0000939767-20-000068 | 10-Q | XBRL Viewer

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Collaboration Agreements - Collaboration Revenues under the Collaboration Agreement with Takeda (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 03, 2020	Mar. 29, 2019
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Revenue from contract with customer	$ 226,915	$ 215,487
Revenues	226,915	215,487
Collaborative Arrangement with Takeda
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Revenues	1,069	11,493
License revenues
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Revenue from contract with customer	20,879	25,564
License revenues \| Collaborative Arrangement with Takeda
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Revenue from contract with customer	0	9,056
Collaboration services revenues
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Revenue not from contract with customer	12,156	10,342
Collaboration services revenues \| Collaborative Arrangement with Takeda
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Revenue not from contract with customer	$ 1,069	$ 2,437

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Apr. 03, 2020	Jan. 03, 2020
Current assets:
Cash and cash equivalents	$ 357,340	$ 266,501
Short-term investments	597,028	585,742
Trade receivables, net	137,338	119,073
Inventory	15,417	12,886
Prepaid expenses and other current assets	29,773	26,988
Total current assets	1,136,896	1,011,190
Long-term investments	486,036	536,385
Property and equipment, net	48,489	48,892
Deferred tax assets, net	163,187	172,374
Goodwill	63,684	63,684
Other long-term assets	57,312	53,145
Total assets	1,955,604	1,885,670
Current liabilities:
Accounts payable	15,321	11,581
Accrued compensation and benefits	26,687	37,364
Accrued clinical trial liabilities	34,969	38,777
Rebates and fees due to customers	23,006	18,719
Accrued collaboration liabilities	8,663	11,856
Other current liabilities	31,831	24,449
Total current liabilities	140,477	142,746
Long-term portion of deferred revenue	14,133	6,596
Long-term portion of operating lease liabilities	47,883	48,011
Other long-term liabilities	5,459	2,347
Total liabilities	207,952	199,700
Commitments
Stockholders’ equity:
Preferred stock, $0.001 par value, 10,000 shares authorized and no shares issued	0	0
Common stock, $0.001 par value; 400,000 shares authorized; issued and outstanding: 305,780 and 304,831 at March 31, 2020 and December 31, 2019, respectively	306	305
Additional paid-in capital	2,258,307	2,241,947
Accumulated other comprehensive income (loss)	(222)	3,069
Accumulated deficit	(510,739)	(559,351)
Total stockholders’ equity	1,747,652	1,685,970
Total liabilities and stockholders’ equity	$ 1,955,604	$ 1,885,670

Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended
	Apr. 03, 2020	Mar. 29, 2019
Statement of Comprehensive Income [Abstract]
Net income	$ 48,612	$ 75,775
Other comprehensive (loss) income:
Net unrealized (losses) gains on available-for-sale debt securities, net of tax impact of $941 and ($394), respectively	(3,291)	1,429
Comprehensive income	$ 45,321	$ 77,204

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Apr. 03, 2020	Mar. 29, 2019
Statement of Cash Flows [Abstract]
Net income	$ 48,612	$ 75,775
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	2,175	1,962
Stock-based compensation	13,982	12,529
Non-cash lease expense	1,174	440
Deferred taxes	10,128	0
Other, net	(888)	1,054
Changes in operating assets and liabilities:
Trade receivables, net	(18,270)	55,101
Inventory	(4,695)	(305)
Prepaid expenses and other assets	(2,863)	(11,165)
Deferred revenue	8,850	(1,313)
Accounts payable and other liabilities	(2,131)	27,515
Net cash provided by operating activities	56,074	161,593
Cash flows from investing activities:
Purchases of property, equipment and other	(2,961)	(2,307)
Purchases of investments	(251,505)	(239,869)
Proceeds from maturities and sales of investments	287,086	134,519
Net cash provided by (used in) investing activities	32,620	(107,657)
Cash flows from financing activities:
Proceeds from issuance of common stock under equity incentive plans	3,938	6,817
Taxes paid related to net share settlement of equity awards	(1,793)	(1,580)
Other, net	0	(11)
Net cash provided by financing activities	2,145	5,226
Net increase in cash, cash equivalents and restricted cash	90,839	59,162
Cash, cash equivalents and restricted cash at beginning of period	268,137	315,875
Cash, cash equivalents and restricted cash at end of period	358,976	375,037
Supplemental cash flow disclosure:
Right-of-use assets obtained in exchange for lease obligations	576	8,170
Unpaid liabilities incurred for purchases of property and equipment	$ 481	$ 141

Income Taxes (Details)	3 Months Ended
Income Taxes (Details)	Apr. 03, 2020	Mar. 29, 2019
Income Tax Disclosure [Abstract]
Effective income tax rate	19.00%	16.40%
U.S. federal statutory rate		21.00%

Stock-Based Compensation

3 Months Ended

Apr. 03, 2020

Share-based Payment Arrangement [Abstract]

STOCK-BASED COMPENSATION

We allocated the stock-based compensation expense for our equity incentive plans and our 2000 Employee Stock Purchase Plan (ESPP) as follows (in thousands):



	Three Months Ended March 31,
	2020		2019
Research and development	$	5,086	$	4,306
Selling, general and administrative	8,896		8,223
Total stock-based compensation	$	13,982	$	12,529

During the three months ended March 31, 2020, we granted 271,370 stock options with a weighted average exercise price of $18.84 per share and a weighted average grant date fair value of $8.27 per share. As of March 31, 2020, there were 19,750,438 stock options outstanding and there was $30.3 million of unrecognized compensation expense related to our unvested stock options.

During the three months ended March 31, 2020, we granted 595,685 restricted stock units (RSUs) with a weighted average grant date fair value of $20.87 per share. As of March 31, 2020, there were 9,104,132 RSUs outstanding and there was $160.0 million of unrecognized compensation expense related to our unvested RSUs.

Stock options and RSUs granted during the three months ended March 31, 2020 have vesting conditions and contractual lives of a similar nature to those described in “Note 8. Employee Benefit Plans” of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

Stock-Based Compensation (Tables)

3 Months Ended

Apr. 03, 2020

Share-based Payment Arrangement [Abstract]

Allocated Employee Stock-Based Compensation Expense

We allocated the stock-based compensation expense for our equity incentive plans and our 2000 Employee Stock Purchase Plan (ESPP) as follows (in thousands):



	Three Months Ended March 31,
	2020		2019
Research and development	$	5,086	$	4,306
Selling, general and administrative	8,896		8,223
Total stock-based compensation	$	13,982	$	12,529

Fair Value Measurements (Details) - USD ($) $ in Thousands	Apr. 03, 2020	Jan. 03, 2020
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investments available-for-sale	$ 1,111,721	$ 1,312,464
Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investments available-for-sale	1,111,721	1,312,464
Total financial assets carried at fair value	1,431,499	1,347,664
Level 1 \| Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investments available-for-sale	0	0
Total financial assets carried at fair value	273,497	2,467
Level 2 \| Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investments available-for-sale	1,111,721	1,312,464
Total financial assets carried at fair value	1,158,002	1,345,197
Commercial paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investments available-for-sale	202,452	389,573
Commercial paper \| Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investments available-for-sale	202,452	389,573
Commercial paper \| Level 1 \| Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investments available-for-sale	0	0
Commercial paper \| Level 2 \| Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investments available-for-sale	202,452	389,573
Corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investments available-for-sale	740,271	756,226
Corporate bonds \| Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investments available-for-sale	740,271	756,226
Corporate bonds \| Level 1 \| Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investments available-for-sale	0	0
Corporate bonds \| Level 2 \| Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investments available-for-sale	740,271	756,226
U.S. Treasury and government-sponsored enterprises
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investments available-for-sale	153,710	166,665
U.S. Treasury and government-sponsored enterprises \| Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investments available-for-sale	153,710	166,665
U.S. Treasury and government-sponsored enterprises \| Level 1 \| Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investments available-for-sale	0	0
U.S. Treasury and government-sponsored enterprises \| Level 2 \| Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investments available-for-sale	153,710	166,665
Municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investments available-for-sale	15,288
Municipal bonds \| Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investments available-for-sale	15,288
Municipal bonds \| Level 1 \| Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investments available-for-sale	0
Municipal bonds \| Level 2 \| Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total investments available-for-sale	15,288
Money market funds \| Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	273,497	2,467
Money market funds \| Level 1 \| Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	273,497	2,467
Money market funds \| Level 2 \| Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	0	0
Certificates of deposit \| Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	46,281	32,733
Certificates of deposit \| Level 1 \| Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	0	0
Certificates of deposit \| Level 2 \| Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	$ 46,281	$ 32,733

Inventory (Tables)

3 Months Ended

Apr. 03, 2020

Inventory Disclosure [Abstract]

Inventory

Inventory consisted of the following (in thousands):



	March 31, 2020		December 31, 2019
Raw materials	$	2,215	$	2,709
Work in process	14,278		9,447
Finished goods	4,865		4,367
Total	$	21,358	$	16,523
Balance Sheet classification:
Current portion included in inventory	$	15,417	$	12,886
Long-term portion included in other long-term assets	5,941		3,637
Total	$	21,358	$	16,523

Net Income Per Share - Computation of Basic and Diluted Net Income Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Apr. 03, 2020	Mar. 29, 2019
Numerator:
Net income	$ 48,612	$ 75,775
Denominator:
Weighted-average common shares outstanding - basic (in shares)	305,388	300,542
Dilutive effect of employee stock plans (in shares)	10,451	14,102
Weighted-average common shares outstanding - diluted (in shares)	315,839	314,644
Net income per share - basic (in dollars per share)	$ 0.16	$ 0.25
Net income per share - diluted (in dollars per share)	$ 0.15	$ 0.24

- Definition

The amount of net income (loss) for the period per each share of common stock or unit outstanding during the reporting period.

+ References

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- Definition

The amount of net income (loss) for the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.

