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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM10-Q

   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
    For the quarterly period ended October 1, 2021
or
   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 000-30235
exel-20211001_g1.jpg
EXELIXIS, INC.
(Exact name of registrant as specified in its charter)

Delaware04-3257395
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number)

1851 Harbor Bay Parkway
Alameda, CA 94502
(650) 837-7000
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock $.001 Par Value per ShareEXELThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days).    Yes  ý No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   No ý
As of October 25, 2021, there were 316,397,360 shares of the registrant’s common stock outstanding.


Table of Contents
EXELIXIS, INC.
QUARTERLY REPORT ON FORM 10-Q
INDEX
Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
2

Table of Contents
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
EXELIXIS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
 
September 30, 2021December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents$567,325 $319,217 
Short-term investments835,406 887,319 
Trade receivables, net179,493 160,875 
Inventory28,240 20,973 
Prepaid expenses and other current assets51,564 57,011 
Total current assets1,662,028 1,445,395 
Long-term investments362,218 330,751 
Property and equipment, net99,838 67,384 
Deferred tax assets, net125,295 156,711 
Goodwill63,684 63,684 
Other long-term assets134,678 73,408 
Total assets$2,447,741 $2,137,333 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$24,314 $23,632 
Accrued compensation and benefits53,306 51,189 
Accrued clinical trial liabilities70,618 52,251 
Rebates and fees due to customers31,120 20,683 
Accrued collaboration liabilities35,403 12,456 
Other current liabilities54,747 44,447 
Total current liabilities269,508 204,658 
Long-term portion of deferred revenues9,444 3,755 
Long-term portion of operating lease liabilities52,252 49,086 
Other long-term liabilities4,090 721 
Total liabilities335,294 258,220 
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value, 10,000 shares authorized and no shares issued
  
Common stock, $0.001 par value; 400,000 shares authorized; issued and outstanding: 316,305 and 311,627 at September 30, 2021 and December 31, 2020, respectively
316 312 
Additional paid-in capital2,422,323 2,321,895 
Accumulated other comprehensive income1,481 4,476 
Accumulated deficit(311,673)(447,570)
Total stockholders’ equity2,112,447 1,879,113 
Total liabilities and stockholders’ equity$2,447,741 $2,137,333 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
3

Table of Contents
EXELIXIS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in thousands, except per share amounts)
(unaudited)
 Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
Revenues:
Net product revenues$263,117 $168,587 $774,577 $541,197 
License revenues49,694 33,205 116,862 113,318 
Collaboration services revenues15,612 29,300 92,391 62,971 
Total revenues328,423 231,092 983,830 717,486 
Operating expenses:
Cost of goods sold11,874 8,725 39,956 27,235 
Research and development163,370 176,762 471,448 393,572 
Selling, general and administrative101,558 88,185 302,404 210,916 
Total operating expenses276,802 273,672 813,808 631,723 
Income (loss) from operations51,621 (42,580)170,022 85,763 
Interest income1,658 3,994 6,231 16,376 
Other income (expense), net(19)565 (120)571 
Income (loss) before income taxes53,260 (38,021)176,133 102,710 
Provision for (benefit from) income taxes15,056 (5,981)40,236 19,317 
Net income (loss)$38,204 $(32,040)$135,897 $83,393 
Net income (loss) per share:
Basic$0.12 $(0.10)$0.43 $0.27 
Diluted$0.12 $(0.10)$0.42 $0.26 
Weighted-average common shares outstanding:
Basic315,380 309,116 313,990 307,437 
Diluted322,022 309,116 322,084 317,495 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
EXELIXIS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Net income (loss)$38,204 $(32,040)$135,897 $83,393 
Other comprehensive income (loss):
Net unrealized gains (losses) on available-for-sale debt securities, net of tax impact of $193, $453, $949 and $(893), respectively
(504)(1,601)(2,995)3,170 
Comprehensive income (loss)$37,700 $(33,641)$132,902 $86,563 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
4

Table of Contents
EXELIXIS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
Three Months Ended September 30, 2021
Common StockAdditional
Paid-in
Capital
Accumulated Other Comprehensive IncomeAccumulated
Deficit
Total
Stockholders’
Equity
SharesAmount
Balance at June 30, 2021
314,822 $315 $2,390,654 $1,985 $(349,877)$2,043,077 
Net income— — — — 38,204 38,204 
Other comprehensive loss— — — (504)— (504)
Issuance of common stock under equity incentive plans1,483 1 3,304 — — 3,305 
Stock transactions associated with taxes withheld on equity awards— — (5,958)— — (5,958)
Stock-based compensation— — 34,323 — — 34,323 
Balance at September 30, 2021
$316,305 $316 $2,422,323 $1,481 $(311,673)$2,112,447 

