Item 1A. Risk Factors.
In addition to the risks discussed elsewhere in this report, the following are important factors that make an investment in our securities speculative or risky, and that could cause actual results or events to differ materially from those contained in any forward-looking statements made by us or on our behalf. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not currently known to us or that we deem immaterial also may impair our business operations. If any of the following risks or such other risks actually occur, our business and the value of your investment in our company could be harmed.
Risks Related to the Commercialization of Our Marketed Products
Our ability to grow our company is dependent upon the commercial success of CABOMETYX in its approved indications and, to a lesser degree, the continued clinical development, regulatory approval, clinical acceptance and commercial success of the cabozantinib franchise.
We anticipate that for the foreseeable future, our ability to maintain or meaningfully increase cash flow to fund our business operations and growth will depend upon the continued commercial success of CABOMETYX, both alone and in
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combination with other therapies, as a treatment for the highly competitive indications for which it is approved, and possibly for other indications for which cabozantinib is currently being or will be evaluated in clinical trials. We cannot be certain that these clinical trials will demonstrate adequate safety and efficacy to receive regulatory approval, and even if the required regulatory approvals to market CABOMETYX for additional indications are achieved, we and our collaboration partners may not be able to commercialize CABOMETYX effectively and successfully in such indications. If revenue from CABOMETYX decreases or remains flat, or if we or our collaboration partners fail to achieve anticipated product royalties and collaboration milestones, we may need to reduce our operating expenses, access other sources of cash or otherwise modify our business plans, which could have a material adverse impact on our business, financial condition and results of operations.
Our ability to grow revenues from sales of CABOMETYX depends upon the degree of market acceptance among physicians, patients, healthcare payers, and the medical community.
Our ability to increase or maintain revenues from sales of CABOMETYX for its approved indications is highly dependent upon the extent of market acceptance of CABOMETYX among physicians, patients, foreign and U.S. government healthcare payers such as Medicare and Medicaid, commercial healthcare plans and the medical community. Market acceptance for CABOMETYX could be impacted by numerous factors, including the effectiveness and safety profile, or the perceived effectiveness and safety profile, of CABOMETYX compared to competing products, the strength of CABOMETYX sales and marketing efforts and changes in pricing and reimbursement for CABOMETYX. If CABOMETYX does not continue to be prescribed broadly for the treatment of patients in its approved indications, our product revenues could flatten or decrease, which could have a material adverse impact on our business, financial condition and results of operations.
Our competitors may develop products and technologies that impair the relative value of our marketed products and any current and future product candidates.
The biopharmaceutical industry is competitive and characterized by constant technological change and diverse offerings of products, particularly in the area of oncology therapies. Some of our competitors have greater capital resources, larger research and development staff and facilities, deeper organizational regulatory experience and more extensive product manufacturing and commercial capabilities than we do, which may afford them a competitive advantage. Further, our competitors may in-license and develop new commercial products that could render our products, and those of our collaboration partners, obsolete or noncompetitive. We face, and will continue to face, intense competition from biopharmaceutical companies, as well as academic research institutions, clinical reference laboratories and government agencies that are pursuing scientific and clinical research activities similar to ours.
The specific indications for which CABOMETYX is currently or may be approved in the future are highly competitive. Several novel therapies and combinations of therapies have been approved, are in advanced stages of clinical development or are under expedited regulatory review in these indications, and these other therapies are currently competing or are expected to compete with CABOMETYX, or the FDA may update their labeling to add accepted indications that compete with CABOMETYX. Even if our current and future clinical trials produce positive results sufficient to obtain marketing approval by the FDA and other global regulatory authorities, it is uncertain whether physicians will choose to prescribe regimens containing our products instead of competing products and product combinations in approved indications.
If we are unable to maintain or increase our sales, marketing, market access and product distribution capabilities for our products, we may be unable to maximize product revenues, which could have a material adverse impact on our business, financial condition and results of operations.
Maintaining our sales, marketing, market access and product distribution capabilities requires significant resources, and there are numerous risks involved with maintaining and continuously improving our commercial organization, including our potential inability to successfully recruit, train, retain and incentivize adequate numbers of qualified and effective sales and marketing personnel. We are competing for talent with numerous commercial- and precommercial-stage, oncology-focused biopharmaceutical companies seeking to build out and maintain their commercial organizations, as well as larger biopharmaceutical organizations that have extensive, well-funded and more experienced sales and marketing operations, and we may be unable to maintain or adequately scale our commercial organization because of such competition. Also, to the extent that the commercial opportunities for CABOMETYX grow over time, we may not properly scale the size and experience of our commercialization teams to market and sell CABOMETYX successfully in an expanded number of indications. If we are unable to maintain or scale our commercial function appropriately, we may
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not be able to maximize product revenues, which could have a material adverse impact on our business, financial condition and results of operations.
If we are unable to obtain or maintain coverage and reimbursement for our products from government and other third-party payers, our business will suffer.
Our ability to commercialize our products successfully is highly dependent on the extent to which health insurance coverage and reimbursement is, and will be, available from third-party payers, including foreign and U.S. governmental payers, such as Medicare and Medicaid, and private health insurers. Third-party payers continue to scrutinize and manage access to pharmaceutical products and services and may limit reimbursement for newly approved products and indications. Patients are generally not capable of paying for CABOMETYX or COMETRIQ themselves and rely on third-party payers to pay for, or subsidize, the costs of their medications, among other medical costs. Accordingly, market acceptance of CABOMETYX and COMETRIQ is dependent on the extent to which coverage and reimbursement is available from third-party payers. These payer entities could refuse, limit or condition coverage for our products, such as by using tiered reimbursement or pressing for new forms of contracting, or alternatively for patients who rely on our co-pay assistance program, implementing co-pay accumulators or maximizers that exempt such co-pay assistance from patient deductibles (or otherwise modify benefit designs in a manner that takes into account the availability of co-pay assistance), which actions have increased and could further increase the costs of our co-pay assistance program or cause patients to abandon CABOMETYX or COMETRIQ therapy due to higher out-of-pocket costs. In April 2024, the CMS finalized regulations that will mitigate maximizer programs by requiring individual and small group market health plans to consider as essential health benefits (EHB) all prescription drugs that are covered in excess of a state’s EHB benchmark plan. The Departments of Labor, Treasury, and HHS stated their intent to address the application of this policy to large group market and self-insured plans in future rulemaking. CMS also plans to address in future rulemaking the application of manufacturer assistance to the annual cost-sharing limit; this follows a 2023 federal district court decision vacating a rule that provided health plans with discretion whether to include manufacturer assistance toward the annual cost-sharing limit. If third-party payers do not provide or increase limitations on coverage or reimbursement for CABOMETYX or COMETRIQ, our revenues and results of operations may suffer. In addition, even if third-party payers provide some coverage or reimbursement for CABOMETYX or COMETRIQ, the availability of such coverage or reimbursement for prescription drugs under private health insurance and managed care plans, which often varies based on the type of contract or plan purchased, may not be sufficient for patients to afford CABOMETYX or COMETRIQ.
Current healthcare laws, policies, and regulations in the U.S. and future legislative or regulatory reforms to the U.S. healthcare system, including those related to drug pricing, may affect our ability to commercialize our marketed products profitably. Pricing for pharmaceutical products in the U.S. has come under increasing attention and scrutiny by federal and state governments, legislative bodies and enforcement agencies. Initiatives arising from this scrutiny may result in changes that have the effect of reducing our revenue or harming our business or reputation.
Concern over access to and affordability of pharmaceutical products continues to spur debate and action by U.S. federal and state government authorities in an effort to contain healthcare costs. Such proposals and actions include:
• use of mandated discounts, rebates, restrictive formularies, or other reference-based price controls, such as most favored nation (MFN) or international reference pricing, direct-to-consumer sales of prescription drugs, as well as price transparency reporting obligations;
• restrictions on Medicaid funding;
• efforts to reevaluate, reduce or limit the price patients pay for pharmaceutical products;
• implementation of additional data collection and transparency reporting regarding drug pricing, rebates, fees and other remuneration provided by drug manufacturers;
• tariffs on imported pharmaceuticals, or their components;
• revisions to rules associated with the calculation of average manufacturer price and average sales price; best price and rebate liability (including broadening the circumstances under which products are subject to rebates and recent changes CMS made to the calculation of average sales price for the Medicare Part B program regarding the treatment of fees as “bona fide service fees” and for bundled sales, which CMS could seek to implement in the Medicaid Drug Rebate Program, and which in turn could impact our rebate liability) for the Medicaid Drug Rebate Program, along with CMS’ stated objective to consider potential future rulemaking that if implemented, could significantly increase manufacturer rebate liability; and
• reevaluation of safe harbors under the federal Anti-Kickback Statute (AKS).