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- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

Stock-Based Compensation - Allocated Employee Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 03, 2020	Mar. 29, 2019
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation	$ 13,982	$ 12,529
Research and development
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation	5,086	4,306
Selling, general and administrative
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation	$ 8,896	$ 8,223

Organization and Summary of Significant Accounting Policies (Policies)	3 Months Ended
	Apr. 03, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Basis of Consolidation	The accompanying Condensed Consolidated Financial Statements include the accounts of Exelixis and those of our wholly-owned subsidiaries. These entities’ functional currency is the U.S. dollar. All intercompany balances and transactions have been eliminated.
Basis of Presentation	The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the U.S. for interim financial information and pursuant to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In our opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of our financial statements for the periods presented have been included. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 or for any future period. The accompanying Condensed Consolidated Financial Statements and Notes thereto should be read in conjunction with our Consolidated Financial Statements and Notes thereto for the year ended December 31, 2019, included in our Annual Report on Form 10-K filed with the SEC on February 25, 2020.
Fiscal Period	We have adopted a 52- or 53-week fiscal year policy that generally ends on the Friday closest to December 31^st. Fiscal year 2020, which is a 52-week fiscal year, will end on January 1, 2021 and fiscal year 2019, which was a 53-week fiscal year, ended on January 3, 2020. For convenience, references in this report as of and for the three months ended April 3, 2020 and March 29, 2019, and as of and for the fiscal years ending January 1, 2021, and ended January 3, 2020, are indicated as being as of and for the three months ended March 31, 2020 and March 31, 2019 and the years ending December 31, 2020 and ended December 31, 2019, respectively. Similarly, references in this report to the first day of the fiscal year ending January 1, 2021 are indicated as being as of January 1, 2020.
Reclassifications	Reclassifications Certain prior period amounts in the accompanying Condensed Consolidated Financial Statements have been reclassified to conform to the current period presentation. Such reclassifications did not impact previously reported total revenue, income from operations, net income, total assets, total liabilities or total stockholders’ equity.
Segment Information	Segment Information We operate in one business segment that focuses on the discovery, development and commercialization of new medicines for difficult-to-treat cancers. Our Chief Executive Officer, as the chief operating decision-maker, manages and allocates resources to our operations on a total consolidated basis. Consistent with this decision-making process, our Chief Executive Officer uses consolidated, single-segment financial information for purposes of evaluating performance, forecasting future period financial results, allocating resources and setting incentive targets.
Use of Estimates	Use of Estimates The preparation of the accompanying Condensed Consolidated Financial Statements conforms to accounting principles generally accepted in the U.S., which requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenues and expenses, and related disclosures. We base our estimates on historical experience and on various other market-specific and other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially from those estimates. In March 2020, we received the 2020 preliminary fee notice from the Internal Revenue Service for the Branded Prescription Drug Fee for the 2018 sales year, which resulted in an increase in our estimate of such fees for the 2018 and 2019 sales years. Accordingly, we recorded an adjustment during the three months ended March 31, 2020 to increase selling, general and administrative expenses and our accrual for these fees by $5.4 million. T
Recently Adopted Accounting Pronouncements and Recent Accounting Pronouncements Not Yet Adopted	Recently Adopted Accounting Pronouncements On January 1, 2020, we adopted Accounting Standards Update (ASU) No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606 (ASU 2018-18). ASU 2018-18 clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue under Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (Topic 606) when the counterparty is a customer for a distinct good or service (i.e. a unit of account). For units of account that are in the scope of Topic 606, all of the guidance in Topic 606 should be applied, including the guidance on recognition, measurement, presentation and disclosure. ASU 2018-18 precludes entities from presenting amounts related to transactions with a counterparty in a collaborative arrangement that is not a customer as revenue from contracts with customers. If a portion of a distinct bundle of goods or services within an arrangement is not with a customer, then the unit of account is not within the scope of Topic 606, and the recognition and measurement of that unit of account shall be based on analogy to authoritative accounting literature or, if there is no appropriate analogy, a reasonable, rational, and consistently applied accounting policy election. Upon adoption of ASU 2018-18, we have presented revenue from performance obligations associated with our collaboration arrangements that are within the scope of Topic 606 (license revenues) separately from revenue from performance obligations that are not subject to Topic 606 (collaboration services revenues). The adoption of ASU 2018-18 was applied retrospectively, and prior periods have been restated to conform to the presentation proscribed by ASU 2018-18. The adoption of ASU 2018-18 did not impact total revenues for the prior period presented in our Condensed Consolidated Statements of Income. On January 1, 2020, we adopted ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (ASU 2017-04). ASU 2017-04 simplifies goodwill impairment testing by eliminating the second step of the impairment test. The amended guidance requires an impairment charge to be recognized for the amount by which the carrying amount of a reporting unit exceeds its fair value under a one-step impairment test. The adoption of ASU 2017-04 did not impact our Condensed Consolidated Financial Statements. On January 1, 2020, we adopted ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326) (ASU 2016-13). ASU 2016-13 implements an impairment model, known as the current expected credit loss model, that is based on expected losses rather than incurred losses. Under the new guidance, we will recognize our estimate of current expected credit losses as an allowance on financial assets measured at amortized cost, including accounts receivable, unbilled collaboration revenue, and investments classified as available for sale. Current expected credit losses were immaterial as of the date of adoption, and the adoption of ASU 2016-13 did not have a significant impact on our Condensed Consolidated Financial Statements. Investment Impairment Quarterly, we assess each of our investments in available-for-sale debt securities whose fair value is below its cost basis to determine if the investment’s impairment is due to credit-related factors or noncredit-related factors. Factors considered in determining whether an impairment is credit-related include the extent to which the investment’s fair value is less than its cost basis, declines in published credit ratings, issuer default on interest or principal payments, and declines in the financial condition and near-term prospects of the issuer. If we determine a credit-related impairment exists, we will measure the credit loss based on a discounted cash flows model. Credit-related impairments on available-for-sale debt securities are recognized as an allowance for credit losses with a corresponding adjustment to other income, net in the accompanying Condensed Consolidated Statements of Income. The portion of the impairment that is not credit-related is recorded, net of applicable taxes, as a reduction of other comprehensive income. We have elected to exclude accrued interest from both the fair value and the amortized cost basis of the available-for-sale debt security for the purposes of identifying and measuring an impairment. We write-off accrued interest as a reduction of interest income when an issuer has defaulted on interest payments due on the security. Accounts Receivable Trade receivables, net contain amounts billed to our customers for product sales, and amounts billed to our collaboration partners for development, regulatory and sales-based milestone payments, royalties on the sale of licensed products, profit-sharing arrangements, development cost reimbursements, and payments for product supply services. Our customers are primarily pharmaceutical and biotechnology companies that are located in the U.S., and collaboration partners that are located in Europe and Japan. We record trade receivables net of allowances for credit losses and chargebacks, and cash discounts for prompt payment. We apply an aging method to estimate credit losses and consider our historical loss information, adjusted to account for current conditions, and reasonable and supportable forecasts of future economic conditions affecting our customers. Goodwill We recorded goodwill amounts as the excess purchase price over tangible assets, liabilities and intangible assets acquired based on their estimated fair value. We review the carrying amount of goodwill for impairment annually and whenever events or changes in circumstance indicate that the carrying value may not be recoverable. We perform our annual assessment of the recoverability of our goodwill as of the first day of our fourth quarter. The assessment of recoverability may first consider qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. We perform a quantitative assessment if the qualitative assessment results in a more-likely-than-not determination or if a qualitative assessment is not performed. The quantitative assessment determines whether the carrying amount of a reporting unit exceeds its fair value, in which case an impairment charge is recognized for the amount by which the carrying amount of a reporting unit exceeds its fair value, limited to the goodwill balance. We operate in one business segment, which is also considered to be our sole reporting unit and therefore, goodwill is tested for impairment at the enterprise level. We did not recognize any impairment charges in any of the periods presented. Collaboration Agreements We assess whether our collaboration agreements are subject to ASC Topic 808, Collaborative Arrangements (Topic 808) based on whether they involve joint operating activities and whether both parties have active participation in the arrangement and are exposed to significant risks and rewards. To the extent that the arrangement falls within the scope of Topic 808, we apply the unit of account guidance under Topic 606 to identify distinct performance obligations, and then determine whether a customer relationship exists for each distinct performance obligation. If we determine a performance obligation within the arrangement is with a customer, we apply the guidance in Topic 606. If a portion of a distinct bundle of goods or services within an arrangement is not with a customer, then the unit of account is not within the scope of Topic 606, and the recognition and measurement of that unit of account shall be based on analogy to authoritative accounting literature or, if there is no appropriate analogy, a reasonable, rational, and consistently applied accounting policy election. We enter into collaboration arrangements, under which we license certain rights to our intellectual property to third parties. The terms of these arrangements typically include payments to us for one or more of the following: non-refundable, up-front license fees; development, regulatory and sales-based milestone payments; product supply services; development cost reimbursements; profit-sharing arrangements; and royalties on net sales of licensed products. As part of the accounting for these arrangements, we develop assumptions that require judgment to determine the standalone selling price for each performance obligation identified in the contract. These key assumptions may include forecasted revenues, clinical development timelines and costs, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success. Up-front License Fees: If the license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenues from nonrefundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. We evaluate the measure of progress at the end of each reporting period and, if necessary, adjust the measure of performance and related revenue recognition. Regulatory and Development Milestone Payments: At the inception of each arrangement that includes development milestone payments, we evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our or the licensee’s control, such as regulatory approvals, are not considered probable of being achieved until uncertainty associated with the approvals has been resolved. The transaction price is then allocated to each performance obligation, on a relative standalone selling price basis, for which we recognize revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, we re-evaluate the probability of achieving such development and regulatory milestones and any related constraint, and if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis. Product Supply Services: Arrangements that include a promise for the future supply of drug product for either clinical development or commercial supply at the licensee’s discretion are generally considered as options. We assess if these options provide a material right to the licensee and if so, they are accounted for as separate performance obligations. Development Cost Reimbursements: Our collaboration arrangements may include promises of future clinical development and drug safety services, as well as participation on certain joint committees. When such services are provided to a customer, and they are distinct from the licenses provided to our collaboration partners, these promises are accounted for as a separate performance obligation which we estimate using internal development costs incurred and projections through the term of the arrangements. We record revenue for these services as the performance obligations are satisfied over time. However, if we conclude that our collaboration partner is not a customer for those collaborative research and development activities, we present such payments as a reduction of research and development expenses. Profit-sharing Arrangements: Under the terms of our collaboration agreement with Genentech for cobimetinib, we are entitled to a share of U.S. profits and losses received in connection with the commercialization of cobimetinib. We account for this arrangement in accordance with Topic 606. We have determined that we are an agent under the agreement and therefore revenues are recorded net of costs incurred. We record revenue for the variable consideration associated with the profits and losses under the collaboration agreement when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Royalty and Sales-based Milestone Payments: For arrangements that include royalties and sales-based milestone payments, including milestone payments earned for the first commercial sale of a product, the license is deemed to be the predominant item to which such payments relate and we recognize revenue at the later of when the related sales occur or when the performance obligation to which the royalty has been allocated has been satisfied. Recent Accounting Pronouncements Not Yet Adopted In December 2019, the Financial Accounting Standards Board issued ASU 2019-12, Income Taxes (Topic 740)-Simplifying the Accounting for Income Taxes (ASU 2019-12). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC Topic 740, Income Taxes and clarifying and amending existing guidance. ASU 2019-12 will be effective for us in the first quarter of 2021 with early adoption permitted. We are currently assessing the impact of ASU 2019-12 on our financial statements.
Revenues	The allowance for chargebacks and discounts for prompt payment is recorded as a reduction of trade receivables, net and the remaining reserves are recorded as rebates and fees due to customers in the accompanying Condensed Consolidated Balance Sheets. Contract Assets and Liabilities We receive payments from our collaboration partners based on billing schedules established in each contract. Amounts are recorded as accounts receivable when our right to consideration is unconditional. We may also recognize revenue in advance of the contractual billing schedule and such amounts are recorded, net of any allowance for credit losses, as a contract asset when recognized. Contract assets, which are presented in prepaid expenses and other current assets in the accompanying Condensed Consolidated Balance Sheets, were $0 and $1.1 million as of March 31, 2020 and December 31, 2019, respectively. We may be required to defer recognition of revenue for upfront and milestone payments until we perform our obligations under these arrangements, and such amounts are recorded as deferred revenue upon receipt or when due. Contract liabilities were $15.4 million and $6.6 million as of March 31, 2020 and December 31, 2019, respectively. The current portion of the contract liabilities, which are presented in other current liabilities in the accompanying Condensed Consolidated Balance Sheets, were $1.3 million and $0 as of March 31, 2020 and December 31, 2019, respectively. The remainder of the contract liabilities are presented in long-term portion of deferred revenue in the accompanying Condensed Consolidated Balance Sheets. For those contracts that have multiple performance obligations, contract assets and liabilities are reported on a net basis at the contract level. Net product revenues and license revenues were recorded in accordance with Topic 606. The related goods and intellectual property license revenues have been recognized at a point in time. License revenues include the recognition of the portion of upfront and milestones payments allocated to the transfer of intellectual property licenses for which it had become probable in the current period that the milestone would be achieved and a significant reversal of revenues would not occur, as well as royalty revenues and our share of profits on the U.S. commercialization of COTELLIC. Collaboration services revenues were recorded in accordance with Topic 808 and by analogy to Topic 606. Collaboration services revenues include the recognition of deferred revenue for the portion of upfront and milestone payments allocated to research and development services performance obligations, development cost reimbursements earned under our collaboration agreements, product supply revenues, net of product supply costs, and the royalties we paid to GlaxoSmithKline (GSK) on sales by Ipsen Pharma SAS (Ipsen) of products containing cabozantinib. Net product revenues are attributed to geographic region based on the ship-to location. Collaboration revenues are attributed to geographic region based on the location of our collaboration partners’ headquarters.