Three Months Ended September 30, 2020
Common StockAdditional
Paid-in
Capital
Accumulated Other Comprehensive IncomeAccumulated
Deficit
Total
Stockholders’
Equity
SharesAmount
Balance at June 30, 2020
308,886 $309 $2,269,093 $7,840 $(443,918)$1,833,324 
Net loss— — — — (32,040)(32,040)
Other comprehensive loss— — — (1,601)— (1,601)
Issuance of common stock under equity incentive plans516  1,872 — — 1,872 
Stock transactions associated with taxes withheld on equity awards— — (5,179)— — (5,179)
Stock-based compensation— — 55,655 — — 55,655 
Balance at September 30, 2020
$309,402 $309 $2,321,441 $6,239 $(475,958)$1,852,031 

Continued on next page
5

Table of Contents
EXELIXIS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - Continued
(in thousands)
(unaudited)
Nine Months Ended September 30, 2021
Common StockAdditional
Paid-in
Capital
Accumulated Other Comprehensive IncomeAccumulated
Deficit
Total
Stockholders’
Equity
SharesAmount
Balance at December 31, 2020
311,627 $312 $2,321,895 $4,476 $(447,570)$1,879,113 
Net income— — — — 135,897 135,897 
Other comprehensive loss— — — (2,995)— (2,995)
Issuance of common stock under equity incentive and stock purchase plans4,678 4 18,788 — — 18,792 
Stock transactions associated with taxes withheld on equity awards— — (15,371)— — (15,371)
Stock-based compensation— — 97,011 — — 97,011 
Balance at September 30, 2021
316,305 $316 $2,422,323 $1,481 $(311,673)$2,112,447 
Nine Months Ended September 30, 2020
Common StockAdditional
Paid-in
Capital
Accumulated Other Comprehensive IncomeAccumulated
Deficit
Total
Stockholders’
Equity
SharesAmount
Balance at December 31, 2019
304,831 $305 $2,241,947 $3,069 $(559,351)$1,685,970 
Net income— — — — 83,393 83,393 
Other comprehensive income
— — — 3,170 — 3,170 
Issuance of common stock under equity incentive and stock purchase plans4,571 4 19,823 — — 19,827 
Stock transactions associated with taxes withheld on equity awards— — (26,120)— — (26,120)
Stock-based compensation— — 85,791 — — 85,791 
Balance at September 30, 2020
309,402 $309 $2,321,441 $6,239 $(475,958)$1,852,031 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

6

Table of Contents
EXELIXIS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
Nine Months Ended September 30,
 