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The IRA, which, among other things: enables CMS to assert control over the prices of certain single-source drugs and biotherapeutics reimbursed under the Medicare Drug Price Negotiation Program; subjects drug manufacturers to potential civil monetary penalties and a significant excise tax for offering a price that is not equal to or less than the government-imposed MFP under the law; imposes Medicare rebates for certain Part B and Part D drugs where relevant pricing metrics associated with the products increase faster than inflation; and redesigns the funding and benefit structure of the Medicare Part D program, potentially increasing manufacturer liability while capping annual out-of-pocket drug expenses for Medicare beneficiaries. These provisions started taking effect incrementally in late 2022 and currently are subject to various legal challenges. As of the date of this report, for example, CMS has begun to implement aspects of the IRA and finalized regulations addressing the Medicare Part B and Medicare Part D inflation rebate provisions of the IRA. These provisions generally require manufacturers of Medicare Part B and Part D rebatable drugs to pay inflation rebates to the Medicare program if pricing metrics associated with their products increase faster than the rate of inflation. In addition, in September 2025, CMS issued final guidance for the third round of drug pricing evaluations (for which the next 15 selected products were announced January 27, 2026, with negotiations to follow over the course of the year, resulting in MFPs that will become effective beginning in 2028), as well as requirements for manufacturers effectuating MFPs in 2026, 2027, and 2028. The IRA also contains the limited small biotech exception, which applies on a drug-specific basis. Qualifying drugs may be exempt from possible pricing negotiation through 2028 and eligible for a lower limit (i.e., a price floor) on the potential MFP in 2029 and 2030, if the manufacturers of those drugs continue to qualify each year. We have qualified for the small biotech exception with respect to our cabozantinib franchise products through Initial Price Applicability Year (IPAY) 2027, and we reapplied for the small biotech exception for IPAY 2028. Additionally, in July 2025, Congress enacted legislation that expands the orphan drug exclusion under the IRA. Starting with price evaluations for 2028, CMS cannot select a drug if all of its approved indications are for rare diseases or conditions. Moreover, if a drug no longer qualifies for the orphan drug exclusion because it is approved for a non-rare disease or condition, the 7-year or 9-year timeline before it may be selected will begin upon approval of the drug for such non-rare disease or condition. Separately, in December 2024, CMS released final guidance on the Part D Discount Program, which requires manufacturers to take on more of the beneficiary cost previously subsidized by the federal government through the application of increased drug discounts. As we received notice from CMS that we qualify for the "specified small manufacturer” designation, we are eligible for a phase-in of the increased manufacturer discounts under the Part D Discount Program from 2025 to 2031. In November 2025, CMS issued a proposed rule on the Part D Discount Program that largely codifies the final guidance. In April 2025, CMS finalized regulations implementing the Medicare Prescription Payment Plan, under which Medicare Part D beneficiaries may opt to make their cost-sharing payments in capped monthly installments; CMS expects that this program will most likely benefit those beneficiaries with high cost-sharing early in their respective plan years.
Over time, the IRA could reduce the revenues we are able to collect from sales of our products or present challenges for payer negotiations and formulary access for our products, as well as increase our government discount and rebate liabilities; however, the degree of impact that the IRA will ultimately have upon our business remains unclear. In addition, we cannot know the final form or timing of any other legislative, regulatory and/or administrative measures, and some of these pending and enacted policy changes, if implemented as currently proposed, would likely have significant and far-reaching impacts on the biopharmaceutical industry and therefore likely also have a material adverse impact on our business, financial condition and results of operations. Additionally, there is ongoing litigation challenging the Medicare Drug Price Negotiation Program, and we cannot predict the outcome of these cases.
If additional prescription drug price controls are implemented, the resulting changes to the pricing and reimbursement of CABOMETYX and COMETRIQ could affect our ability to continue to commercialize the products. Consolidation and integration of private payers and pharmacy benefit managers in the U.S. has also significantly impacted the market for pharmaceuticals by increasing payer leverage in negotiating manufacturer price or rebate concessions and pharmacy reimbursement rates. Such restrictive or unfavorable pricing, coverage or reimbursement determinations for CABOMETYX and COMETRIQ or our other product candidates, whether made by governments (including regulatory agencies and courts) or by private payers, may adversely impact our business.
In addition, there have been, and may in the future be, initiatives at both the federal and state level or legal challenges that could significantly modify the terms and scope of government-provided health insurance coverage, ranging from changes to or litigation opposing some or all of the provisions of the Patient Protection and Affordable Care Act of 2010, as amended, to establishing a single-payer, national health insurance system, to more limited “buy-in” options to existing public health insurance programs, any of which could have a significant impact on the healthcare industry. Although such attempts to reform the U.S. healthcare system have not significantly impacted our business to date, it is possible that additional legislative, executive and judicial activities in the future could have a material adverse impact on our business, financial condition and results of operations.
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In addition, the current U.S. administration has indicated that it plans to pursue additional policies aimed at lowering prescription drug costs. For example, on May 12, 2025, the current administration published an executive order that expressed support for equalizing the prices paid for drugs in the United States and other developed countries by employing an MFN approach to drug pricing. The May 12 executive order directs the Secretary of the HHS to communicate MFN price targets to pharmaceutical manufacturers, which the Secretary announced on May 20, 2025. If significant progress towards MFN pricing targets is not delivered, the executive order directs the Secretary to propose a rulemaking plan to impose MFN pricing. On September 25, 2025 and October 2, 2025, CMS submitted proposed rules for Center for Medicare and Medicaid Innovation (CMMI) models, called the Global Benchmark for Efficient Drug Pricing (GLOBE) Model and Guarding U.S. Medicare Against Rising Drug Costs (GUARD) Model, to the White House for review. These models, if implemented, may allow CMS to pursue formalized approaches to MFN pricing for prescription drugs. In addition, on November 6, 2025, CMS published a request for applications for another CMMI model, the GENEROUS (GENErating cost Reductions fOr U.S. Medicaid) Model. This is a voluntary model that tests the effect of supplemental rebate agreements between manufacturers and CMS, which align Medicaid prices with a defined MFN price. The scope of these models and the impact that they could have on Exelixis’ products is unclear at this time.
It is also unclear which authorities the current administration could use to effectuate an MFN approach beyond the CMMI models, although the May 12 executive order makes reference to using waivers on import restrictions under section 804(j)(2)(B) of the Federal Food, Drug, and Cosmetic Act (FDCA) and also to various authorities, including the antitrust laws. And, previously, on April 15, 2025, the current administration published a separate executive order that, among other things, directs specified agency heads to pursue a range of drug policy reforms, including, among other things, innovative payment models to obtain better value for high-cost prescription drugs and biologics, increasing access to drugs imported from Canada, and accelerating the approval of generics. Because the specifics of these proposals are unclear, there is uncertainty about how these and other potential legal or regulatory changes may affect our business.
Furthermore, because we participate in the 340B Program to sell a portion of our marketed products, changes in the administration of the program could have a material adverse impact on our revenues. Effective July 2022, and as subsequently updated, we implemented a 340B Program Integrity Initiative, pursuant to which Exelixis offers its 340B covered outpatient drugs (i.e., CABOMETYX and COMETRIQ) directly to all covered entities (i.e., entities that participate in the 340B Program) at their Health Resources and Services Administration (HRSA) registered locations (including both the HRSA registered parent and child site locations), and requires that covered entities provide claims-level data for all dispenses of Exelixis’ 340B covered outpatient drugs including dispenses of such products at covered entity in-house pharmacies. A covered entity that does not have an in-house pharmacy capable of dispensing 340B drugs to its patients may designate one (1) contract pharmacy within our authorized specialty pharmacy network for delivery of 340B priced drugs, but may no longer select an affiliated contract pharmacy to fulfill this purpose. We believe this initiative will provide much-needed transparency and promote compliance with program requirements, and at the same time, should not restrict patient access to our medicines.
Some manufacturers that have implemented similar contract pharmacy integrity programs received enforcement letters from the HHS asserting that those programs violate the 340B Program statute, have been referred to the HHS Office of Inspector General for assessment of civil monetary penalties, and have been subject to administrative dispute resolution (ADR) proceedings brought on behalf of covered entities. Several manufacturers are challenging the HHS’ position in litigation. Relatedly, in November 2023, we received from several covered entities a 340B Program ADR petition seeking to invoke an administrative adjudication process overseen by the HRSA. The petitioners contend that our 340B Program Integrity Initiative caused them to be overcharged for CABOMETYX and COMETRIQ. We have since received confirmation that the HRSA will assign an ADR panel to the claim and responded to the complaint in October 2024. At this time, it remains unclear what, if any, liabilities we might incur as a party to this ADR proceeding.
In addition, a growing number of states have enacted laws requiring manufacturers to provide the 340B Program pricing through contract pharmacy arrangements, and additional states may adopt similar laws. We believe these laws, which are being challenged in ongoing litigation, are invalid or are otherwise inapplicable to our 340B Program Integrity Initiative, but we have carved out covered entities in certain states while litigation challenging these laws proceeds. We also believe that our 340B Program Integrity Initiative complies with the 340B Program statute, as supported by the federal appellate court decisions in Sanofi Aventis U.S. LLC v. United States Department of Health and Human Services (U.S. Court of Appeals for the Third Circuit) and Novartis v. Johnson (U.S. Court of Appeals for the District of Columbia).
On March 17, 2025, April 24, 2025, and May 27, 2025, we received notice letters (collectively, Notices) from the West Virginia Board of Pharmacy (WV Board) of complaints filed against us for purported violations of laws related to distribution of drugs to 340B facilities (West Virginia Code § 60A-8-6a (WV Statute)). The WV Statute provides for civil
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monetary penalties, in addition to investigative demands, remedies, and other penalties for violations. We acknowledged receipt of the Notices, and there have been no further communications. Other pharmaceutical manufacturers are challenging the WV Statute in court.
Depending on the outcome of the ongoing litigation or any specific proceedings involving us, however, we may be required to modify or suspend our 340B Program Integrity Initiative. Ultimately, any negative ruling in a federal court, HHS administrative proceeding, or state-level proceeding in which we are a party, or in which the compliance of our 340B Program Integrity Initiative is at issue, could have a material adverse effect on our business, financial condition and results of operations. Other aspects of the 340B Program are subject to ongoing litigation, the resolution of which could impact the scope of the 340B Program. In addition, potential policy changes by the current U.S. administration may introduce additional uncertainty for our business. These could include changes to the level of scrutiny applied by the HRSA to enforce non-compliance with the 340B Drug Pricing Program, new price restrictions on products we sell to Medicaid, Medicare, or other government purchasers, or other regulatory changes impacting reimbursement or competitive dynamics in multisource markets. Any such policy shifts could significantly impact our business and operations. Due to general uncertainty with respect to these issues, we are unable to predict the impact of any future legislative, regulatory, third-party payer, or policy actions at this time. If proposed changes are ultimately enacted, we and any third parties we might engage may be unable to adapt to any changes implemented because of such measures, and we could face difficulties in maintaining or increasing profitability or otherwise experience a material adverse impact on our business, financial condition and results of operations.