Stock-Based Compensation - Narrative (Details) $ / shares in Units, $ in Millions	3 Months Ended
	Apr. 03, 2020 USD ($) $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted in the period (in shares)	271,370
Options granted in the period (in dollars per share) \| $ / shares	$ 18.84
Weighted average grant-date fair value (in dollars per share) \| $ / shares	$ 8.27
Options outstanding (in shares)	19,750,438
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense \| $	$ 30.3
RSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense \| $	$ 160.0
RSUs awarded (in shares)	595,685
Weighted average grant date fair value, awarded (in dollars per share) \| $ / shares	$ 20.87
RSUs outstanding (in shares)	9,104,132

Fair Value Measurements

3 Months Ended

Apr. 03, 2020

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

Fair value reflects the amounts that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy has the following three levels:


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


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


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

The classifications within the fair value hierarchy of our financial assets that were measured and recorded at fair value on a recurring basis were as follows (in thousands):



	March 31, 2020
	Level 1		Level 2		Total
Commercial paper	$	—	$	202,452	$	202,452
Corporate bonds	—		740,271		740,271
U.S. Treasury and government-sponsored enterprises	—		153,710		153,710
Municipal bonds	—		15,288		15,288
Total debt securities available-for-sale	—		1,111,721		1,111,721
Money market funds	273,497		—		273,497
Certificates of deposit	—		46,281		46,281
Total financial assets carried at fair value	$	273,497	$	1,158,002	$	1,431,499



	December 31, 2019
	Level 1		Level 2		Total
Commercial paper	$	—	$	389,573	$	389,573
Corporate bonds	—		756,226		756,226
U.S. Treasury and government-sponsored enterprises	—		166,665		166,665
Total debt securities available-for-sale	—		1,312,464		1,312,464
Money market funds	2,467		—		2,467
Certificates of deposit	—		32,733		32,733
Total financial assets carried at fair value	$	2,467	$	1,345,197	$	1,347,664

When available, we value investments based on quoted prices for those financial instruments, which is a Level 1 input. Our remaining investments are valued using third-party pricing sources, which use observable market prices, interest rates and yield curves observable at commonly quoted intervals for similar assets as observable inputs for pricing, which is a Level 2 input.

The carrying amount of our remaining financial assets and liabilities, which include cash, receivables and payables, approximate their fair values due to their short-term nature.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Cash and Investments (Tables)

3 Months Ended

Apr. 03, 2020

Investments, Debt and Equity Securities [Abstract]

Reconciliation of Cash, Cash Equivalents, and Restricted Cash

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



	March 31, 2020		December 31, 2019
Cash and cash equivalents	$	357,340	$	266,501
Restricted cash equivalents included in long-term investments	1,636		1,636
Cash, cash equivalents, and restricted cash equivalents as reported within the accompanying Condensed Consolidated Statements of Cash Flows	$	358,976	$	268,137

Reconciliation of Cash, Cash Equivalents, and Restricted Cash



	March 31, 2020		December 31, 2019
Cash and cash equivalents	$	357,340	$	266,501
Restricted cash equivalents included in long-term investments	1,636		1,636
Cash, cash equivalents, and restricted cash equivalents as reported within the accompanying Condensed Consolidated Statements of Cash Flows	$	358,976	$	268,137

Investments by Security Type

Cash and investments consisted of the following (in thousands):



	March 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Debt securities available-for-sale:
Commercial paper	$	202,452	$	—	$	—		$	202,452
Corporate bonds	741,315		2,404		(3,448		)	740,271
U.S. Treasury and government-sponsored enterprises	152,922		788		—			153,710
Municipal bonds	15,148		140		—			15,288
Total debt securities available-for-sale	1,111,837		3,332		(3,448		)	1,111,721
Cash	8,905		—		—			8,905
Money market funds	273,497		—		—			273,497
Certificates of deposit	46,279		2		—			46,281
Total cash and investments	$	1,440,518	$	3,334	$	(3,448	)	$	1,440,404



	December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Debt securities available-for-sale:
Commercial paper	$	389,573	$	—	$	—		$	389,573
Corporate bonds	752,295		3,934		(3		)	756,226
U.S. Treasury and government-sponsored enterprises	166,483		187		(5		)	166,665
Total debt securities available-for-sale	1,308,351		4,121		(8		)	1,312,464
Cash	40,964		—		—			40,964
Money market funds	2,467		—		—			2,467
Certificates of deposit	32,728		5		—			32,733
Total cash and investments	$	1,384,510	$	4,126	$	(8	)	$	1,388,628

Fair Value and Gross Unrealized Losses of Investments Available-for-Sale in an Unrealized Loss Position

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



	March 31, 2020
	Fair Value		Gross Unrealized Losses
Corporate bonds	$	351,135	$	(3,448	)
Total	$	351,135	$	(3,448	)



	December 31, 2019
	Fair Value		Gross Unrealized Losses
Corporate bonds	$	14,529	$	(3	)
U.S. Treasury and government-sponsored enterprises	2,848		(5		)
Total	$	17,377	$	(8	)

Fair Value of Cash Equivalents and Investments by Contractual Maturity

The fair value of debt securities available-for-sale by contractual maturity was as follows (in thousands):



	March 31, 2020		December 31, 2019
Maturing in one year or less	$	641,070	$	789,913
Maturing after one year through five years	470,651		522,551
Total debt securities available-for-sale	$	1,111,721	$	1,312,464

Inventory

3 Months Ended

Apr. 03, 2020

Inventory Disclosure [Abstract]

INVENTORY

Inventory consisted of the following (in thousands):



	March 31, 2020		December 31, 2019
Raw materials	$	2,215	$	2,709
Work in process	14,278		9,447
Finished goods	4,865		4,367
Total	$	21,358	$	16,523
Balance Sheet classification:
Current portion included in inventory	$	15,417	$	12,886
Long-term portion included in other long-term assets	5,941		3,637
Total	$	21,358	$	16,523