20212020
Net income $135,897 $83,393 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation11,699 6,731 
Stock-based compensation96,654 85,791 
Non-cash lease expense3,952 3,607 
Deferred taxes32,365 15,803 
Other, net35,871 1,609 
Changes in operating assets and liabilities:
Trade receivables, net(20,124)(47,074)
Inventory(26,956)(13,466)
Prepaid expenses and other assets(24,252)(15,868)
Deferred revenue11,434 4,012 
Accounts payable and other liabilities47,812 51,151 
Net cash provided by operating activities304,352 175,689 
Cash flows from investing activities:
Purchases of property, equipment and other(48,265)(16,055)
Purchases of investments(1,077,377)(866,975)
Proceeds from maturities and sales of investments1,095,813 781,324 
Net cash used in investing activities(29,829)(101,706)
Cash flows from financing activities:
Proceeds from issuance of common stock under equity incentive and stock purchase plans18,242 19,682 
Taxes paid related to net share settlement of equity awards(15,049)(26,120)
Net cash provided by (used in) financing activities3,193 (6,438)
Net increase in cash, cash equivalents and restricted cash equivalents277,716 67,545 
Cash, cash equivalents and restricted cash equivalents at beginning of period320,772 268,137 
Cash, cash equivalents and restricted cash equivalents at end of period$598,488 $335,682 
Supplemental cash flow disclosures:
Non-cash operating activities:
Right-of-use assets obtained in exchange for lease obligations$4,893 $1,824 
Non-cash investing activities:
Unpaid liabilities incurred for purchases of property and equipment$5,143 $843 
Unpaid liabilities incurred in asset acquisition$9,000 $ 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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EXELIXIS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1. 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. We have invented and brought to market novel, effective and tolerable therapies using our drug discovery and development resources and capabilities and commercialization platform; we will continue to build on this foundation, working toward providing cancer patients with additional treatment options.
Since our founding 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. Our flagship molecule, cabozantinib, is an inhibitor of multiple tyrosine kinases including MET, AXL, VEGF receptors and RET and has been approved by the U.S. Food and Drug Administration (FDA) and foreign regulatory authorities as two products: CABOMETYX® (cabozantinib) tablets approved for advanced renal cell carcinoma (RCC), both alone and in combination with Bristol Myers Squibb Company’s OPDIVO® (nivolumab), and for previously treated hepatocellular carcinoma (HCC) and, in the U.S. only, for previously treated, radioactive iodine (RAI)-refractory differentiated thyroid cancer (DTC) and COMETRIQ® (cabozantinib) capsules approved for progressive, metastatic medullary thyroid cancer (MTC). For these types of cancer, cabozantinib has become or is becoming a standard of care.
The other two products resulting from our discovery efforts are: COTELLIC® (cobimetinib), an inhibitor of MEK, approved as part of multiple combination regimens to treat specific forms of 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).
Leveraging the revenue stream derived from our cabozantinib franchise and other marketed products, we are expanding our oncology product pipeline through drug discovery efforts, which encompass both small molecule and biologics programs with multiple modalities and mechanisms of action.
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 and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 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, 2020, included in our Annual Report on Form 10-K submitted to the SEC on February 10, 2021.
We have adopted a 52- or 53-week fiscal year policy that generally ends on the Friday closest to December 31st. Fiscal year 2021, which is a 52-week fiscal year, will end on December 31, 2021 and fiscal year 2020, which was a 52-week fiscal year, ended on January 1, 2021. For convenience, references in this report as of and for the fiscal periods ended July 2, 2021 and July 3, 2020, October 1, 2021 and October 2, 2020, and as of and for the fiscal year ended January 1, 2021, are indicated as being as of and for the fiscal periods ended June 30, 2021 and June 30, 2020, September 30, 2021 and September 30, 2020, and the year ended December 31, 2020, respectively.
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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. On an ongoing basis, we evaluate our significant estimates. We base our estimates on historical experience and on various other market-specific and other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially from those estimates.
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 revenues, income (loss) from operations, net income (loss), total assets, total liabilities or total stockholders’ equity.
Significant Accounting Policies
Except for the foreign currency forward contracts for non-designated hedges, there have been no material changes to our significant accounting policies during the nine months ended September 30, 2021, as compared to the significant accounting policies disclosed in Note 1 – Significant Accounting Policies included in our Annual Report on Form 10-K for the year ended December 31, 2020.
Foreign Currency Forward Contracts for Non-Designated Hedges