Increasingly, states are enacting legislation requiring manufacturers to report drug pricing information. However, states have not always clearly defined their reporting requirements, which may result in manufacturers inadvertently failing to properly disclose the required pricing information. Complying with federal and state programs and future changes to these programs can be complex and cost-and resource-intensive and could have a material adverse effect on our business, prospects, operating results, and financial condition.
In addition to such drug pricing and transparency matters, other state legislative and regulatory initiatives include proposals designed to control pharmaceutical and biotherapeutic product pricing, including restrictions on pricing or reimbursement at the state government level, limitations on discounts to patients, advance notices of price increases, marketing cost disclosure and transparency measures, and, in some cases, policies to encourage importation from other countries (subject to federal approval) and bulk purchasing.
Lengthy regulatory pricing and reimbursement procedures and cost control initiatives imposed by governments outside the U.S. could delay the marketing of and/or result in downward pressure on the price of our approved products, resulting in a decrease in revenue.
Outside the U.S., including major markets in the EU and Japan, the pricing and reimbursement of prescription pharmaceuticals is generally subject to significant governmental control. In these countries, pricing and reimbursement negotiations with governmental authorities or payers can take six to 12 months or longer after the initial marketing authorization is granted for a product, or after the marketing authorization for a new indication is granted. This can substantially delay broad availability of the product. To obtain reimbursement and/or pricing approval in some countries, our collaboration partners Ipsen and Takeda may also be required to conduct a study or otherwise provide data that seeks to establish the cost effectiveness of CABOMETYX compared with other available established therapies. The conduct of such a study could also result in delays in the commercialization of CABOMETYX.
Additionally, cost-control initiatives, increasingly based on affordability and accessibility, as well as post-marketing assessments of the added value of CABOMETYX and COMETRIQ as compared to existing treatments, could influence the prices paid for and net revenues we realize from CABOMETYX and COMETRIQ, or the indications for which we are able to obtain reimbursement, which would result in lower license revenues to us. Recent legislative changes and ongoing policy changes in the EU are aimed at increasing cooperation between the Member States of the EEA. Such initiatives, particularly the Regulation on Health Technology Assessment adopted in December 2021 and entered into application in January 2025, may further impact the price and reimbursement status of CABOMETYX and COMETRIQ.
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The timing of the entrance of generic competitors to CABOMETYX and legislative and regulatory action designed to reduce barriers to the development, approval and adoption of generic drugs in the U.S. could limit the revenue we derive from our products, most notably CABOMETYX, which could have a material adverse impact on our business, financial condition and results of operations.
Under the FDCA, the FDA can approve an ANDA for a generic version of a branded drug without the applicant undertaking the human clinical testing necessary to obtain approval to market a new drug. The FDA can also approve a 505(b)(2) NDA that relies in part on the FDA’s findings of safety and/or effectiveness for a previously approved drug, where at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use. Both the ANDA and 505(b)(2) NDA processes are discussed in more detail in “Item 1. Business—Government Regulation—FDA Review and Approval—Abbreviated FDA Approval Pathways and Generic Products” of this Annual Report on Form 10-K. In either case, if an ANDA or 505(b)(2) NDA applicant submits an application referencing one of our marketed products prior to the expiry of one or more of our Orange Book-listed patents for the applicable product and includes a paragraph IV certification asserting that the patents are invalid or not infringed, we may litigate with the potential generic competitor to protect our patent rights, which would result in substantial costs, divert the attention of management, and could have an adverse impact on our stock price. For example, other companies, including MSN Pharmaceuticals, Inc. (individually and collectively with certain of its affiliates, including MSN Laboratories Private Limited, referred to as MSN) have applied for or received tentative approval for an ANDA for generic versions of CABOMETYX tablets. Azurity Pharmaceuticals, Inc. (Azurity) has received tentative approval for a 505(b)(2) NDA for cabozantinib tablets and Handa Oncology, LLC (Handa) has submitted a 505(b)(2) NDA requesting approval to market cabozantinib capsules (in the form of cabozantinib lauryl sulfate). Both of these 505(b)(2) products are for different strengths of cabozantinib than CABOMETYX. Because of this, we believe that the FDA would not consider them to be therapeutically equivalent and they cannot be automatically substituted for CABOMETYX. With the exception of Handa (for which we continue to evaluate all legal and strategic options), we have subsequently filed patent infringement lawsuits against these companies. For a more detailed discussion of these matters, see “Legal Proceedings” in Part I, Item 3 of this Annual Report on Form 10-K. It is possible that MSN, Azurity, Handa, or other companies, will obtain FDA approval of an ANDA or 505(b)(2) NDA, and introduce generic or otherwise competitor versions of cabozantinib before our patents expire if they do not infringe our patents or if it is determined that our patents are invalid or unenforceable. We expect that generic cabozantinib products would be offered at a significantly lower price compared to our marketed cabozantinib products. Regardless of the regulatory approach, the introduction of a generic version of cabozantinib would likely decrease our revenues derived from the U.S. sales of CABOMETYX and thereby materially harm our business, financial condition and results of operations. There are also equivalent procedures in the EEA permitting authorization of generic versions of medicinal products authorized in the EU once related data and market exclusivity periods have expired.
The U.S. federal government has also taken numerous legislative and regulatory actions to expedite the development and approval of generic drugs. Both Congress and the FDA are considering, and have enacted, various legislative and regulatory proposals focused on drug competition, including legislation focused on drug patenting and provision of drug to generic applicants for testing. For example, the Ensuring Innovation Act, enacted in April 2021, amended the FDA’s statutory authority for granting NCE exclusivity to reflect the FDA’s existing regulations and longstanding interpretation that award NCE exclusivity based on a drug’s active moiety, as opposed to its active ingredient, which is intended to limit the applicability of NCE exclusivity, thereby potentially facilitating generic competition. In addition, the Further Consolidated Appropriations Act, 2020, which incorporated the framework from the Creating and Restoring Equal Access To Equivalent Samples (CREATES) legislation, allows ANDA, 505(b)(2) NDA or biosimilar developers to obtain access to quantities of branded drug and biological product samples necessary to conduct research and development. Further, Section 3222 of the Consolidated Appropriations Act, 2023, enacted on December 29, 2022 (2023 Appropriations Act), requires the FDA to make therapeutic equivalence determinations for 505(b)(2) NDAs at the time of approval, or up to 180 days thereafter, if requested by the applicant. Additionally, Section 3224 of the 2023 Appropriations Act allows the FDA to approve an ANDA even if there are differences between the generic drug’s proposed labeling and that of the listed drug due to the FDA approving a change to the listed drug’s label (excluding warnings) within 90 days of when the ANDA is otherwise eligible for approval, provided that the ANDA applicant agrees to submit revised labeling for the generic drug within 60 days of approval. In addition, the policies introduced in the Generic Drug User Fee Amendments Commitment Letter give the FDA greater flexibility to approve ANDAs without adding additional review cycles when there are changes to the reference listed drug that may previously have delayed approval. While the full impact of these provisions is unclear at this time, they have the potential to facilitate the development and future approval and market success of generic versions of our products, introducing generic competition that could have a material adverse impact on our business, financial condition and results of operations. Moreover, in September 2023, the FTC issued a policy statement, supported by the FDA, warning brand pharmaceutical companies that they could face legal action under the FTC
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Act if they improperly list patents in the Orange Book, and it subsequently initiated, and continues to initiate, challenges against patents held by brand pharmaceutical companies and listed in the Orange Book under the FDA’s patent listing dispute process. In December 2024, the Federal Circuit ruled that, to be listed in the Orange Book, a patent must claim the active ingredient of the drug product. This decision may limit the number of patents brand pharmaceutical companies may list in the Orange Book. In April 2025, the U.S. administration issued an executive order that, among other things, directs the FDA to issue a report with recommendations to accelerate the approval of generics, biosimilars, combination products, and second-in-class brand name medications, and, in October 2025, the FDA announced a pilot prioritization program that makes generic drugs for which required bioequivalence testing is conducted in the U.S. and that are made in the U.S. using domestic sources for active pharmaceutical ingredient(s) eligible for priority review. It remains to be seen what effect these may have on potential generic competition for our products, if any.
Risks Related to Growth of Our Product Portfolio and Research and Development
We may be unable to expand our discovery and development pipeline, which could limit our growth and revenue potential.
Our business is focused on the discovery, development and commercialization of new medicines for difficult-to-treat cancers. In this regard, we have invested substantial technical, financial and human resources toward drug discovery activities with the goal of identifying new potential product candidates to advance into clinical trials. Notwithstanding this investment, many drug discovery programs that initially show promise will ultimately fail to yield clinical product candidates for multiple reasons. For example, product candidates and preclinical development candidates may, on further study, be shown to have inadequate efficacy, harmful side effects, suboptimal pharmaceutical profiles or other characteristics suggesting that they are unlikely to become commercially viable products.