Cash and Investments - Reconciliation of Cash, Cash Equivalents, and Restricted Cash (Details) - USD ($) $ in Thousands	Apr. 03, 2020	Jan. 03, 2020	Mar. 29, 2019	Dec. 28, 2018
Cash and Cash Equivalents [Abstract]
Cash and cash equivalents	$ 357,340	$ 266,501
Restricted cash equivalents included in long-term investments	1,636	1,636
Cash, cash equivalents, and restricted cash equivalents as reported within the accompanying Condensed Consolidated Statements of Cash Flows	$ 358,976	$ 268,137	$ 375,037	$ 315,875

Collaboration Agreements - Ipsen Collaboration (Details) $ in Millions	Apr. 03, 2020 USD ($)
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Remaining performance obligation	$ 65.1
Collaborative Arrangement with Ipsen
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Remaining performance obligation	$ 46.6

Cash and Investments - Narrative (Details)	3 Months Ended
Cash and Investments - Narrative (Details)	Apr. 03, 2020 USD ($) investment	Mar. 29, 2019 USD ($)	Jan. 03, 2020 USD ($) investment
Investments, Debt and Equity Securities [Abstract]
Interest receivable	$ 5,400,000		$ 6,200,000
Gain (loss) on sales of investments available-for-sale	$ 0	$ 0
Number of investments in an unrealized loss position \| investment	144		9
Allowance for credit losses	$ 0	$ 0

Cover Page - shares	3 Months Ended
Cover Page - shares	Apr. 03, 2020	Apr. 27, 2020
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Apr. 03, 2020
Document Transition Report	false
Entity File Number	000-30235
Entity Registrant Name	EXELIXIS, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	04-3257395
Entity Address, Address Line One	1851 Harbor Bay Parkway
Entity Address, City or Town	Alameda,
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	94502
City Area Code	650
Local Phone Number	837-7000
Title of 12(b) Security	Common Stock $.001 Par Value per Share
Trading Symbol	EXEL
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		306,658,794
Amendment Flag	false
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q1
Entity Central Index Key	0000939767
Current Fiscal Year End Date	--01-01

Revenues - Activities and Ending Reserve Balances for Significant Categories of Discounts and Allowances (Details) $ in Thousands	3 Months Ended
	Apr. 03, 2020 USD ($)
SEC Schedule, 12-09, Movement in Valuation Allowances and Reserves [Roll Forward]
Balance at December 31, 2019	$ 26,233
Provision related to sales made in:
Current period	58,093
Prior periods	593
Payments and customer credits issued	(49,256)
Balance at March 31, 2020	35,663
Chargebacks and Discounts for Prompt Payment
SEC Schedule, 12-09, Movement in Valuation Allowances and Reserves [Roll Forward]
Balance at December 31, 2019	7,514
Provision related to sales made in:
Current period	37,686
Prior periods	41
Payments and customer credits issued	(32,584)
Balance at March 31, 2020	12,657
Other Customer Credits/Fees and Co-pay Assistance
SEC Schedule, 12-09, Movement in Valuation Allowances and Reserves [Roll Forward]
Balance at December 31, 2019	3,497
Provision related to sales made in:
Current period	4,586
Prior periods	(167)
Payments and customer credits issued	(4,842)
Balance at March 31, 2020	3,074
Rebates
SEC Schedule, 12-09, Movement in Valuation Allowances and Reserves [Roll Forward]
Balance at December 31, 2019	15,222
Provision related to sales made in:
Current period	15,821
Prior periods	719
Payments and customer credits issued	(11,830)
Balance at March 31, 2020	$ 19,932

Collaboration Agreements (Tables)

3 Months Ended

Apr. 03, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Collaborative Revenues Under Collaboration Agreement

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



	Three Months Ended March 31,
	2020		2019
License revenues	$	—	$	9,056
Collaboration services revenues	1,069		2,437
Total	$	1,069	$	11,493

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



	Three Months Ended March 31,
	2020		2019
License revenues	$	17,949	$	13,963
Collaboration services revenues	11,087		7,905
Total	$	29,036	$	21,868

License revenues under the collaboration agreement with Genentech were as follows (in thousands):



	Three Months Ended March 31,
	2020		2019
Profits on U.S. commercialization	$	1,407	$	1,055
Royalty revenues on ex-U.S. sales	$	1,309	$	1,490

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Apr. 03, 2020	Jan. 03, 2020
Preferred stock
Par value (in dollars per share)	$ 0.001	$ 0.001
Shares authorized (in shares)	10,000,000	10,000,000
Shares issued (in shares)	0	0
Common stock
Par value (in dollars per share)	$ 0.001	$ 0.001
Shares authorized (in shares)	400,000,000	400,000,000
Shares issued (in shares)	305,780,000	304,831,000
Shares outstanding (in shares)	305,780,000	304,831,000

Condensed Consolidated Statements of Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Income (Loss)	Accumulated Deficit
Beginning balance (in shares) at Dec. 28, 2018		299,876
Beginning balance at Dec. 28, 2018	$ 1,287,453	$ 300	$ 2,168,217	$ (701)	$ (880,363)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	75,775				75,775
Other comprehensive (loss) income	1,429			1,429
Issuance of common stock under equity incentive plans, net of taxes (in shares)		1,644
Issuance of common stock under equity incentive plans, net of tax	7,834	$ 2	7,832
Stock-based compensation	12,529		12,529
Ending balance (in shares) at Mar. 29, 2019		301,520
Ending balance at Mar. 29, 2019	$ 1,385,020	$ 302	2,188,578	728	(804,588)
Beginning balance (in shares) at Jan. 03, 2020	304,831	304,831
Beginning balance at Jan. 03, 2020	$ 1,685,970	$ 305	2,241,947	3,069	(559,351)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	48,612				48,612
Other comprehensive (loss) income	(3,291)			(3,291)
Issuance of common stock under equity incentive plans, net of taxes (in shares)		949
Issuance of common stock under equity incentive plans, net of tax	2,379	$ 1	2,378
Stock-based compensation	$ 13,982		13,982
Ending balance (in shares) at Apr. 03, 2020	305,780	305,780
Ending balance at Apr. 03, 2020	$ 1,747,652	$ 306	$ 2,258,307	$ (222)	$ (510,739)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

Collaboration Agreements - Royalty Revenues under the Collaboration Agreement with Genentech (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 03, 2020	Mar. 29, 2019
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Royalty revenues on ex-U.S. sales	$ 226,915	$ 215,487
Cotellic \| Collaborative Arrangement with Genentech
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Profits on U.S. commercialization	1,407	1,055
Royalty revenues on ex-U.S. sales	$ 1,309	$ 1,490

Net Income Per Share (Tables)

3 Months Ended

Apr. 03, 2020

Earnings Per Share [Abstract]

Computation of Basic and Diluted Net Income Per Share

Net income per share - basic and diluted, were computed as follows (in thousands, except per share amounts):



	Three Months Ended March 31,
	2020		2019
Numerator:
Net income	$	48,612	$	75,775
Denominator:
Weighted-average common shares outstanding - basic	305,388		300,542
Dilutive effect of employee stock plans	10,451		14,102
Weighted-average common shares outstanding - diluted	315,839		314,644
Net income per share - basic	$	0.16	$	0.25
Net income per share - diluted	$	0.15	$	0.24

Potential Shares of Common Stock Not Included in the Computation of Diluted Net Income (Loss) Per Share

These potential common shares were as follows (in thousands):



	Three Months Ended March 31,
	2020	2019
Anti-dilutive securities and contingently issuable shares excluded	12,014	5,089

Collaboration Agreements - Collaboration Revenues under the Collaboration Agreement with Ipsen (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 03, 2020	Mar. 29, 2019
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Revenue from contract with customer	$ 226,915	$ 215,487
Revenues	226,915	215,487
Collaborative Arrangement with Ipsen
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Revenues	29,036	21,868
License revenues
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Revenue from contract with customer	20,879	25,564
License revenues \| Collaborative Arrangement with Ipsen
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Revenue from contract with customer	17,949	13,963
Collaboration services revenues
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Revenue not from contract with customer	12,156	10,342
Collaboration services revenues \| Collaborative Arrangement with Ipsen
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Revenue not from contract with customer	$ 11,087	$ 7,905

Net Income Per Share

3 Months Ended

Apr. 03, 2020

Earnings Per Share [Abstract]

NET INCOME PER SHARE

Net income per share - basic and diluted, were computed as follows (in thousands, except per share amounts):



	Three Months Ended March 31,
	2020		2019
Numerator:
Net income	$	48,612	$	75,775
Denominator:
Weighted-average common shares outstanding - basic	305,388		300,542
Dilutive effect of employee stock plans	10,451		14,102
Weighted-average common shares outstanding - diluted	315,839		314,644
Net income per share - basic	$	0.16	$	0.25
Net income per share - diluted	$	0.15	$	0.24

Dilutive securities included outstanding stock options, RSUs and ESPP contributions. Certain potential common shares were excluded from our calculation of weighted-average common shares outstanding - diluted because either they would have had an anti-dilutive effect on net income per share or they are related to shares from stock options that have a market vesting condition and performance stock units that were contingently issuable for which the contingency had not been satisfied. These potential common shares were as follows (in thousands):



	Three Months Ended March 31,
	2020	2019
Anti-dilutive securities and contingently issuable shares excluded	12,014	5,089

