. For additional information on the COSMIC-021 results, see “Business—Cabozantinib Development Program—Trials Conducted under our Clinical Collaboration Agreements—Combination Studies with F. Hoffmann-La Roche Ltd. (Roche)” in Part I, Item 1 of this Annual Report on Form 10-K.

•	In February 2020, we announced the enrollment of the first 100 patients in COSMIC-311, the phase 3 pivotal trial of cabozantinb versus placebo in patients with RAI-refractory DTC who have progressed after up to two prior VEGF receptor-targeted therapies.

•	Net product revenues for 2019 increased to $760.0 million, compared to $619.3 million for 2018.

•	Total revenues for 2019 increased to $967.8 million, compared to $853.8 million for 2018.

•	Research and development expenses for 2019 increased to $337.0 million, compared to $182.3 million for 2018.

•	Selling, general and administrative expenses for 2019 increased to $228.2 million, compared to $206.4 million for 2018.

•	Provision for income taxes for 2019 was $77.1 million, compared to an income tax benefit of $238.0 million for 2018.

•	Net income for 2019 was $321.0 million, or $1.06 per share, basic and $1.02 per share, diluted, compared to $690.1 million, or $2.32 per share, basic and $2.21 per share diluted, for 2018.

•	Cash and investments increased to $1.4 billion at December 31, 2019, compared to $0.9 billion at December 31, 2018.

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Milestone revenues for the year ended December 31, 2019 primarily included: 1) recognition of a $50.0 million milestone from Ipsen upon their achievement of $250.0 million in net sales of cabozantinib in their territories over four consecutive quarters; 2) recognition of a $20.0 million milestone from Daiichi Sankyo for the first commercial sale of MINNEBRO tablets as a treatment for patients with hypertension in Japan; 3) recognition of $9.9 million in revenues related to a $16.0 million milestone from Takeda for the submission of a regulatory application for cabozantinib as a treatment for patients with advanced RCC to the Japanese MHLW; 4) recognition of $9.1 million in revenues related to a $10.0 million milestone from Takeda for the submission of a regulatory application in January 2020 for cabozantinib as a treatment for patients with advanced HCC to the Japanese MHLW; and 5) recognition of two milestones totaling $5.0 million from Ipsen on the approvals by Health Canada of cabozantinib for the treatment of adults with first-line RCC and for the treatment of adults with advanced HCC who have been previously treated with sorafenib.

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Milestone revenues for the year ended December 31, 2018 primarily included: 1) recognition of $46.5 million in revenue related to a $50.0 million milestone from Ipsen for the approval of cabozantinib for the first-line treatment of adults with intermediate- or poor-risk advanced RCC by the EC; 2) recognition of $37.2 million in revenue related to a $40.0 million milestone from Ipsen for the approval by the EC of cabozantinib for previously-treated HCC; 3) recognition of a $25.0 million milestone from Ipsen upon their achievement of $100.0 million in net sales of cabozantinib in their territories over four consecutive quarters; 4) recognition of a $20.0 million milestone upon Daiichi Sankyo’s submission to the Japanese MHLW of a regulatory application for esaxerenone as a treatment for patients with hypertension; 5) recognition of $18.6 million of a $20.0 million milestone from Ipsen for the initiation of COSMIC-312; and 6) recognition of a $5.0 million milestone from Ipsen on the approval by Health Canada of cabozantinib for the treatment of adults with advanced RCC.

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(1)	Primarily includes personnel expenses, consulting and outside services and laboratory supplies.

(2)	Includes stock-based compensation and the allocation of general corporate costs to research and development.

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(1)

In addition to the amounts presented, we have committed to make payments for potential future milestones, research funding commitments and royalties to certain collaboration partners as part of our agreements with those parties. Because the amount and timing of those payments is uncertain they have not been included in the table above. For more information about these obligations, see “Note 3. Collaboration Agreements” in our “Notes to Consolidated Financial Statements” contained in Part II, Item 8 of this Annual Report on Form 10-K.