We may use forward foreign currency exchange contracts (forward contracts) to hedge certain operational exposures resulting from potential changes in foreign currency exchange rates. Our strategy is to enter into forward contracts so that increases or decreases in our foreign currency exposures are offset by gains or losses on the foreign currency forward contracts thereby mitigating the risks and volatility associated with our foreign currency transactions. We do not apply hedge accounting treatment to these non-designated hedging instruments. We do not hold or issue derivative instruments for trading or speculative purposes.
Our forward contracts are generally short-term in duration. Given the short duration of the forward contracts, amounts recorded generally are not significant. We account for our derivative instruments as either assets or liabilities on our Condensed Consolidated Balance Sheets and measure them at fair value. Derivatives not designated as hedging instruments are adjusted to fair value through earnings in other income (expense), net in the Condensed Consolidated Statements of Income (Loss).
Recently Adopted Accounting Pronouncements
On January 1, 2021, we adopted the Accounting Standards Board’s (FASB) Accounting Standards Update (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 Accounting Standards Codification (ASC) Topic 740, Income Taxes and clarifying and amending existing guidance. Our adoption of ASU 2019-12 did not have a significant impact on the accompanying Condensed Consolidated Financial Statements.
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Recent Accounting Pronouncements Not Yet Adopted
There were no new accounting pronouncements issued since our filing of the Annual Report on Form 10-K for the year ended December 31, 2020, which could have a significant effect on our condensed consolidated financial statements.
NOTE 2. REVENUES
Revenues consisted of the following (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Product revenues:
Gross product revenues$357,462 $220,401 $1,051,871 $702,865 
Discounts and allowances(94,345)(51,814)(277,294)(161,668)
Net product revenues263,117 168,587 774,577 541,197 
Collaboration revenues:
License revenues49,694 33,205 116,862 113,318 
Collaboration services revenues15,612 29,300 92,391 62,971 
Total collaboration revenues65,306 62,505 209,253 176,289 
Total revenues$328,423 $231,092 $983,830 $717,486 
The percentage of total revenues by customer who individually accounted for 10% or more of our total revenues were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Ipsen Pharma SAS12 %16 %17 %16 %
Affiliates of McKesson Corporation15 %12 %15 %13 %
Affiliates of CVS Health Corporation16 %14 %15 %15 %
Affiliates of AmerisourceBergen Corporation16 %11 %14 %11 %
Affiliates of Optum Specialty Pharmacy9 %10 %9 %11 %
Takeda Pharmaceutical Company Limited7 %10 %3 %7 %
The percentage of trade receivables by customer who individually accounted for 10% or more of our trade receivables were as follows:
September 30, 2021December 31, 2020
Ipsen Pharma SAS24 %23 %
Affiliates of McKesson Corporation19 %12 %
Affiliates of AmerisourceBergen Corporation16 %11 %
Affiliates of CVS Health Corporation13 %11 %
Takeda Pharmaceutical Company Limited3 %10 %
Revenues by geographic region were as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
U.S.$266,436 $171,552 $783,583 $549,379 
Europe38,095 36,006 162,822 117,959 
Japan23,892 23,534 37,425 50,148 
Total revenues$328,423 $231,092 $983,830 $717,486 
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Total revenues include net product revenues attributed to geographic regions based on the ship-to location and license and collaboration services revenues attributed to geographic regions based on the location of our collaboration partners’ headquarters.
Net product revenues and license revenues are recorded in accordance with ASC Topic 606, Revenue from Contracts with Customers (Topic 606). License revenues include the recognition of the portion of milestone 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 under our collaboration agreement with Genentech. Collaboration services revenues were recorded in accordance with ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606 and by analogy to Topic 606. Collaboration services revenues include the recognition of deferred revenues for the portion of upfront and milestone payments allocated to our 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 on sales of products containing cabozantinib by our collaboration partners. We received notification that, effective January 1, 2021, Royalty Pharma plc (Royalty Pharma) acquired from GlaxoSmithKline (GSK) all rights, title and interest in royalties on net product sales containing cabozantinib for non-U.S. markets for the full term of the royalty and for the U.S. market through September 2026, after which time U.S. royalties will revert back to GSK.
Net product revenues by product were as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
CABOMETYX$259,791 $159,555 $759,000 $522,381 
COMETRIQ3,326 9,032 15,577 18,816 
Net product revenues$263,117 $168,587 $774,577 $541,197 
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, Discounts for Prompt Payment and Other
Other Customer Credits/Fees and Co-pay Assistance
Rebates
Total
Balance at December 31, 2020
$9,853 $3,279 $17,404 $30,536 
Provision related to sales made in:
Current period178,083 22,945 74,851 275,879 
Prior periods(22)(225)1,662 1,415 
Payments and customer credits issued(171,416)(18,789)(70,007)(260,212)
Balance at September 30, 2021
$16,498 $7,210 $23,910 $47,618 
The allowance for chargebacks, discounts for prompt payment and other are 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 as a contract asset when recognized. 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. For those contracts that have multiple performance obligations, contract assets and liabilities are reported on a net basis at the contract level. Contract assets were zero as of September 30, 2021 and December 31, 2020. Contract liabilities as of September 30, 2021 are primarily related to deferred revenues from Takeda Pharmaceutical Company Limited (Takeda).