Organization and Summary of Significant Accounting Policies (Details)	3 Months Ended
	Apr. 03, 2020 USD ($) segment product $ / shares	Mar. 29, 2019 USD ($) $ / shares	Jan. 03, 2020 USD ($)
Organization And Summary Of Significant Policies [Line Items]
Number of business segments \| segment	1
Selling, general and administrative	$ 62,940,000	$ 60,138,000
Decrease in earnings per share due to change in accounting estimate (USD per share) \| $ / shares	$ (0.16)	$ (0.25)
Decrease in earnings per share diluted, due to change in accounting estimate (USD per share) \| $ / shares	$ (0.15)	$ (0.24)
Branded Prescription Drug Fee, accrual	$ 13,400,000		$ 6,000,000.0
Branded Prescription Drug Fee, accrual, current	8,600,000		4,400,000
Branded Prescription Drug Fee, accrual, noncurrent	4,800,000		$ 1,600,000
Goodwill impairment	$ 0
Resulting from Discovery Efforts
Organization And Summary Of Significant Policies [Line Items]
Number of products that entered in the commercial marketplace \| product	4
Products Derived from Cabozantinib
Organization And Summary Of Significant Policies [Line Items]
Number of products that entered in the commercial marketplace \| product	2
Products Derived From Other Compounds
Organization And Summary Of Significant Policies [Line Items]
Number of products that entered in the commercial marketplace \| product	2
New Information [Member]
Organization And Summary Of Significant Policies [Line Items]
Selling, general and administrative	$ 5,400,000
Decrease in earnings per share due to change in accounting estimate (USD per share) \| $ / shares	$ 0.02
Decrease in earnings per share diluted, due to change in accounting estimate (USD per share) \| $ / shares	$ 0.02

Income Taxes	3 Months Ended
Income Taxes	Apr. 03, 2020
Income Tax Disclosure [Abstract]
INCOME TAXES	INCOME TAXES Our effective income tax rate was 19.0% and 16.4% during the three months ended March 31, 2020 and 2019, respectively. The effective tax rate for the three months ended March 31, 2020 differed from the U.S. federal statutory rate of 21% primarily due to excess tax benefits related to the exercise of certain stock options during the period and the generation of research tax credits. The effective tax rate for the three months ended March 31, 2019 differed from the U.S. federal statutory rate of 21% primarily due to excess tax benefits related to the exercise of certain stock options during the period.

Fair Value Measurements (Tables)

3 Months Ended

Apr. 03, 2020

Fair Value Disclosures [Abstract]

Classification of Financial Assets Measured and Recorded at Fair Value on a Recurring Basis

The classifications within the fair value hierarchy of our financial assets that were measured and recorded at fair value on a recurring basis were as follows (in thousands):



	March 31, 2020
	Level 1		Level 2		Total
Commercial paper	$	—	$	202,452	$	202,452
Corporate bonds	—		740,271		740,271
U.S. Treasury and government-sponsored enterprises	—		153,710		153,710
Municipal bonds	—		15,288		15,288
Total debt securities available-for-sale	—		1,111,721		1,111,721
Money market funds	273,497		—		273,497
Certificates of deposit	—		46,281		46,281
Total financial assets carried at fair value	$	273,497	$	1,158,002	$	1,431,499



	December 31, 2019
	Level 1		Level 2		Total
Commercial paper	$	—	$	389,573	$	389,573
Corporate bonds	—		756,226		756,226
U.S. Treasury and government-sponsored enterprises	—		166,665		166,665
Total debt securities available-for-sale	—		1,312,464		1,312,464
Money market funds	2,467		—		2,467
Certificates of deposit	—		32,733		32,733
Total financial assets carried at fair value	$	2,467	$	1,345,197	$	1,347,664

Condensed Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Apr. 03, 2020	Mar. 29, 2019
Revenue from contract with customer	$ 226,915	$ 215,487
Revenues	226,915	215,487
Operating expenses:
Cost of goods sold	9,289	7,501
Research and development	101,877	63,289
Selling, general and administrative	62,940	60,138
Total operating expenses	174,106	130,928
Income from operations	52,809	84,559
Interest income	7,220	6,087
Other income, net	6	25
Income before income taxes	60,035	90,671
Provision for income taxes	(11,423)	(14,896)
Net income	$ 48,612	$ 75,775
Net income per share:
Basic (in dollars per share)	$ 0.16	$ 0.25
Diluted (in dollars per share)	$ 0.15	$ 0.24
Weighted-average common shares outstanding:
Basic (in shares)	305,388	300,542
Diluted (in shares)	315,839	314,644
Net product revenues
Revenue from contract with customer	$ 193,880	$ 179,581
License revenues
Revenue from contract with customer	20,879	25,564
Collaboration services revenues
Revenue not from contract with customer	$ 12,156	$ 10,342

Revenues (Tables)

3 Months Ended

Apr. 03, 2020

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue

Revenues consisted of the following (in thousands):



	Three Months Ended March 31,
	2020			2019
Product revenues:
Gross product revenues	$	252,566		$	223,750
Discounts and allowances	(58,686		)	(44,169		)
Net product revenues	193,880			179,581
Collaboration revenues:
License revenues	20,879			25,564
Collaboration services revenues	12,156			10,342
Total collaboration revenues	33,035			35,906
Total revenues	$	226,915		$	215,487

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



	Three Months Ended March 31,
	2020		2019
CABOMETYX	$	189,216	$	175,890
COMETRIQ	4,664		3,691
Net product revenues	$	193,880	$	179,581

The percentage of total revenues by customer who individually accounted for 10% or more of our total revenues were as follows:



	Three Months Ended March 31,
	2020		2019
Affiliates of CVS Health Corporation	18	%	15	%
Affiliates of McKesson Corporation	15	%	12	%
Ipsen	13	%	10	%
Affiliates of AmerisourceBergen Corporation	11	%	10	%
Affiliates of Optum Specialty Pharmacy	12	%	8	%
Accredo Health, Incorporated	8	%	10	%

Revenues by geographic region were as follows (in thousands):



	Three Months Ended March 31,
	2020		2019
U.S.	$	196,596	$	182,126
Europe	29,036		21,868
Japan	1,283		11,493
Total revenues	$	226,915	$	215,487

Activities and Ending Reserve Balances for Significant Categories of Discounts and Allowances

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



	Chargebacks and Discounts for Prompt Payment			Other Customer Credits/Fees and Co-pay Assistance			Rebates			Total
Balance at December 31, 2019	$	7,514		$	3,497		$	15,222		$	26,233
Provision related to sales made in:
Current period	37,686			4,586			15,821			58,093
Prior periods	41			(167		)	719			593
Payments and customer credits issued	(32,584		)	(4,842		)	(11,830		)	(49,256		)
Balance at March 31, 2020	$	12,657		$	3,074		$	19,932		$	35,663

Revenues - Net Product Revenues Disaggregated by Product (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 03, 2020	Mar. 29, 2019
Disaggregation of Revenue [Line Items]
Net product revenues	$ 226,915	$ 215,487
Net product revenues
Disaggregation of Revenue [Line Items]
Net product revenues	193,880	179,581
CABOMETYX
Disaggregation of Revenue [Line Items]
Net product revenues	189,216	175,890
COMETRIQ
Disaggregation of Revenue [Line Items]
Net product revenues	$ 4,664	$ 3,691