Apart from our drug discovery efforts, our strategy to expand our development pipeline is also dependent on our ability to successfully identify and acquire or in-license relevant investigational oncology assets and technologies. However, the in-licensing and acquisition of investigational oncology assets and technologies is a highly competitive area, and many other companies are pursuing the same or similar investigational oncology assets and technologies to those that we may consider attractive. Larger companies with more capital resources and more extensive clinical development and commercialization capabilities may have a competitive advantage over us. Furthermore, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We may also be unable to in-license or acquire additional investigational oncology assets and technologies on acceptable terms that would allow us to realize an appropriate return on our investment. Even if we succeed in our efforts to obtain rights to suitable investigational oncology assets and technologies, the competitive business environment may result in higher acquisition or licensing costs, and our investment in these potential product candidates and technologies will remain subject to the inherent risks associated with the development and commercialization of new medicines. In certain circumstances, we may also be reliant on licensors for the continued development of any product candidates and/or technologies that we have in-licensed and such licensors’ efforts to safeguard their underlying intellectual property.
With respect to acquisitions, we may not be able to integrate the target company successfully into our existing business, maintain the key business relationships of the target company, or retain key personnel of the acquired business. Furthermore, we could assume unknown or contingent liabilities or otherwise incur unanticipated expenses. Any acquisitions or investments made by us also could result in our spending significant amounts of resources, issuing dilutive securities, assuming or incurring significant debt obligations and contingent liabilities, incurring large one-time expenses, and acquiring intangible assets that could result in significant future amortization expense and significant write-offs, any of which could harm our financial condition and results of operations. If our drug discovery efforts, including research collaborations, in-licensing arrangements and other business development activities, do not result in suitable product candidates, our business and prospects for growth could suffer.
Clinical testing of our product candidates is a lengthy, costly, complex and uncertain process that may ultimately fail to demonstrate sufficiently differentiated safety and efficacy data for those products to compete in our highly competitive market environment.
Clinical trials are inherently risky and may reveal that a product candidate is ineffective or has an unacceptable safety profile with respect to an intended use. This also applies to the testing of new indications for cabozantinib, or the clinical development of zanzalintinib, or any of our other product candidates. Adverse clinical trial results may significantly decrease the likelihood of regulatory approval of a new product or a new indication for an existing product. Furthermore, the results of preliminary studies do not necessarily predict clinical or commercial success, and late-stage or other
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potentially label-enabling clinical trials may fail to confirm the results observed in early-stage trials or preliminary studies. Finally, although we have established timelines for clinical development as well as manufacturing of zanzalintinib and our other product candidates based on existing knowledge of our compounds in development and industry metrics, we may not be able to meet those timelines.
We may experience numerous unforeseen events, during or as a result of clinical investigations, that could delay or prevent commercialization of cabozantinib in new indications or of zanzalintinib or our other new product candidates. These events may include:
• lack of acceptable efficacy or a tolerable safety profile;
• being placed on clinical hold by the FDA due to safety or effectiveness concerns;
• 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 demonstrate potentially superior safety or efficacy profiles as compared to cabozantinib, zanzalintinib or our other product candidates;
• our inability to identify and maintain a sufficient number of clinical trial sites;
• lower-than-anticipated patient registration or enrollment in our clinical testing;
• additional complexities posed by clinical trials evaluating cabozantinib, zanzalintinib or our other product candidates in combination with other therapies, including extended timelines to provide for collaboration on clinical development planning, the 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;
• reduced staffing or shortages in laboratory supplies and other resources necessary to complete clinical trials;
• replacement of staff at the FDA’s OCE that changes OCE’s view of the acceptability of the design, conduct, or data produced by our clinical trials;
• failure of our third-party contract research organizations or investigators to satisfy their contractual obligations, including deviating from any trial protocols or failing to adhere to appropriate recordkeeping or data integrity requirements; and
• withholding of authorization from regulators or institutional review boards to commence or conduct clinical trials or delays, variations, 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.
Further, with the passage of the Food and Drug Omnibus Reform Act of 2022 (FDORA), Congress clarified the FDA’s authority to conduct inspections by expressly permitting inspection of facilities involved in the preparation, conduct or analysis of clinical and non-clinical studies submitted to the FDA, as well as of other persons holding study records or otherwise involved in the study process, which could delay or add complexity to our clinical trials.
The ongoing conflicts between Russia and Ukraine and in the Middle East and the political, economic and social instability in Venezuela have had modest impacts on our clinical development operations and may continue to have adverse impacts on the ability of clinical sites and enrolled patients to adhere to trial protocols for in-office clinical visits and other procedures, our ability to supply clinical sites with cabozantinib, zanzalintinib or other study drugs and to pay clinical sites and investigators for work performed, as well as our ability to collect data and conduct site monitoring visits, all of which could undermine the data quality for patients enrolled at these clinical sites. These issues could further impact our anticipated timelines for completing the trials and achieving clinical endpoints, as well as increase our clinical development expenses. If there are further delays in or termination of the clinical testing of cabozantinib, zanzalintinib or our other product candidates due to any of the events described above or otherwise, our expenses could increase and our ability to generate revenues could be impaired, either of which could adversely impact our financial results. Furthermore, we have relied and may in the future rely on collaboration partners to share a significant portion of the expenses associated with our clinical development programs. Should one or all of our collaboration partners decline to support future planned clinical trials, we will be entirely responsible for financing the further development of the cabozantinib franchise, zanzalintinib or our other product candidates and, as a result, the burden of clinical trial expenses we incur associated with our business plans may be materially greater than currently anticipated, which could have a material adverse impact on our business, financial condition and results of operations.
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We may not be able to pursue the further development of the cabozantinib franchise, zanzalintinib or our other product candidates or meet current or future requirements of the FDA or regulatory authorities in other jurisdictions in accordance with our stated timelines or at all. Our planned clinical trials may not begin on time, or at all, may not be completed on schedule, or at all, may not be sufficient for registration of our product candidates or otherwise may not result in an approvable product. The duration and the cost of clinical trials vary significantly due to a number of factors, including, but not limited to: the characteristics of the product candidate under investigation; the number of patients who ultimately participate in the clinical trial; the duration of patient follow-up; the number of clinical sites included in the trial; and the length of time required to enroll eligible patients. Any delay could limit our ability to generate revenues, cause us to incur additional expenses and cause the market price of our common stock to decline significantly.
The regulatory approval processes of the FDA and comparable foreign regulatory authorities are lengthy, uncertain and subject to change, and may not result in regulatory approvals for additional cabozantinib indications or for our other product candidates, such as zanzalintinib, which could have a material adverse impact on our business, financial condition and results of operations.
The activities associated with the research, development and commercialization of the cabozantinib franchise, zanzalintinib and our other product candidates are subject to extensive regulation by the FDA and other regulatory agencies in the U.S., as well as by comparable regulatory authorities in other territories. The processes of obtaining regulatory approvals in the U.S. and other foreign jurisdictions are expensive and often takes many years, if approval is obtained at all, and they can vary substantially based upon the type, complexity and novelty of the product candidates involved. For example, before an NDA or sNDA can be submitted to the FDA, or a MAA to the EMA or any application or submission to comparable regulatory authorities in other jurisdictions, the product candidate must undergo extensive clinical trials, which can take many years and require substantial expenditures.
Any clinical trial may fail to produce results satisfactory to the FDA or foreign regulatory authorities; moreover, these regulatory authorities have substantial discretion and influence over clinical trial design and conduct, as well as the drug approval process. As such, approval outcomes are difficult to predict. Even if late-state, registrational clinical trials for our new products are positive, the FDA or foreign regulatory authorities may refuse to approve any NDA or sNDA or their foreign equivalents, or require additional preclinical, clinical, safety or other non-clinical studies.
In addition, policy-based activities could delay the approval of an application for cabozantinib, zanzalintinib, or our other product candidates. For example, the FDA’s OCE has many initiatives aimed at improving oncology drug development, some of which may lead to the need for additional studies, such as dose optimization. Many of these initiatives are based on guidance issued by OCE. If the FDA chooses to withdraw those guidance documents for any reason it may affect our ability to gain regulatory approval based on studies that relied on those guidance documents. The FDA also continues to develop and finalize guidance documents that further refine the development process for oncology drug products, although the FDA’s rate of issuing guidance has slowed significantly under the current U.S. administration. And, as this market expands, it becomes increasingly difficult to demonstrate benefit over the standard of care, which can be a hurdle for approval. Moreover, the development of our product candidates may be delayed by other events beyond our control. For example, action by the current U.S. administration to further limit federal agency budgets or personnel, may result in reductions to the FDA’s budget, workforce, and operations, which may lead to slower response times and longer review periods, potentially affecting our ability to progress development of our product candidates or obtain regulatory approval for our product candidates. Pursuant to a February 2025 executive order on workforce optimization, on March 27, 2025, the HHS announced that it was initiating a restructuring of the department, including reducing the FDA’s workforce by approximately 3,500 full-time employees, which began on April 1, 2025. The termination of these employees has been preceded and accompanied by the resignation of senior and mid-level leaders within the FDA, which could result in the potential loss of certain institutional knowledge and experience. Terminations, and resignations at the FDA have continued and there has been notable turnover and instability in key leadership positions. Although the full impact of these events remains unclear, there could be an adverse effect on the FDA’s ability to efficiently carry out its functions, including conducting inspections and timely reviewing drug product applications, and a potential impact on how it interprets and enforces its authorities, which may be also exacerbated by other events, such as a U.S. federal government shutdown. Further, ongoing deregulation and transparency efforts at the FDA could create regulatory uncertainty for biopharmaceutical companies. Additionally, uncertainty remains as to how the FDA’s use of artificial intelligence (AI) and deployment of agentic AI capabilities, including for review of drug product applications, will impact the outcomes and timeliness of FDA reviews and other activities.