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Contract liabilities were as follows (in thousands):
September 30, 2021December 31, 2020
Contract liabilities:
Current portion (1)
$7,535 $1,790 
Long-term portion (1)
9,444 3,755 
Total contract liabilities$16,979 $5,545 
____________________
(1)    Presented in Other current liabilities and Long-term portion of deferred revenues, respectively, in the accompanying Condensed Consolidated Balance Sheets.
We recognized $6.8 million in revenues in each of the nine months ended September 30, 2021 and 2020, that were included in the beginning deferred revenues balance for those periods.
During the three and nine months ended September 30, 2021, we recognized $48.4 million and $116.2 million, respectively, in revenues for performance obligations satisfied in previous periods, as compared to $33.1 million and $115.3 million for the corresponding periods in 2020. Such revenues were primarily related to royalty payments allocated to the license performance obligations for our collaborations with Ipsen Pharma SAS (Ipsen), Takeda, Daiichi Sankyo and Genentech.
As of September 30, 2021, $86.5 million of the combined transaction prices for our Ipsen and Takeda collaborations were allocated to performance obligations that had not yet been satisfied. See “Note 3. Collaboration Agreements— Cabozantinib 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, 2020 for information about the expected timing to satisfy these performance obligations.
NOTE 3. COLLABORATION AGREEMENTS, IN-LICENSING ARRANGEMENTS AND BUSINESS DEVELOPMENT ACTIVITIES
We have established multiple collaborations with leading pharmaceutical companies for the commercialization and further development of our cabozantinib franchise. Additionally, we have entered into several research collaboration and in-licensing arrangements to further enhance our early-stage pipeline and expand our ability to discover, develop and commercialize novel therapies with the goal of providing new treatment options for cancer patients and their physicians. Historically, we also entered into other collaborations with leading pharmaceutical companies pursuant to which we out-licensed other compounds and programs in our portfolio.
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, 2020, or as further described below, for additional information on each of our collaboration agreements and in-licensing arrangements.
Cabozantinib Collaborations
Ipsen Collaboration
In February 2016, we entered into a collaboration agreement with Ipsen for the commercialization and further development of cabozantinib. Under the terms of the collaboration agreement, as amended, Ipsen received exclusive commercialization rights for current and potential future cabozantinib indications outside of the U.S. and Japan. 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.
During the second quarter of 2021, Ipsen opted into and is now co-funding the development costs for COSMIC-311, our phase 3 pivotal trial evaluating cabozantinib versus placebo in patients with RAI-refractory DTC who have progressed after up to two VEGF receptor-targeted therapies. Under the terms of the collaboration agreement, Ipsen is now obligated to reimburse us for their share of COSMIC-311 global development costs, as well as an additional payment calculated as a percentage of such costs, triggered by the timing of the exercise of its option. We determined that the decision to opt in and co-fund the development costs for COSMIC-311 represented a contract modification for additional distinct services at their standalone selling price and therefore was treated as a separate contract under Topic 606.
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Accordingly, collaboration services revenues for the nine months ended September 30, 2021, includes a cumulative catch up for Ipsen’s share of global development costs incurred since the beginning of the study and through the end of the period.
Revenues under the collaboration agreement with Ipsen were as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
License revenues$25,139 $19,910 $81,246 $71,456 
Collaboration services revenues12,956 16,096 81,576 46,503 
Total$38,095 $36,006 $162,822 $117,959 
Milestone revenues for the nine months ended September 30, 2021 included $11.9 million recognized in connection with a $12.5 million regulatory milestone we determined was probable of achievement in the second quarter of 2021. The milestone was achieved in the third quarter of 2021 upon submission of a variation application to the European Medicines Agency for CABOMETYX as a treatment for patients with previously treated RAI-refractory DTC.
As of September 30, 2021, $44.8 million of the transaction price was allocated to our research and development services performance obligations that has not yet been satisfied.
Takeda Collaboration
In January 2017, we entered into a collaboration and license agreement with Takeda for the commercialization and further development of cabozantinib. Pursuant to this collaboration and license agreement, as amended, Takeda has exclusive commercialization rights for current and potential future cabozantinib indications in Japan, and the parties have agreed to collaborate on the clinical development of cabozantinib in Japan. The operation and strategic direction of the parties’ collaboration is governed through a joint executive committee and appropriate subcommittees.
Revenues under the collaboration agreement with Takeda were as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
License revenues$20,078 $9,780 $23,476 $32,726 
Collaboration services revenues2,656 13,204 10,815 16,468 