Organization and Summary of Significant Accounting Policies	3 Months Ended
	Apr. 03, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Exelixis, Inc. (Exelixis, we, our or us) is an oncology-focused biotechnology company that strives to accelerate the discovery, development and commercialization of new medicines for difficult-to-treat cancers. Our drug discovery and development capabilities and commercialization platform are the foundations upon which we intend to bring to market novel, effective and tolerable therapies to provide cancer patients with additional treatment options. Since we were founded in 1994, four products resulting from our discovery efforts have progressed through clinical development, received regulatory approval and established a commercial presence in various geographies around the world. Two are derived from cabozantinib, our flagship molecule, an inhibitor of multiple tyrosine kinases including MET, AXL, VEGF receptors and RET. Our cabozantinib products are: CABOMETYX® (cabozantinib) tablets approved for advanced renal cell carcinoma and previously treated hepatocellular carcinoma; and COMETRIQ® (cabozantinib) capsules approved for progressive, metastatic medullary thyroid cancer. For these types of cancer, cabozantinib has become or is becoming a standard of care. Beyond these approved indications, cabozantinib is currently the focus of a broad clinical development program and is being investigated both alone and in combination with other therapies in a wide variety of cancers. The other two products resulting from our discovery efforts are: COTELLIC® (cobimetinib), an inhibitor of MEK, approved as part of a combination regimen to treat advanced melanoma and marketed under a collaboration with Genentech, Inc. (a member of the Roche Group) (Genentech); and MINNEBRO® (esaxerenone), an oral, non-steroidal, selective blocker of the mineralocorticoid receptor, approved for the treatment of hypertension in Japan and licensed to Daiichi Sankyo Company, Limited (Daiichi Sankyo). Basis of Presentation The accompanying Condensed Consolidated Financial Statements include the accounts of Exelixis and those of our wholly-owned subsidiaries. These entities’ functional currency is the U.S. dollar. All intercompany balances and transactions have been eliminated. The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the U.S. for interim financial information and pursuant to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In our opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of our financial statements for the periods presented have been included. Operating results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 or for any future period. The accompanying Condensed Consolidated Financial Statements and Notes thereto should be read in conjunction with our Consolidated Financial Statements and Notes thereto for the year ended December 31, 2019, included in our Annual Report on Form 10-K filed with the SEC on February 25, 2020. We have adopted a 52- or 53-week fiscal year policy that generally ends on the Friday closest to December 31^st. Fiscal year 2020, which is a 52-week fiscal year, will end on January 1, 2021 and fiscal year 2019, which was a 53-week fiscal year, ended on January 3, 2020. For convenience, references in this report as of and for the three months ended April 3, 2020 and March 29, 2019, and as of and for the fiscal years ending January 1, 2021, and ended January 3, 2020, are indicated as being as of and for the three months ended March 31, 2020 and March 31, 2019 and the years ending December 31, 2020 and ended December 31, 2019, respectively. Similarly, references in this report to the first day of the fiscal year ending January 1, 2021 are indicated as being as of January 1, 2020. Reclassifications Certain prior period amounts in the accompanying Condensed Consolidated Financial Statements have been reclassified to conform to the current period presentation. Such reclassifications did not impact previously reported total revenue, income from operations, net income, total assets, total liabilities or total stockholders’ equity. Segment Information We operate in one business segment that focuses on the discovery, development and commercialization of new medicines for difficult-to-treat cancers. Our Chief Executive Officer, as the chief operating decision-maker, manages and allocates resources to our operations on a total consolidated basis. Consistent with this decision-making process, our Chief Executive Officer uses consolidated, single-segment financial information for purposes of evaluating performance, forecasting future period financial results, allocating resources and setting incentive targets. All of our long-lived assets are located in the U.S. See “Note 2. Revenues” for enterprise-wide disclosures about product sales, revenues from major customers and revenues by geographic region. Use of Estimates The preparation of the accompanying Condensed Consolidated Financial Statements conforms to accounting principles generally accepted in the U.S., which requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenues and expenses, and related disclosures. We base our estimates on historical experience and on various other market-specific and other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially from those estimates. In March 2020, we received the 2020 preliminary fee notice from the Internal Revenue Service for the Branded Prescription Drug Fee for the 2018 sales year, which resulted in an increase in our estimate of such fees for the 2018 and 2019 sales years. Accordingly, we recorded an adjustment during the three months ended March 31, 2020 to increase selling, general and administrative expenses and our accrual for these fees by $5.4 million. This adjustment resulted in a decrease of basic and diluted earnings per share of $0.02 for the three months ended March 31, 2020. Our total accrual for the Branded Prescription Drug Fee was $13.4 million and $6.0 million as of March 31, 2020 and December 31, 2019, respectively, of which $8.6 million and $4.4 million was recorded in other current liabilities, and $4.8 million and $1.6 million was recorded in other long-term liabilities. Recently Adopted Accounting Pronouncements On January 1, 2020, we adopted Accounting Standards Update (ASU) No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606 (ASU 2018-18). ASU 2018-18 clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue under Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (Topic 606) when the counterparty is a customer for a distinct good or service (i.e. a unit of account). For units of account that are in the scope of Topic 606, all of the guidance in Topic 606 should be applied, including the guidance on recognition, measurement, presentation and disclosure. ASU 2018-18 precludes entities from presenting amounts related to transactions with a counterparty in a collaborative arrangement that is not a customer as revenue from contracts with customers. If a portion of a distinct bundle of goods or services within an arrangement is not with a customer, then the unit of account is not within the scope of Topic 606, and the recognition and measurement of that unit of account shall be based on analogy to authoritative accounting literature or, if there is no appropriate analogy, a reasonable, rational, and consistently applied accounting policy election. Upon adoption of ASU 2018-18, we have presented revenue from performance obligations associated with our collaboration arrangements that are within the scope of Topic 606 (license revenues) separately from revenue from performance obligations that are not subject to Topic 606 (collaboration services revenues). The adoption of ASU 2018-18 was applied retrospectively, and prior periods have been restated to conform to the presentation proscribed by ASU 2018-18. The adoption of ASU 2018-18 did not impact total revenues for the prior period presented in our Condensed Consolidated Statements of Income. On January 1, 2020, we adopted ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (ASU 2017-04). ASU 2017-04 simplifies goodwill impairment testing by eliminating the second step of the impairment test. The amended guidance requires an impairment charge to be recognized for the amount by which the carrying amount of a reporting unit exceeds its fair value under a one-step impairment test. The adoption of ASU 2017-04 did not impact our Condensed Consolidated Financial Statements. On January 1, 2020, we adopted ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326) (ASU 2016-13). ASU 2016-13 implements an impairment model, known as the current expected credit loss model, that is based on expected losses rather than incurred losses. Under the new guidance, we will recognize our estimate of current expected credit losses as an allowance on financial assets measured at amortized cost, including accounts receivable, unbilled collaboration revenue, and investments classified as available for sale. Current expected credit losses were immaterial as of the date of adoption, and the adoption of ASU 2016-13 did not have a significant impact on our Condensed Consolidated Financial Statements. Investment Impairment Quarterly, we assess each of our investments in available-for-sale debt securities whose fair value is below its cost basis to determine if the investment’s impairment is due to credit-related factors or noncredit-related factors. Factors considered in determining whether an impairment is credit-related include the extent to which the investment’s fair value is less than its cost basis, declines in published credit ratings, issuer default on interest or principal payments, and declines in the financial condition and near-term prospects of the issuer. If we determine a credit-related impairment exists, we will measure the credit loss based on a discounted cash flows model. Credit-related impairments on available-for-sale debt securities are recognized as an allowance for credit losses with a corresponding adjustment to other income, net in the accompanying Condensed Consolidated Statements of Income. The portion of the impairment that is not credit-related is recorded, net of applicable taxes, as a reduction of other comprehensive income. We have elected to exclude accrued interest from both the fair value and the amortized cost basis of the available-for-sale debt security for the purposes of identifying and measuring an impairment. We write-off accrued interest as a reduction of interest income when an issuer has defaulted on interest payments due on the security. Accounts Receivable Trade receivables, net contain amounts billed to our customers for product sales, and amounts billed to our collaboration partners for development, regulatory and sales-based milestone payments, royalties on the sale of licensed products, profit-sharing arrangements, development cost reimbursements, and payments for product supply services. Our customers are primarily pharmaceutical and biotechnology companies that are located in the U.S., and collaboration partners that are located in Europe and Japan. We record trade receivables net of allowances for credit losses and chargebacks, and cash discounts for prompt payment. We apply an aging method to estimate credit losses and consider our historical loss information, adjusted to account for current conditions, and reasonable and supportable forecasts of future economic conditions affecting our customers. Goodwill We recorded goodwill amounts as the excess purchase price over tangible assets, liabilities and intangible assets acquired based on their estimated fair value. We review the carrying amount of goodwill for impairment annually and whenever events or changes in circumstance indicate that the carrying value may not be recoverable. We perform our annual assessment of the recoverability of our goodwill as of the first day of our fourth quarter. The assessment of recoverability may first consider qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. We perform a quantitative assessment if the qualitative assessment results in a more-likely-than-not determination or if a qualitative assessment is not performed. The quantitative assessment determines whether the carrying amount of a reporting unit exceeds its fair value, in which case an impairment charge is recognized for the amount by which the carrying amount of a reporting unit exceeds its fair value, limited to the goodwill balance. We operate in one business segment, which is also considered to be our sole reporting unit and therefore, goodwill is tested for impairment at the enterprise level. We did not recognize any impairment charges in any of the periods presented. Collaboration Agreements We assess whether our collaboration agreements are subject to ASC Topic 808, Collaborative Arrangements (Topic 808) based on whether they involve joint operating activities and whether both parties have active participation in the arrangement and are exposed to significant risks and rewards. To the extent that the arrangement falls within the scope of Topic 808, we apply the unit of account guidance under Topic 606 to identify distinct performance obligations, and then determine whether a customer relationship exists for each distinct performance obligation. If we determine a performance obligation within the arrangement is with a customer, we apply the guidance in Topic 606. If a portion of a distinct bundle of goods or services within an arrangement is not with a customer, then the unit of account is not within the scope of Topic 606, and the recognition and measurement of that unit of account shall be based on analogy to authoritative accounting literature or, if there is no appropriate analogy, a reasonable, rational, and consistently applied accounting policy election. We enter into collaboration arrangements, under which we license certain rights to our intellectual property to third parties. The terms of these arrangements typically include payments to us for one or more of the following: non-refundable, up-front license fees; development, regulatory and sales-based milestone payments; product supply services; development cost reimbursements; profit-sharing arrangements; and royalties on net sales of licensed products. As part of the accounting for these arrangements, we develop assumptions that require judgment to determine the standalone selling price for each performance obligation identified in the contract. These key assumptions may include forecasted revenues, clinical development timelines and costs, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success. Up-front License Fees: If the license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenues from nonrefundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. We evaluate the measure of progress at the end of each reporting period and, if necessary, adjust the measure of performance and related revenue recognition. Regulatory and Development Milestone Payments: At the inception of each arrangement that includes development milestone payments, we evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our or the licensee’s control, such as regulatory approvals, are not considered probable of being achieved until uncertainty associated with the approvals has been resolved. The transaction price is then allocated to each performance obligation, on a relative standalone selling price basis, for which we recognize revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, we re-evaluate the probability of achieving such development and regulatory milestones and any related constraint, and if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis. Product Supply Services: Arrangements that include a promise for the future supply of drug product for either clinical development or commercial supply at the licensee’s discretion are generally considered as options. We assess if these options provide a material right to the licensee and if so, they are accounted for as separate performance obligations. Development Cost Reimbursements: Our collaboration arrangements may include promises of future clinical development and drug safety services, as well as participation on certain joint committees. When such services are provided to a customer, and they are distinct from the licenses provided to our collaboration partners, these promises are accounted for as a separate performance obligation which we estimate using internal development costs incurred and projections through the term of the arrangements. We record revenue for these services as the performance obligations are satisfied over time. However, if we conclude that our collaboration partner is not a customer for those collaborative research and development activities, we present such payments as a reduction of research and development expenses. Profit-sharing Arrangements: Under the terms of our collaboration agreement with Genentech for cobimetinib, we are entitled to a share of U.S. profits and losses received in connection with the commercialization of cobimetinib. We account for this arrangement in accordance with Topic 606. We have determined that we are an agent under the agreement and therefore revenues are recorded net of costs incurred. We record revenue for the variable consideration associated with the profits and losses under the collaboration agreement when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Royalty and Sales-based Milestone Payments: For arrangements that include royalties and sales-based milestone payments, including milestone payments earned for the first commercial sale of a product, the license is deemed to be the predominant item to which such payments relate and we recognize revenue at the later of when the related sales occur or when the performance obligation to which the royalty has been allocated has been satisfied. Recent Accounting Pronouncements Not Yet Adopted In December 2019, the Financial Accounting Standards Board issued ASU 2019-12, Income Taxes (Topic 740)-Simplifying the Accounting for Income Taxes (ASU 2019-12). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC Topic 740, Income Taxes and clarifying and amending existing guidance. ASU 2019-12 will be effective for us in the first quarter of 2021 with early adoption permitted. We are currently assessing the impact of ASU 2019-12 on our financial statements.