(2)

We entered into the build-to-suit lease agreement in October 2019, which is expected to commence in October 2021. The amounts presented include the estimated lease commitment payments at the estimated commencement of the lease, subject to adjustment dependent upon the actual total development costs of the premises but do not include the impact of a tenant improvement allowance of approximately $16.5 million. For more information about our lease obligations, see “Note 11. Commitments” in our “Notes to Consolidated Financial Statements” contained in Part II, Item 8 of this Annual Report on Form 10-K.

(3)	Purchase obligations include firm purchase commitments related to manufacturing and maintenance of inventory, software services and other facilities and equipment.

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•	Level 1 - quoted prices (unadjusted) in active markets for identical assets and liabilities;

•	Level 2 - inputs other than level 1 that are observable either directly or indirectly, such as quoted prices in active markets for similar instruments or on industry models using data inputs, such as interest rates and prices that can be directly observed or corroborated in active markets;

•	Level 3 - unobservable inputs that are supported by little or no market activity that are significant to the fair value measurement

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(1)	The 2017 amounts have not been adjusted for the adoption of Topic 842 and continue to be reported in accordance with the previous lease guidance, ASC Topic 840: Leases.

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(1)

Total revenues for the quarters ended March 31, 2019, June 30, 2019, September 30, 2019 and December 31, 2019 included $10.0 million, $20.4 million, $50.6 million and $15.1 million in milestone revenue, respectively, as compared to $66.5 million, $25.8 million, $42.6 million and $29.6 million during the comparable periods in 2018. Due to uncertainties surrounding the timing and achievement of regulatory and development milestones, it is difficult to predict future milestone revenues and such milestones can vary significantly from period to period.

(2)	Gross profit is computed as net product revenues less cost of goods sold.

(3)	Net income for the quarter ended December 31, 2018 included a $244.1 million income tax benefit related to the release of substantially all of the valuation allowance against our deferred tax assets.

(4)	The fiscal quarter ended December 31, 2019 is a 14-week fiscal period. All other quarters presented are 13-week fiscal periods.

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ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

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(1 )

Equity plans approved by our shareholders include the Director Plan, the 2011 Plan, the 2014 Plan, the 2017 Plan and the ESPP. As of December 31, 2019, a total of 4,238,999 shares of our common stock remained available for issuance under the ESPP, and up to a maximum of 465,480 shares of our common stock may be purchased in the current purchase period. The shares issuable pursuant to our ESPP are not included in the number of shares to be issued pursuant to rights outstanding or and the weighted-average exercise price of such rights as of December 31, 2019, as those numbers are not known.

(2)	The weighted-average exercise price takes into account the shares subject to outstanding restricted stock units, including such awards with performance conditions (RSUs) which have no exercise price. The weighted-average exercise price, excluding such outstanding RSUs, is $9.83.

(3)

Represents shares of our common stock issuable pursuant to the 2016 Plan. As of December 31, 2019, no shares of our common stock remained available for additional grants under the 2016 Plan. In November 2016, the Board adopted the 2016 Plan pursuant to which we reserved 1,500,000 shares of our common stock for issuance under the 2016 Plan. The only persons eligible to receive grants of Awards under the 2016 Plan are individuals who satisfy the standards for inducement grants under Nasdaq Marketplace Rule 5635(c)(4) and the related guidance under Nasdaq IM 5635-1 - that is, generally, a person not previously an employee or director of Exelixis, or following a bona fide period of non-employment, as an inducement material to the individual's entering into employment with Exelixis. An “Award” is any right to receive Exelixis common stock pursuant to the 2016 Plan, consisting of nonstatutory stock options, stock appreciation rights, restricted stock awards, RSUs, or any other stock award.

(4)	The weighted-average exercise price takes into account the shares subject to outstanding RSUs, which have no exercise price. The weighted-average exercise price, excluding such outstanding RSUs, is $19.41.

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(a)	The following documents are being filed as part of this report:

(1)	The following financial statements and the Report of Independent Registered Public Accounting Firm are included in Part II, Item 8:

(2)	All financial statement schedules are omitted because the information is inapplicable or presented in the Notes to Consolidated Financial Statements.

(3)	The following Exhibits are filed as part of this report.

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