The FDA has also been tightening the requirements for confirmatory studies for drugs approved via accelerated approval under additional authorities the FDA received in Section 3210 of the FDORA (incorporated in Section 3222 of the
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2023 Appropriations Act). While the standard for accelerated approval remains unchanged, the FDA may now require that confirmatory trials for drugs approved under the pathway be underway prior to approval, which was not previously a requirement. The changes to the law are intended to prevent accelerated approval of drugs without verified clinical benefit, which had previously resulted in withdrawal of approval for certain products and indications approved on an accelerated basis. While it is not clear at this time how these legislative and regulatory initiatives will affect our plans to pursue accelerated approval for one or more of our product candidates, these developments may have a material adverse impact on our business, financial condition, and results of operations.
The FDA may also choose to convene an advisory committee of independent experts to evaluate the adequacy of the safety and efficacy data supporting a drug candidate’s approvability. The outcome of such advisory committee meetings is inherently uncertain and may have a significant impact on the likelihood, timing, and scope of regulatory approval for our product candidates. In addition, while influential, advisory committee decisions are not binding on the FDA and there have been instances in the oncology space where the FDA chose not to take an advisory committee’s recommendation. There is also the risk that an advisory committee may recommend against approval, suggest a narrower indication, or require additional studies or safety labeling, and the FDA may or may not accept these recommendations. This uncertainty is heightened by recent leadership changes at OCE, which may result in shifts in regulatory priorities, review standards, or interpretations of clinical data, further complicating the approval process. As a result, the regulatory pathway for our drug candidates may be even more unpredictable, complex, and lengthy, and any adverse outcome in the advisory committee process or final FDA decision could materially and adversely affect our business, financial condition, results of operations, and prospects.
Even if the FDA or a comparable authority in another jurisdiction grants accelerated approval for cabozantinib in one or more new indications or for zanzalintinib or one of our other product candidates, such accelerated approval may be limited, imposing significant restrictions on the indicated uses, conditions for use, labeling, distribution, and/or production of the product and would impose requirements for post-marketing studies, including additional research and clinical trials, all of which may result in significant expense and limit our and our collaboration partners’ ability to commercialize cabozantinib, zanzalintinib or our other product candidates in any new indications. In addition, some products approved under accelerated approval have encountered challenges with CMS coverage determinations. Failure to complete post-marketing requirements could significantly increase costs or delay, limit or ultimately restrict the commercialization of cabozantinib, zanzalintinib or another product candidate in the approved indication, or result in product withdrawal. Further, current or any future laws or executive orders governing FDA or foreign regulatory approval processes that may be enacted or executed could have a material adverse impact on our business, financial condition, and results of operations.
Risks Related to Financial Matters
Our profitability could be negatively impacted if expenses associated with our drug discovery, clinical development, business development and commercialization activities grow more quickly than the revenues we generate.
Although we reported net income of $782.6 million and $521.3 million for the fiscal years ended December 31, 2025 and 2024, respectively, we may not be able to maintain or increase profitability on a quarterly or annual basis, and we are unable to predict the extent of future profits or losses. The amount of our net profits or losses will depend, in part, on: the level of sales of CABOMETYX and COMETRIQ in the U.S.; our achievement of development, regulatory and commercial milestones, if any, under our collaboration agreements; the amount of royalties from sales of CABOMETYX and COMETRIQ outside of the U.S. under our collaboration agreements; other collaboration revenues; and the level of our expenses associated with our extensive drug discovery, clinical development, business development and commercialization activities, as well as our general business expansion plans. Our expected future expenses may also be increased by inflationary pressures, which could increase the costs of outside services, labor, raw materials and finished drug product. Significant changes in tariffs or other trade barriers, such as the enactment of tariffs on goods imported into the United States, including, but not limited to, tariffs on goods imported from China, Mexico and Canada (including raw materials and components used in our manufacturing processes) or the introduction of additional tariffs or other trade barriers, could also increase the costs of our finished drug product. We expect to continue to spend substantial amounts to fund the continued development of the cabozantinib franchise for additional indications and of zanzalintinib and our other product candidates, as well as the commercialization of our approved products. In addition, we intend to continue to expand our oncology product pipeline through our drug discovery efforts, including research collaborations, in-licensing arrangements and other strategic transactions that align with our oncology drug development, regulatory and commercial expertise, which efforts could involve substantial costs. To offset these costs in the future, we will need to generate substantial revenues. If these costs exceed our current expectations, or we fail to achieve anticipated revenue targets, our profitability and financial condition may be adversely affected and the market value of our common stock may decline.
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Risks related to recent U.S. tariff announcements
The U.S. government has made and continues to make significant additional changes in U.S. trade policy and may continue to take future actions that could negatively impact U.S. trade. For example, the United States has announced tariffs on many goods imported from specified nations. In addition, there are currently discussions concerning potential increased tariffs for pharmaceutical products, which may impact our supply chain and create uncertainty in the broader pharmaceutical industry. While certain tariffs have been suspended, modified or temporarily reduced, we cannot predict the results of the U.S. government’s trade negotiations or the outcome of ongoing legal challenges to specific tariff policies. Changes in U.S. trade policy, including recently announced tariffs, related to countries where we or our suppliers operate could result in increased costs for raw materials, components, or finished goods for us, or challenges for our third-party contract manufacturers, distributors and suppliers to continue to meet demands for our products at current prices. These cost increases may reduce our margins, require us to raise prices, or make our products less competitive in the marketplace. Additionally, retaliatory tariffs imposed by other countries on U.S. exports could adversely impact demand for our products in international markets or increase the costs of conducting business. If we are unable to mitigate these risks through supply chain adjustments, pricing strategies, or other measures, our financial performance and growth prospects could be negatively affected.
Risks Related to Our Relationships with Third Parties
We rely on Ipsen and Takeda for the commercial success of CABOMETYX in its approved indications outside of the U.S., and we are unable to control the amount or timing of resources expended by these collaboration partners in the commercialization of CABOMETYX in its approved indications outside of the U.S.
We rely upon the regulatory, commercial, medical affairs, market access and other expertise and resources of our collaboration partners, Ipsen and Takeda, for commercialization of CABOMETYX in their respective territories outside of the U.S. We cannot control the amount and timing of resources that our collaboration partners dedicate to the commercialization of CABOMETYX, or to its marketing and distribution, and our ability to generate revenues from the commercialization of CABOMETYX by our collaboration partners depends on their ability to obtain and maintain regulatory approvals for, achieve market acceptance of, and to otherwise effectively market, CABOMETYX in its approved indications in their respective territories. If our collaboration partners are unable or unwilling to invest the resources necessary to commercialize CABOMETYX successfully in the EU, Japan, and other international territories where it has been approved, this could reduce the amount of revenue we are due to receive under these collaboration agreements, thus resulting in harm to our business and operations.
Our clinical, regulatory and commercial collaborations with major companies make us reliant on those companies for their continued performance and investments, which subjects us to a number of risks.
We have established clinical and commercial collaborations with leading biopharmaceutical companies for the development and commercialization of our products, and our dependence on these collaboration partners subjects us to a number of risks, including, but not limited to:
• our collaboration partners’ decision to terminate our collaboration, or their failure to comply with the terms of our collaboration agreements and related ancillary agreements, either intentionally or as a result of negligence or other insufficient performance;
• our inability to control the amount and timing of resources that our collaboration partners devote to the development or commercialization of our products;
• the possibility that our collaboration partners may stop or delay clinical trials, fail to supply us on a timely basis with product required for a combination trial, or deliver product that fails to meet appropriate quality and regulatory standards;
• disputes that may arise between us and our collaboration partners that result in the delay or termination of the development or commercialization of our products or product 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 that prevent them from fulfilling their obligations under our agreements;
• our collaboration partners’ inability to obtain regulatory approvals in a timely manner, or at all;
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• our collaboration partners’ failure to comply with legal and regulatory requirements relevant to the authorization, marketing, distribution and supply of our marketed products in the territories outside the U.S. where they are approved; and
• 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.
If any of these risks materialize, we may not receive collaboration revenues or otherwise realize anticipated benefits from such collaborations, and our product development efforts and prospects for growth could be delayed or disrupted, all of which could have a material adverse impact on our business, financial condition and results of operations.
Our growth potential is dependent in part upon companies with which we have entered into research collaborations, in-licensing arrangements and similar business development relationships.
To expand our early-stage product pipeline, we have augmented our drug discovery activities with multiple research collaborations and in-licensing arrangements with other companies. Our dependence on our relationships with these research and in-licensing partners subjects us to numerous risks, including, but not limited to:
• our research and in-licensing partners’ decision to terminate our relationship, or their failure to comply with the terms of our agreements, either intentionally or as a result of negligent performance;
• disputes that may arise between us and our research and in-licensing partners that result in the delay or termination of research and development activities with respect to any in-licensed assets or supporting technology platforms;
• the possibility that our research and in-licensing partners may experience financial difficulties that prevent them from fulfilling their obligations under our agreements;
• our research and in-licensing partners’ failure to retain essential staff, which is crucial for fulfilling their obligations under our agreements;
• the possibility that our research and in-licensing partners’ technology may be superseded or otherwise no longer be competitive;
• the possibility that our research and in-licensing partners may be acquired, and that any acquiring entity may not honor our partners’ research commitments or otherwise fail to continue fulfilling their obligations under our agreements;
• our research and in-licensing partners’ failure to properly maintain or defend their intellectual property rights or their use of third-party intellectual property rights or proprietary information in such a way as to invite litigation that could jeopardize or invalidate our license to develop these assets or utilize technology platforms;
• laws, regulations or practices imposed by countries or regions outside the U.S. that could impact or inhibit scientific research or the development of healthcare products by foreign competitors or otherwise disadvantage healthcare products made by foreign competitors, as well as general political or economic instability or downturn in those countries, including as a result of tariffs or the imposition of new tariffs, trade wars, barriers, restrictions, or threats of such actions and the related uncertainty thereof, any of which could complicate, interfere with or impede our relationships with our ex-U.S. research, development and in-licensing partners; and
• our research and in-licensing partners’ failure to comply with applicable healthcare laws, as well as established laws and regulations related to Good Practice guidelines.