Collaboration Agreements

3 Months Ended

Apr. 03, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

COLLABORATION AGREEMENTS

We have established multiple collaborations with leading pharmaceutical companies for the commercialization and further development of cabozantinib, Additionally, in line with our business strategy prior to the commercialization of our first product, COMETRIQ, we entered into other collaborations with leading pharmaceutical companies for other compounds and programs in our portfolio. Under these collaborations, we are generally entitled to receive milestone and royalty payments, and for certain collaborations, payments for product supply services, development cost reimbursements, and/or profit-sharing payments. See “Note 2. Revenues” for additional information on revenues recognized under our collaboration agreements during the three months ended March 31, 2020 and 2019.

We have also established multiple collaborations with smaller, discovery-focused biotechnology companies to expand our product pipeline. Under these collaborations, we may be required to make milestone and royalty payments, and for certain collaborations, payments for option exercise fees and/or development cost reimbursements.

See “Note 3. Collaboration Agreements” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2019 for a description of each of our collaboration agreements.

Cabozantinib Collaborations

Ipsen Collaboration

In February 2016, we entered into a collaboration and license agreement with Ipsen for the commercialization and further development of cabozantinib. Under the terms of the collaboration agreement, Ipsen received exclusive commercialization rights for current and potential future cabozantinib indications outside of the U.S., Canada and Japan. The collaboration agreement was subsequently amended on three occasions, including in December 2016 to include commercialization rights in Canada. We have also agreed to collaborate with Ipsen on the development of cabozantinib for current and potential future indications. The parties’ efforts are governed through a joint steering committee and appropriate subcommittees established to guide and oversee the collaboration’s operation and strategic direction; provided, however, that we retain final decision-making authority with respect to cabozantinib’s ongoing development.

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



	Three Months Ended March 31,
	2020		2019
License revenues	$	17,949	$	13,963
Collaboration services revenues	11,087		7,905
Total	$	29,036	$	21,868

As of March 31, 2020, $46.6 million of the transaction price allocated to our research and development services was related to performance obligations that had not been satisfied.

Takeda Collaboration

In January 2017, we entered into a collaboration and license agreement with Takeda, which was subsequently amended effective March 2018 and May 2019, to, among other things, modify the amount of reimbursements we receive for costs associated with our required pharmacovigilance activities and milestones we are eligible to receive. Under this collaboration agreement, Takeda has exclusive commercialization rights for current and potential future cabozantinib indications in Japan, and the parties have agreed to collaborate on the clinical development of cabozantinib in Japan. The operation and strategic direction of the parties’ collaboration is governed through a joint executive committee and appropriate subcommittees.

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



	Three Months Ended March 31,
	2020		2019
License revenues	$	—	$	9,056
Collaboration services revenues	1,069		2,437
Total	$	1,069	$	11,493

As of March 31, 2020, $18.5 million of the transaction price allocated to our research and development services was related to performance obligations that had not been satisfied.

GSK

In October 2002, we established a product development and commercialization collaboration agreement with GSK. We are required to pay a 3% royalty to GSK on the net sales of any product incorporating cabozantinib by us and our collaboration partners. Royalties earned by GSK in connection with the sales of cabozantinib are included in cost of goods sold for sales by us and as a reduction of collaboration services revenues for sales by our collaboration partners. Such royalties were $8.1 million and $7.3 million during the three months ended March 31, 2020 and 2019, respectively.

Genentech Collaboration

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



	Three Months Ended March 31,
	2020		2019
Profits on U.S. commercialization	$	1,407	$	1,055
Royalty revenues on ex-U.S. sales	$	1,309	$	1,490

Inventory (Details) - USD ($) $ in Thousands	Apr. 03, 2020	Jan. 03, 2020
Inventory [Line Items]
Raw materials	$ 2,215	$ 2,709
Work in process	14,278	9,447
Finished goods	4,865	4,367
Total	21,358	16,523
Current portion included in inventory
Inventory [Line Items]
Total	15,417	12,886
Long-term portion included in other long-term assets
Inventory [Line Items]
Total	$ 5,941	$ 3,637

Revenues - Revenues Disaggregated by Significant Customer (Details) - Revenue - Customer Concentration Risk	3 Months Ended
	Apr. 03, 2020	Mar. 29, 2019
Affiliates of CVS Health Corporation
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Percent of total revenues	18.00%	15.00%
Affiliates of McKesson Corporation
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Percent of total revenues	15.00%	12.00%
Ipsen
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Percent of total revenues	13.00%	10.00%
Affiliates of AmerisourceBergen Corporation
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Percent of total revenues	11.00%	10.00%
Affiliates of Optum Specialty Pharmacy
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Percent of total revenues	12.00%	8.00%
Accredo Health, Incorporated
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Percent of total revenues	8.00%	10.00%

Revenues - Revenues by Disaggregated Category (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 03, 2020	Mar. 29, 2019
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	$ 226,915	$ 215,487
Revenues	226,915	215,487
Net product revenues
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	193,880	179,581
Gross product revenues
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	252,566	223,750
Discounts and allowances
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	(58,686)	(44,169)
Total collaboration revenues
Disaggregation of Revenue [Line Items]
Revenues	33,035	35,906
License revenues
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	$ 20,879	$ 25,564

Condensed Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended
	Apr. 03, 2020	Mar. 29, 2019
Other comprehensive (loss) income:
Unrealized gains (losses) on available-for-sale securities, tax impact	$ 941	$ (394)

Cash and Investments - Investments by Security Type (Details) - USD ($) $ in Thousands	Apr. 03, 2020	Jan. 03, 2020
Debt Securities, Available-for-sale [Line Items]
Investments, available-for-sale, Amortized Cost	$ 1,111,837	$ 1,308,351
Investments available-for-sale, Gross Unrealized Gains	3,332	4,121
Investments available-for-sale, Gross Unrealized Losses	(3,448)	(8)
Investments available-for-sale, Fair Value	1,111,721	1,312,464
Cash, cash equivalents, restricted cash and restricted cash equivalents and available-for-sale debt securities, amortized cost	1,440,518	1,384,510
Cash, cash equivalents, restricted cash and restricted cash equivalents and available-for-sale debt securities, gross unrealized gains	3,334	4,126
Cash, cash equivalents, restricted cash and restricted cash equivalents and available-for-sale debt securities, gross unrealized losses	3,448	8
Cash, cash equivalents, restricted cash and restricted cash equivalents and available-for-sale debt securities	1,440,404	1,388,628
Commercial paper
Debt Securities, Available-for-sale [Line Items]
Investments, available-for-sale, Amortized Cost	202,452	389,573
Investments available-for-sale, Gross Unrealized Gains	0	0
Investments available-for-sale, Gross Unrealized Losses	0	0
Investments available-for-sale, Fair Value	202,452	389,573
Corporate bonds
Debt Securities, Available-for-sale [Line Items]
Investments, available-for-sale, Amortized Cost	741,315	752,295
Investments available-for-sale, Gross Unrealized Gains	2,404	3,934
Investments available-for-sale, Gross Unrealized Losses	(3,448)	(3)
Investments available-for-sale, Fair Value	740,271	756,226
U.S. Treasury and government-sponsored enterprises
Debt Securities, Available-for-sale [Line Items]
Investments, available-for-sale, Amortized Cost	152,922	166,483
Investments available-for-sale, Gross Unrealized Gains	788	187
Investments available-for-sale, Gross Unrealized Losses	0	(5)
Investments available-for-sale, Fair Value	153,710	166,665
Municipal bonds
Debt Securities, Available-for-sale [Line Items]
Investments, available-for-sale, Amortized Cost	15,148
Investments available-for-sale, Gross Unrealized Gains	140
Investments available-for-sale, Gross Unrealized Losses	0
Investments available-for-sale, Fair Value	15,288
Cash
Debt Securities, Available-for-sale [Line Items]
Cash, cash equivalents, restricted cash and restricted cash equivalents, amortized cost	8,905	40,964
Cash, cash equivalents, restricted cash and restricted cash equivalents, gross unrealized gain	0	0
Cash, cash equivalents, restricted cash and restricted cash equivalents, gross unrealized loss	0	0
Cash, cash equivalents, restricted cash and restricted cash equivalents	8,905	40,964
Money market funds
Debt Securities, Available-for-sale [Line Items]
Cash, cash equivalents, restricted cash and restricted cash equivalents, amortized cost	273,497	2,467
Cash, cash equivalents, restricted cash and restricted cash equivalents, gross unrealized gain	0	0
Cash, cash equivalents, restricted cash and restricted cash equivalents, gross unrealized loss	0	0
Cash, cash equivalents, restricted cash and restricted cash equivalents	273,497	2,467
Certificates of deposit
Debt Securities, Available-for-sale [Line Items]
Cash, cash equivalents, restricted cash and restricted cash equivalents, amortized cost	46,279	32,728
Cash, cash equivalents, restricted cash and restricted cash equivalents, gross unrealized gain	2	5
Cash, cash equivalents, restricted cash and restricted cash equivalents, gross unrealized loss	0	0
Cash, cash equivalents, restricted cash and restricted cash equivalents	$ 46,281	$ 32,733

Revenues - Contract Assets and Liabilities (Details) - USD ($)	3 Months Ended
	Apr. 03, 2020	Mar. 29, 2019	Jan. 03, 2020
Revenue from Contract with Customer [Abstract]
Contract assets	$ 0		$ 1,100,000
Contract with Customer, Liability	15,400,000
Contract liabilities	14,133,000		6,596,000
Contract with Customer, Liability, Current	1,300,000		$ 0
Reduction related to a milestone	10,000,000.0
Amount of revenues recognized included in the beginning contract liability balance	1,600,000	$ 1,300,000
Revenues recognized for performance obligations satisfied in previous periods	18,800,000	$ 25,300,000
Remaining performance obligation	$ 65,100,000

Cash and Investments - Fair Value and Gross Unrealized Losses of Investments Available-for-Sale in an Unrealized Loss Position (Details) - USD ($) $ in Thousands	Apr. 03, 2020	Jan. 03, 2020
Debt Securities, Available-for-sale, Unrealized Loss Position, Accumulated Loss [Abstract]
Fair Value	$ 351,135	$ 17,377
Gross Unrealized Losses	(3,448)	(8)
Corporate bonds
Debt Securities, Available-for-sale, Unrealized Loss Position, Accumulated Loss [Abstract]
Fair Value	351,135	14,529
Gross Unrealized Losses	$ (3,448)	(3)
U.S. Treasury and government-sponsored enterprises
Debt Securities, Available-for-sale, Unrealized Loss Position, Accumulated Loss [Abstract]
Fair Value		2,848
Gross Unrealized Losses		$ (5)

Collaboration Agreements - Takeda Collaboration (Details) $ in Millions	Apr. 03, 2020 USD ($)
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Remaining performance obligation	$ 65.1
Collaborative Arrangement with Takeda
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Remaining performance obligation	$ 18.5

Net Income Per Share - Potential Shares of Common Stock Not Included in the Computation of Diluted Net Income (Loss) Per Share (Details) - shares shares in Thousands	3 Months Ended
	Apr. 03, 2020	Mar. 29, 2019
Anti-dilutive securities and contingently issuable shares excluded
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive shares (in shares)	12,014	5,089

Revenues

3 Months Ended

Apr. 03, 2020

Revenue from Contract with Customer [Abstract]

REVENUES

Revenues consisted of the following (in thousands):



	Three Months Ended March 31,
	2020			2019
Product revenues:
Gross product revenues	$	252,566		$	223,750
Discounts and allowances	(58,686		)	(44,169		)
Net product revenues	193,880			179,581
Collaboration revenues:
License revenues	20,879			25,564
Collaboration services revenues	12,156			10,342
Total collaboration revenues	33,035			35,906
Total revenues	$	226,915		$	215,487

Net product revenues and license revenues were recorded in accordance with Topic 606. The related goods and intellectual property license revenues have been recognized at a point in time. License revenues include the recognition of the portion of upfront and milestones payments allocated to the transfer of intellectual property licenses for which it had become probable in the current period that the milestone would be achieved and a significant reversal of revenues would not occur, as well as royalty revenues and our share of profits on the U.S. commercialization of COTELLIC. Collaboration services revenues were recorded in accordance with Topic 808 and by analogy to Topic 606. Collaboration services revenues include the recognition of deferred revenue for the portion of upfront and milestone payments allocated to research and development services performance obligations, development cost reimbursements earned under our collaboration agreements, product supply revenues, net of product supply costs, and the royalties we paid to GlaxoSmithKline (GSK) on sales by Ipsen Pharma SAS (Ipsen) of products containing cabozantinib.

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



	Three Months Ended March 31,
	2020		2019
CABOMETYX	$	189,216	$	175,890
COMETRIQ	4,664		3,691
Net product revenues	$	193,880	$	179,581

The percentage of total revenues by customer who individually accounted for 10% or more of our total revenues were as follows:



	Three Months Ended March 31,
	2020		2019
Affiliates of CVS Health Corporation	18	%	15	%
Affiliates of McKesson Corporation	15	%	12	%
Ipsen	13	%	10	%
Affiliates of AmerisourceBergen Corporation	11	%	10	%
Affiliates of Optum Specialty Pharmacy	12	%	8	%
Accredo Health, Incorporated	8	%	10	%

Revenues by geographic region were as follows (in thousands):



	Three Months Ended March 31,
	2020		2019
U.S.	$	196,596	$	182,126
Europe	29,036		21,868
Japan	1,283		11,493
Total revenues	$	226,915	$	215,487

Net product revenues are attributed to geographic region based on the ship-to location. Collaboration revenues are attributed to geographic region based on the location of our collaboration partners’ headquarters.

Product Sales Discounts and Allowances

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



	Chargebacks and Discounts for Prompt Payment			Other Customer Credits/Fees and Co-pay Assistance			Rebates			Total
Balance at December 31, 2019	$	7,514		$	3,497		$	15,222		$	26,233
Provision related to sales made in:
Current period	37,686			4,586			15,821			58,093
Prior periods	41			(167		)	719			593
Payments and customer credits issued	(32,584		)	(4,842		)	(11,830		)	(49,256		)
Balance at March 31, 2020	$	12,657		$	3,074		$	19,932		$	35,663

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

Contract Assets and Liabilities

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

Significant changes in contract assets during the three months ended March 31, 2020, as compared to December 31, 2019, include the impact of a $10.0 million milestone from Takeda Pharmaceutical Company Limited (Takeda) which was achieved, invoiced and collected during the period.

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

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

milestone and royalty payments allocated to our license performance obligations of our collaborations with Ipsen, Takeda and Daiichi Sankyo.

As of March 31, 2020, $65.1 million of the transaction price was allocated to performance obligations that had not yet been satisfied, which was considered in the determination of contract assets and liabilities. See “Note 3. Collaboration Agreements - Cabozantinib Commercial Collaborations - Performance Obligations and Transaction Prices for our Ipsen and Takeda Collaborations” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2019 for information about the expected timing to satisfy these performance obligations.

Collaboration Agreements - GSK (Details) - USD ($) $ in Millions	3 Months Ended
	Apr. 03, 2020	Mar. 29, 2019
Collaboration Agreement with GlaxoSmithKline
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Royalty expense	$ 8.1	$ 7.3
GSK
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Percent of royalty on net sale	3.00%

Revenues - Revenues Disaggregated by Geographic Region (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 03, 2020	Mar. 29, 2019
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	$ 226,915	$ 215,487
U.S.
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	196,596	182,126
Europe
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	29,036	21,868
Japan
Disaggregation of Revenue [Line Items]
Revenue from contract with customer	$ 1,283	$ 11,493

Cash and Investments

3 Months Ended

Apr. 03, 2020

Investments, Debt and Equity Securities [Abstract]

CASH AND INVESTMENTS

Cash, Cash Equivalents and Restricted Cash Equivalents



	March 31, 2020		December 31, 2019
Cash and cash equivalents	$	357,340	$	266,501
Restricted cash equivalents included in long-term investments	1,636		1,636
Cash, cash equivalents, and restricted cash equivalents as reported within the accompanying Condensed Consolidated Statements of Cash Flows	$	358,976	$	268,137

Restricted cash equivalents consisted of certificates of deposit with original maturities of 90 days or less used to collateralize letters of credit. The classification of restricted cash equivalents as long-term is based upon the remaining term of the underlying restriction.

Cash and Investments

Cash and investments consisted of the following (in thousands):



	March 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Debt securities available-for-sale:
Commercial paper	$	202,452	$	—	$	—		$	202,452
Corporate bonds	741,315		2,404		(3,448		)	740,271
U.S. Treasury and government-sponsored enterprises	152,922		788		—			153,710
Municipal bonds	15,148		140		—			15,288
Total debt securities available-for-sale	1,111,837		3,332		(3,448		)	1,111,721
Cash	8,905		—		—			8,905
Money market funds	273,497		—		—			273,497
Certificates of deposit	46,279		2		—			46,281
Total cash and investments	$	1,440,518	$	3,334	$	(3,448	)	$	1,440,404



	December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Debt securities available-for-sale:
Commercial paper	$	389,573	$	—	$	—		$	389,573
Corporate bonds	752,295		3,934		(3		)	756,226
U.S. Treasury and government-sponsored enterprises	166,483		187		(5		)	166,665
Total debt securities available-for-sale	1,308,351		4,121		(8		)	1,312,464
Cash	40,964		—		—			40,964
Money market funds	2,467		—		—			2,467
Certificates of deposit	32,728		5		—			32,733
Total cash and investments	$	1,384,510	$	4,126	$	(8	)	$	1,388,628

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

Realized gains and losses on the sales of investments available-for-sale were insignificant during the three months ended March 31, 2020 and 2019.

We manage credit risk associated with our investment portfolio through our investment policy, which limits purchases to high-quality issuers and limits the amount of our portfolio that can be invested in a single issuer. The fair value and gross unrealized losses on investment securities available-for-sale in an unrealized loss position were as follows (in thousands):



	March 31, 2020
	Fair Value		Gross Unrealized Losses
Corporate bonds	$	351,135	$	(3,448	)
Total	$	351,135	$	(3,448	)



	December 31, 2019
	Fair Value		Gross Unrealized Losses
Corporate bonds	$	14,529	$	(3	)
U.S. Treasury and government-sponsored enterprises	2,848		(5		)
Total	$	17,377	$	(8	)

All securities presented have been in an unrealized loss position less than 12 months as of March 31, 2020 and December 31, 2019. There were 144 and 9 investments in an unrealized loss position as of March 31, 2020 and December 31, 2019, respectively. During the three months ended March 31, 2020 and 2019, we did not record an allowance for credit losses or other impairment charges on our investment securities. Based upon our quarterly impairment review, we determined that the unrealized losses were not attributed to credit risk but were primarily associated with changes in interest rates and market liquidity. Based on the scheduled maturities of our investments, we determined that it was more likely than not that we will hold these investments for a period of time sufficient for a recovery of our cost basis.

The fair value of debt securities available-for-sale by contractual maturity was as follows (in thousands):



	March 31, 2020		December 31, 2019
Maturing in one year or less	$	641,070	$	789,913
Maturing after one year through five years	470,651		522,551
Total debt securities available-for-sale	$	1,111,721	$	1,312,464

Cash and Investments - Fair Value of Cash Equivalents and Investments by Contractual Maturity (Details) - USD ($) $ in Thousands	Apr. 03, 2020	Jan. 03, 2020
Investments, Debt and Equity Securities [Abstract]
Maturing in one year or less	$ 641,070	$ 789,913
Maturing after one year through five years	470,651	522,551
Total debt securities available-for-sale	$ 1,111,721	$ 1,312,464