If any of these risks materialize, we may not be able to expand our product pipeline or otherwise realize a return on the resources we will have invested to develop these early-stage assets, which could have a material adverse impact on our financial condition and prospects for growth.
If third parties, upon which we rely to perform clinical trials for cabozantinib in new indications and for other new product candidates, do not perform as contractually required or expected, additional regulatory approvals may be delayed or may not be possible.
We do not have the ability to conduct clinical trials for cabozantinib or for new potential product candidates independently, so we rely on independent third parties for the performance of these trials, such as the U.S. federal government, third-party contract research organizations, medical institutions, clinical investigators and contract laboratories to conduct our clinical trials. If these third parties do not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines, or if the third parties must be replaced or if the quality or accuracy of
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the data they generate or provide is compromised due to their failure to adhere to our clinical trial or data security protocols or regulatory requirements or for other reasons, our preclinical development activities or clinical trials may be extended, delayed, suspended or terminated, and we may not be able to obtain regulatory approval for or commercialize cabozantinib beyond currently approved indications or obtain regulatory approval for zanzalintinib or our other product candidates. In addition, due to the complexity of our research initiatives, we may be unable to engage with third-party contract research organizations that have the necessary experience and sophistication to help advance our drug discovery efforts, which would impede our ability to identify, develop and commercialize our potential product candidates.
If third-party advisors we rely on to assist with our drug discovery and development efforts do not perform as expected, the expansion of our product pipeline may be delayed.
We work with scientific advisors at academic and other institutions, as well as third-party contractors in various locations throughout the world, who assist us in our research and development efforts, including in drug discovery and preclinical development strategy. These third parties are not our employees and may have other commitments or contractual obligations that limit their availability to us. Although these third-party scientific advisors and contractors generally agree not to do competing work, if a conflict of interest between their work for us and their work for another entity arises, we may lose their services. There has also been scrutiny surrounding the disclosures of payments made to medical researchers from companies in the pharmaceutical industry, and it is possible that the academic and other institutions that employ these medical researchers may prevent us from engaging them as scientific advisors and contractors or otherwise limit our access to these experts, or that the scientific advisors themselves may now be more reluctant to work with industry partners. Even if these scientific advisors and contractors with whom we have engaged intend to meet their contractual obligations, their ability to perform services may be impacted by increased demand for such services from other companies or by other external factors, such as reduced capacity to perform services. If we experience additional delays in the receipt of services, lose work performed by these scientific advisors and contractors or are unable to engage them in the first place, our discovery and development efforts with respect to the matters on which they were working or would work in the future may be significantly delayed or otherwise adversely affected.
We lack our own manufacturing and distribution capabilities necessary for us to produce materials required for certain preclinical activities and to produce and distribute our products for clinical development or for commercial sale, and our reliance on third parties for these services subjects us to various risks.
We do not operate our own manufacturing or distribution facilities for CMC development activities, clinical or commercial production and distribution for our current products and new product candidates. Instead, we mostly rely on various third-party contract manufacturing organizations to conduct these operations on our behalf in accordance with cGMP. As our operations continue to grow in these areas, we are expanding internal CMC development laboratories to include preclinical, and continue to augment our external network focusing on our product candidates. We expect this to enable us to maximize application of our internal expertise and scientific know-how and advance our product candidates more efficiently and with greater technical precision, speed, agility and quality, while working in close collaboration with our expanding external manufacturing and supply chain network through additional third-party contract manufacturers, distributors and suppliers. To establish and manage our manufacturing network and supply chain requires a significant financial commitment, the creation of numerous third-party contractual relationships and continued oversight of these third parties to fulfill compliance with applicable legal and regulatory requirements, including the FDA’s cGMP, the EC’s Guidelines on GDP, as well as other stringent regulatory requirements enforced by the FDA or foreign regulatory agencies, as applicable. These third parties are also subject to routine inspections by the FDA and foreign regulatory agencies. Although we maintain significant resources to directly and effectively oversee the activities and relationships with the third parties in our network, we do not have direct control over their operations.
Our third-party contract manufacturers may not be able to produce or deliver material on a timely basis or manufacture material with the required quality standards, or in the quantity required to meet our preclinical, clinical development and commercial needs and applicable regulatory requirements. Although we have not yet experienced significant production delays or seen significant impairment to our supply chain as a result of the ongoing conflicts between Russia and Ukraine and in the Middle East, the political, economic and social instability in Venezuela or other global events, including as a result of tariffs or the imposition of new tariffs, trade wars, barriers, restrictions, or threats of such actions and the related uncertainty thereof, our third-party contract manufacturers, distributors and suppliers could experience operational delays due to lack of capacity or resources, facility closures and other hardships as a result of these types of global events, which could impact our supply chain by potentially causing delays to or disruptions in the supply of our preclinical, clinical or commercial products. If our third-party contract manufacturers, distributors and suppliers do not continue to supply us with our products or product candidates in a timely fashion and in compliance with applicable quality
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and regulatory requirements, or if they otherwise fail or refuse to comply with their obligations to us under our manufacturing, distribution and supply arrangements, we may not have adequate remedies for any breach. Furthermore, their failure to supply us could impair or preclude meeting commercial or clinical product supply requirements for us or our partners, which could delay product development and future commercialization efforts and have a material adverse impact on our business, financial condition and results of operations. In addition, through our third-party contract manufacturers and data service providers, we continue to provide serialized commercial products as required to comply with the DSCSA and its foreign equivalents where applicable. If our third-party contract manufacturers or data service providers fail to support our efforts to continue to comply with DSCSA and its foreign equivalents, as well as any future electronic pedigree requirements, we may face legal penalties or be restricted from selling our products.
Risks Related to Healthcare Regulatory and Other Legal Compliance Matters
We are subject to healthcare laws, regulations and enforcement; our failure to comply with those laws could have a material adverse impact on our business, financial condition and results of operations.
We are subject to federal and state healthcare laws and regulations, which laws and regulations are enforced by the federal government and the states in which we conduct our business. We also conduct clinical trial activities outside the United States and are therefore subject to applicable laws in the countries where those operations take place. Should our compliance controls prove ineffective at preventing or mitigating the risk and impact of improper business conduct or inaccurate reporting, we could be subject to enforcement of the following, including, without limitation:
• the federal AKS;
• federal Civil Monetary Penalties law, including the beneficiary inducement provisions;
• the Eliminating Kickbacks in Recovery Act;
• the FDCA and its implementing regulations;
• federal civil and criminal false claims laws, including the civil False Claims Act, and the Civil Monetary Penalties Law;
• federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;
• the HIPAA and its implementing regulation, as amended;
• state law equivalents of each of the above federal laws;
• state laws concerning contract pharmacy arrangements and related obligations of drug manufacturers;
• 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;
• state and federal pharmaceutical price and price reporting laws and regulations, including the provisions enacted through the IRA;
• European countries’ national laws mandating public disclosure of transfers of value to healthcare professionals, healthcare organizations and other entities active in the healthcare sector, as well as requirements for prior review and/or approval of agreements with healthcare professionals; and
• laws and regulations in effect in foreign jurisdictions where drug manufacturers, or third party entities operating on behalf of drug manufacturers (including clinical research organizations), are conducting clinical trial activities.
In addition, we are subject to the Foreign Corrupt Practices Act, a U.S. law which regulates certain financial relationships with foreign government officials (which could include, for example, medical professionals employed by national healthcare programs) and its foreign equivalents, as well as federal and state consumer protection and unfair competition laws.
These federal and state healthcare laws and regulations govern prescription drug marketing practices, including off-label promotion and direct-to-consumer (DTC) advertisements. These laws and regulations may also affect our current and future business arrangements with third parties, including various healthcare entities. If our operations are found, or even alleged, to be in violation of the laws described above or other governmental regulations that apply to us, we, or our officers or employees, may be subject to significant penalties, including administrative civil and criminal penalties, damages, fines, regulatory penalties, the curtailment or restructuring of our operations, exclusion from participation in Medicare, Medicaid and other federal and state healthcare programs, imprisonment, reputational harm, additional reporting requirements and oversight through a Corporate Integrity Agreement or other monitoring agreement, any of which would
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adversely affect our ability to sell our products and operate our business and also adversely affect our financial results. Furthermore, responding to any such allegation or investigation and/or defending against any such enforcement actions can be time-consuming and would require significant financial and personnel resources. Therefore, if any state or the federal government initiates an enforcement action against us, our business may be impaired, and even if we are ultimately successful in our defense, litigating these actions could result in substantial costs and divert the attention of management.
Enhanced governmental and private scrutiny over, or investigations or litigation involving, pharmaceutical manufacturer patient assistance programs and donations to patient assistance foundations created by charitable organizations could negatively impact our business practices, harm our reputation, divert the attention of management and increase our expenses .
To help patients afford our products, we have a patient assistance program and also make periodic donations to independent charitable foundations that help financially needy patients. These types of programs are designed to provide financial assistance to patients who might otherwise be unable to afford pharmaceuticals that they have been prescribed by their physicians and have become the subject of Congressional interest and enhanced government scrutiny. The HHS Office of Inspector General established guidelines permitting pharmaceutical manufacturers to make donations to charitable organizations that provide co-pay assistance to Medicare patients, provided that manufacturers meet certain specified compliance requirements. In the event we are found not to have complied with these guidelines (including as interpreted by the HHS Office of Inspector General) and other laws or regulations respecting these arrangements, we could be subject to significant investigations or damages, fines, penalties or other criminal, civil or administrative sanctions or enforcement actions.
We also rely on a third-party hub provider and exercise oversight to monitor patient assistance program activities. Hub providers are generally hired by manufacturers to assist patients with insurance coverage, financial assistance and treatment support after the patients receive a prescription from their healthcare professional. For manufacturers of specialty pharmaceuticals (including our marketed products), the ability to have a single point of contact for their therapies helps ensure efficient medication distribution to patients. Accordingly, our hub activities are also subject to scrutiny and may create risk for us if not conducted in accordance with the views of federal or state enforcement authorities. A variety of entities, including independent charitable foundations and pharmaceutical manufacturers, but not including our company, have received subpoenas in recent years from the U.S. Department of Justice (DOJ) and other enforcement authorities seeking information related to their patient assistance programs and reimbursement and other product support programs, and certain of these entities have entered into costly civil settlement agreements with DOJ and other enforcement authorities that include requirements to maintain complex corporate integrity agreements that impose significant reporting and other requirements. Should we or our hub providers receive a subpoena or other process, regardless of whether we are ultimately found to have complied with the prevailing industry guidance and enforcement standards governing patient assistance and other product support programs, this type of government investigation could negatively impact our business practices, harm our reputation, divert the attention of management and increase our expenses.
We are subject to laws and regulations relating to privacy, data protection and the collection and processing of personal data. Failure to maintain compliance with these regulations could create additional liabilities for us.
The legislative and regulatory landscape for privacy and data protection continues to evolve in the U.S. and other jurisdictions around the world. For example, the CCPA went into operation in 2020 and affords California residents expanded privacy rights and protections, including civil penalties for violations and statutory damages under a private right of action for data security breaches. These protections were expanded by the CPRA, which became effective in January 2023. A rapidly-growing number of privacy laws in other states may also impact our operations, including both comprehensive and sector-specific legislation, and Congress has also considered additional federal privacy legislation. In addition, most healthcare professionals and facilities are subject to privacy and security requirements under HIPAA with respect to our clinical and commercial activities. Although we are not considered to be a covered entity or business associate under HIPAA, we could be subject to penalties if we use or disclose individually identifiable health information in a manner not authorized or permitted by HIPAA. Other countries also have, or are developing, laws governing the collection, use and transmission of personal information. For example, in the EU, the GDPR regulates the processing of personal data of individuals within the EU, even if, under certain circumstances, that processing occurs outside the EU, and also places restrictions on transfers of such data to countries outside of the EU, including the U.S. Should we fail to provide adequate privacy or data security protections or maintain compliance with these laws and regulations, including the CCPA, as amended by the CPRA, as well as the GDPR, we could be subject to sanctions or other penalties, litigation, an increase in our cost of doing business and questions concerning the validity of our data processing activities, including clinical trials.
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Risks Related to Our Information Technology and Intellectual Property
Data breaches and other cybersecurity incidents impacting our information technology operations and infrastructure could compromise our intellectual property or other sensitive information, damage our operations and cause significant harm to our business and reputation.
In the ordinary course of our business, we and our third-party service providers, such as contract research organizations, collect, maintain and transmit sensitive data on our networks and systems, including our intellectual property and proprietary or confidential business information (such as research data and personal information) and confidential information with respect to our customers, clinical trial patients and our collaboration partners. We outsource significant elements of our information technology infrastructure to third parties and, as a result, such third parties may or could have access to our confidential information. Additionally, we are vulnerable to data exfiltration, which is the loss of confidential and proprietary data in the event that persons with authorized access to our systems transfer our confidential and proprietary data outside our systems for their own use, evading our system safeguards and violating our policy restrictions on data transfer.
AI software is increasingly being used in the biopharmaceutical industry, including, in limited instances, by us. The misuse of AI-based software could result in inadvertent disclosure and improper use of confidential information (including personal and proprietary data) of our employees, clinical trial participants, or other third parties, leading to the loss of trade-secrets or other intellectual property. As with many developing technologies, AI also presents risks related to misuse by outside threat actors who may try to gain unauthorized access to our systems and information. The secure maintenance of this information is critical to our business and reputation, and while we have enhanced and are continuing to enhance our cybersecurity efforts commensurate with the growth and complexity of our business, our systems and those of third-party service providers may be vulnerable to cybersecurity incidents or threats. In addition, we are heavily dependent on the functioning of our information technology infrastructure to carry out our business processes, such as external and internal communications or access to clinical data and other key business information. Accordingly, both inadvertent disruptions to this infrastructure and/or cyber-attacks could cause us to incur significant remediation or litigation costs, result in product development delays, disrupt critical business operations, expend key information technology resources and divert the attention of management.
Although the aggregate impact of cybersecurity incidents and threats, including cyber-attacks and data exfiltration, on our operations and financial condition has not been material to date, we and our third-party service providers have frequently been the target of threats of this nature and expect them to continue. Any future data breach and/or unauthorized access or disclosure of our information or intellectual property could compromise our intellectual property and expose our sensitive business information or sensitive business information of our collaboration partners, which may lead to significant liability for us. A data security breach could also lead to public exposure of personal information of our clinical trial patients, employees or others and result in harm to our reputation and business, compel us to comply with federal and/or state breach notification laws and foreign law equivalents, including the GDPR, subject us to investigations and mandatory corrective action, or otherwise subject us to liability under laws and regulations that protect the privacy and security of personal information, which could disrupt our business, result in increased costs or loss of revenue, and/or result in significant financial exposure. Furthermore, the costs of maintaining or upgrading our cybersecurity systems (including the recruitment and retention of experienced information technology professionals, who are in high demand) at the level necessary to keep up with our expanding operations and prevent against potential attacks or other cybersecurity incidents are increasing, and despite our best efforts, our network security and data recovery measures and those of our third-party service providers may still not be adequate to protect against such security breaches and disruptions, which could cause material harm to our business, financial condition and results of operations.
If we are unable to adequately protect our intellectual property, third parties may be able to use our technology, which could adversely affect our ability to compete in the market.
Our success will depend in part upon our ability to obtain patents and maintain adequate protection of the intellectual property related to our technologies and products. The patent positions of biopharmaceutical companies, including our patent position, are generally uncertain and involve complex legal and factual questions. We will be able to protect our intellectual property rights from unauthorized use by third parties only to the extent that our technologies are covered by valid and enforceable patents or are effectively maintained as trade secrets. We will continue to apply for patents covering our technologies and products as, where and when we deem lawful and appropriate. However, these applications may be challenged or may fail to result in issued patents. Our issued patents have been and may in the future be challenged by third parties as invalid or unenforceable under U.S. or foreign laws, or they may be infringed by third
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parties, and we are from time to time involved in the defense and enforcement of our patents or other intellectual property rights in a court of law, U.S. Patent and Trademark Office inter partes review or reexamination proceeding, foreign opposition proceeding or related legal and administrative proceeding in the U.S. and elsewhere. The costs of defending our patents or enforcing our proprietary rights in post-issuance administrative proceedings and litigation can be substantial and the outcome can be uncertain. An adverse outcome may allow third parties to use our intellectual property without a license and/or allow third parties to introduce generic and other competing products, any of which would negatively impact our business. Third parties may also attempt to invalidate or design around our patents, or assert that they are invalid or otherwise unenforceable, and seek to introduce generic versions of cabozantinib. For example, we received Paragraph IV certification notice letters from MSN, Teva, Cipla, Sun, and Biocon concerning the respective ANDAs that each had filed with the FDA seeking approval to market generic versions of CABOMETYX tablets. We have also received Paragraph IV certification notice letters from Azurity and Handa concerning the 505(b)(2) NDA that each has filed with the FDA seeking approval to market cabozantinib tablets and cabozantinib (in the form of cabozantinib lauryl sulfate) capsules, respectively. Because these 505(b)(2) products are for a different strength than CABOMETYX, we believe they will not be considered generic equivalents. However, should MSN, Teva, Cipla, Sun, Biocon, Azurity, Handa, or any other third parties receive FDA approval of an ANDA or a 505(b)(2) NDA with respect to cabozantinib, it is possible that such company or companies could introduce generic versions or otherwise competitor versions of our marketed products before our patents expire if they do not infringe our patents or if it is determined that our patents are invalid or unenforceable, and the resulting generic competition could have a material adverse impact on our business, financial condition and results of operations.
In addition, because patent applications can take many years to issue, third parties may have pending applications, unknown to us, which may later result in issued patents that cover the production, manufacture, commercialization or use of our product candidates. Our existing patents and any future patents we obtain may not be sufficiently broad to prevent others from practicing our technologies or from developing competing products. They may also be negatively impacted by the decisions of foreign courts, which could limit the protection contemplated by the original regulatory approval and our ability to thwart the development of competing products that might otherwise have been determined to infringe our intellectual property rights. Furthermore, others may independently develop similar or alternative technologies or design around our patents. In addition, our patents may be challenged or invalidated or may fail to provide us with any competitive advantages, if, for example, others were the first to invent or to file patent applications for closely related inventions.
The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the U.S., and many companies have encountered significant problems in protecting and defending such rights in foreign jurisdictions. Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties and many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of the patent. Moreover, the Russian Federation has and may further limit protections on patents originating from certain countries (including the U.S.) in response to sanctions relating to the ongoing Russia-Ukraine conflict, and in general, the legal systems of certain countries, particularly certain developing countries, do not favor the aggressive enforcement of patent and other intellectual property protection, which makes it difficult to stop infringement. We also rely on trade secret protection for some of our confidential and proprietary information, and we are taking security measures to protect our proprietary information and trade secrets, particularly in light of recent instances of data loss and misappropriation of intellectual property in the biopharmaceutical industry. However, these measures may not provide adequate protection, and while we seek to protect our proprietary information by entering into confidentiality agreements with employees, partners and consultants, as well as maintain cybersecurity protocols within our information technology infrastructure, we cannot provide assurance that our proprietary information will not be disclosed, or that we can meaningfully protect our trade secrets. In addition, our competitors may independently develop substantially equivalent proprietary information or may otherwise gain access to our trade secrets.
Litigation or third-party claims of intellectual property infringement could require us to spend substantial time and money and adversely affect our ability to develop and commercialize products.
Our commercial success depends in part upon our ability to avoid infringing patents and proprietary rights of third parties and not to breach any licenses that we have entered into with regard to our technologies and the technologies of third parties. Other parties have filed, and in the future are likely to file, patent applications covering products and technologies that we have developed or intend to develop. If patents covering technologies required by our operations are issued to others, we may have to obtain licenses from third parties, which may not be available on commercially reasonable terms, or at all, and may require us to pay substantial royalties, grant a cross-license to some of our patents to another patent holder or redesign the formulation of a product candidate so that we do not infringe third-party patents, which may
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be impossible to accomplish or could require substantial time and expense. In addition, we may be subject to claims that our employees or independent contractors have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers, or that they used or sought to use patent inventions belonging to their former employers. Furthermore, third parties may obtain patents that relate to our technologies and claim that use of such technologies infringes on their patents or otherwise employs their proprietary technology without authorization. Regardless of their merit, such claims could require us to incur substantial costs and divert the attention of management and key technical personnel in defending ourselves against any such claims or enforcing our own patents. In the event of any third party’s successful claim of patent infringement or misappropriation of trade secrets, we may lose valuable intellectual property rights or personnel, which could impede or prevent the achievement of our product development goals, or we may be required to pay damages and obtain one or more licenses from these third parties, subjecting us to substantial royalty payment obligations. We may not be able to obtain these licenses on commercially reasonable terms, or at all. Defense of any lawsuit or failure to obtain any of these licenses could adversely affect our ability to develop and commercialize products.
Risks Related to Our Operations, Managing Our Growth and Employee Matters
If we are unable to manage our human capital needs, there could be a material adverse impact on our business, financial condition and results of operations, and our prospects may be adversely affected .
As we continue to grow our pipeline of product candidates, our clinical development organization and related functions may grow, which may place significant demands on our management and resources, and our current and planned personnel and operating practices may not be adequate to support such growth. To effectively manage our evolving human capital needs, we must continue to improve existing, and when necessary, implement new facilities, operational and financial systems, and procedures and controls, as well as train and manage our employee base, and there can be no assurance that we can do so effectively or avoid experiencing operating inefficiencies or control deficiencies. We continue to rely on our management personnel to oversee our operations, and retaining and recruiting qualified individuals is difficult. If we are unable to manage our human capital needs effectively, or if we are unsuccessful in retaining or recruiting qualified management personnel, there could be a material adverse impact on our business, financial condition and results of operations.
The loss of key personnel or the inability to retain or attract additional personnel could impair our ability to operate successfully.
We are highly dependent upon the principal members of our management, as well as clinical, commercial and scientific staff, the loss of whose services might adversely impact the achievement of our objectives. Also, we may not have sufficient personnel to execute our business plans. Retaining and, where necessary, recruiting qualified clinical, commercial, scientific and pharmaceutical operations personnel will be critical to support activities related to advancing the development programs for the cabozantinib franchise, zanzalintinib and our other product candidates, successfully executing upon our commercialization plan for the cabozantinib franchise and continuing our proprietary research and development efforts. Competition is intense for experienced clinical, commercial, scientific and pharmaceutical operations personnel, and we may be unable to retain or recruit such personnel with the expertise or experience necessary to allow us to successfully develop and commercialize our products. Furthermore, the majority of our employees are employed “at will” and, therefore, may leave our employment at any time.
Risks Related to Environmental and Product Liability
We use hazardous chemicals and biological materials in our business. Any claims relating to improper handling, storage or disposal of these materials could be time consuming and costly.
Our research and development processes involve the controlled use of hazardous materials, including chemicals and biological materials, and our operations can produce hazardous waste products. We cannot eliminate the risk of accidental contamination or discharge, or any resultant injury from these materials, and we may face liability under applicable laws for any injury or contamination that results from our use or the use by our collaboration partners or other third parties of these materials. Such liability may exceed our insurance coverage and our total assets, and in addition, we may be required to indemnify our collaboration partners against all damages and other liabilities arising out of our development activities or products produced in connection with our collaborations with them. Moreover, our continued compliance with environmental laws and regulations may be expensive, and current or future environmental regulations may impair our research, development and production efforts.
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We face potential product liability exposure far in excess of our limited insurance coverage.
We may be held liable if any product we or our collaboration partners develop or commercialize causes injury or is found otherwise unsuitable during product testing, manufacturing, marketing or sale. Regardless of merit or eventual outcome, product liability claims could result in decreased demand for our products and product candidates, injury to our reputation, withdrawal of patients from our clinical trials, product recall, substantial monetary awards to third parties and the inability to commercialize any products that we may develop in the future. We maintain limited product liability insurance coverage for our clinical trials and commercial activities. However, our insurance may not be sufficient to reimburse us for expenses or losses we may suffer. Moreover, if insurance coverage becomes more expensive, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability.
Risks Related to Our Common Stock
Our stock price has been and may in the future be highly volatile.
The trading price of our common stock has been highly volatile, and it may remain highly volatile or fluctuate substantially due to factors such as the following, many of which we cannot control:
• the announcement of FDA or other regulatory approval or non-approval, or delays in the FDA or other regulatory review process with respect to cabozantinib, zanzalintinib or our other product candidates, our collaboration partners’ product candidates being developed in combination with either cabozantinib, zanzalintinib or our other product candidates, 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 the cabozantinib franchise, zanzalintinib or any of our other product candidates or programs;
• our ability to make future investments in the expansion of our pipeline through drug discovery, including future research collaborations, in-licensing arrangements and other strategic transactions;
• 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, zanzalintinib and our other product candidates;
• actions taken by regulatory agencies, both in the U.S. and abroad, with respect to cabozantinib or our clinical trials for zanzalintinib or our other product candidates;
• 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, Teva’s, Cipla’s, Biocon’s and Sun’s respective ANDAs, seeking approval of generic versions of our marketed products, and Azurity’s and Handa’s 505(b)(2) NDAs seeking approval of a different solid formulation or salt of cabozantinib;
• 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;
• 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;
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• developments in the biopharmaceutical industry;
• sales of large blocks of our common stock or sales of our common stock by our executive officers, directors and significant stockholders;
• the announcement of a repurchase of our common stock;
• additions and departures of key personnel or board members;
• the disposition of any of our technologies or compounds; and
• general market, macroeconomic and political conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors.
These and other factors could have a material adverse impact on the market price of our common stock. In addition, the stock markets in general, and the markets for biotechnology and pharmaceutical stocks in particular, have historically experienced and may continue to experience significant volatility that has often been unrelated or disproportionate to the operating performance of particular companies. Likewise, as a result of significant changes in U.S. or global political and macroeconomic conditions, including the potential for local and/or global economic downturn or recession, inflation, fluctuating interest rates, as well as policies governing foreign trade, including tariffs or the imposition of new tariffs, trade wars, barriers, restrictions, or threats of such actions and the related uncertainty thereof, and healthcare spending and delivery, the ongoing conflicts between Russia and Ukraine and in the Middle East, or the political, economic and social instability in Venezuela, the financial markets could continue to experience significant volatility that could also continue to negatively impact the markets for biotechnology and pharmaceutical stocks. These broad market fluctuations have adversely affected and may in the future adversely affect the trading price of our common stock. Excessive volatility may continue for an extended period of time following the date of this report.
In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been initiated. A securities class action suit against us could result in substantial costs and divert the attention of management, which could have a material adverse impact on our business, financial condition and results of operations.
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent or deter attempts by our stockholders to replace or remove our current management, which could cause the market price of our common stock to decline.
Provisions in our corporate charter and bylaws may discourage, delay or prevent an acquisition of us, a change in control, or attempts by our stockholders to replace or remove members of our current Board of Directors. Because our Board of Directors is responsible for appointing the members of our management team, these provisions could in turn affect any attempt by our stockholders to replace current members of our management team. These provisions include:
• 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.
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
Our disclosures related to environmental, social and governance matters subjects us to risks, including risks to our market perception and stock price.
The focus of governments, investors and other stakeholders on environmental, social and governance (ESG) practices and disclosures is constantly shifting and expectations in this area continue to evolve. Various jurisdictions are adopting or considering new laws and regulations that expand or curtail disclosure, reporting and diligence requirements with respect to ESG topics, including California legislation that requires various climate-related disclosures. We manage, track and report on our ESG initiatives, including in our Corporate Values & Sustainability Report or as may be required in our annual and quarterly reports. Our efforts to accomplish and report on these topics subjects us to risks, any of which
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could have a material adverse impact on our business, including specifically market perception and the market price of our common stock. Such risks may be outside of our control and the criteria by which our ESG practices and disclosures are assessed may change due to the evolving regulatory requirements affecting ESG standards and disclosures, which could result in changed expectations for us with respect to ESG matters (including those in support of or in opposition to ESG principles). In addition, state attorneys general and other governmental authorities may take action against certain ESG policies or practices, and we may become subject to restrictions on ESG initiatives. Our failure or perceived failure to pursue or achieve our ESG objectives, or to maintain our ESG practices that meet evolving stakeholder expectations or expanding legal requirements (which are continually evolving and may emphasize different priorities than the ones we focus on or none at all), could have a material adverse impact on our market perception and stock price, as well as expose us to government enforcement actions and private litigation.