Total$22,734 $22,984 $34,291 $49,194 
Milestone revenues for the three and nine months ended September 30, 2021 included $18.8 million recognized in connection with a $20.0 million milestone we achieved upon Takeda’s first commercial sale in Japan of CABOMETYX in combination with OPDIVO for the treatment of patients with unresectable, advanced or metastatic RCC.
As of September 30, 2021, $41.7 million of the transaction price was allocated to our research and development services performance obligations that has not yet been satisfied.
GSK and Royalty Pharma
In October 2002, we established a product development and commercialization collaboration agreement with GSK, that required us to pay a 3% royalty to GSK on the worldwide net sales of any product incorporating cabozantinib by us and our collaboration partners. As disclosed in Note 2, we received notification that, effective January 1, 2021, Royalty Pharma acquired from GSK all rights, title and interest in royalties on net product sales containing cabozantinib for non-U.S. markets for the full term of the royalty and for U.S. market through September 2026, after which time U.S. royalties will revert back to GSK. Royalties earned by GSK and Royalty Pharma in connection with our sales of cabozantinib are included in cost of goods sold and as a reduction of collaboration services revenues for sales by our collaboration partners. Such royalties were $11.5 million and $33.7 million during the three and nine months ended September 30, 2021, respectively, as compared to $7.9 million and $23.7 million in the corresponding periods in 2020.
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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 FDA approved cobimetinib, under the brand name COTELLIC, in combination with Genentech’s ZELBORAF® (vemurafenib) for the treatment of 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. In July 2020, the FDA also approved COTELLIC for use in combination with ZELBORAF and TECENTRIQ® (atezolizumab) for the treatment of patients with BRAF V600 mutation-positive advanced melanoma in previously untreated patients. License revenues under the collaboration agreement with Genentech were as follows (in thousands):
 Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
Profits on U.S. commercialization$1,743 $1,595 $5,697 $4,378 
Royalty revenues on ex-U.S. sales$1,576 $1,370 $3,309 $3,804 
Research Collaborations, In-Licensing Arrangements and Other Business Development Activities
During the nine months ended September 30, 2021, in support of our development pipeline, we entered into collaboration and in-licensing arrangements with Adagene Inc. (Adagene), WuXi Biologics Ireland Limited (WuXi Bio), expanded our collaboration with Invenra, Inc. (Invenra), and amended our existing collaboration agreement with StemSynergy Therapeutics, Inc. (StemSynergy). In conjunction with each of these arrangements we have made aggregate upfront payments totaling $28.0 million and will make payments for potential future development milestones of up to $98.0 million, regulatory milestones of up to $229.0 million and commercial milestones of up to $802.5 million, each in the aggregate per product or target, as well as royalties on future net product sales. In addition to the upfront and future milestone payments, we will also pay Invenra, in three equal annual installments, an exclusivity payment of up to $15.0 million to nominate up to 20 additional oncology targets and up to $30.0 million in research program funding in equal quarterly payments over a three-year period, as well as additional fees. As of September 30, 2021, we have paid the first exclusivity installment of $5.0 million and $2.5 million for the first quarterly research and development funding installment. We have the ability to opt in to certain of Invenra’s other internal research programs in exchange for an option exercise payment of $3.0 million per program.
Additionally, in May 2021, we entered into an asset purchase agreement with GamaMabs Pharma SA (GamaMabs), pursuant to which we made an upfront payment of $5.0 million for the initial technology transfer, and subject to certain conditions, will make a $9.0 million payment upon the completion of an initial technology transfer of certain materials and documents specified in the asset purchase agreement. We will also make payments for potential future development milestones of up to $42.0 million and regulatory milestones of up to $22.5 million, per product.
NOTE 4. CASH AND INVESTMENTS
Cash, Cash Equivalents and Restricted Cash Equivalents
A reconciliation of cash, cash equivalents, and restricted cash equivalents reported in the accompanying Condensed Consolidated Balance Sheets to the amount reported within the accompanying Condensed Consolidated Statements of Cash Flows was as follows (in thousands):
 
September 30, 2021December 31, 2020
Cash and cash equivalents$567,325 $319,217 
Restricted cash equivalents included in other long-term assets31,163 1,555 
Cash, cash equivalents, and restricted cash equivalents as reported in the accompanying Condensed Consolidated Statements of Cash Flows$598,488 $320,772 
Restricted cash equivalents are used to collateralize letters of credit and consist of money-market funds and certificates of deposit with original maturities of 90 days or less. The restricted cash equivalents are classified as other long-term assets based upon the remaining term of the underlying restriction. As of September 30, 2021, restricted cash equivalents included $29.6 million of short-term investments, which is collateral under our January 2021 standby letter of
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credit to guarantee our obligation to fund a portion of the total tenant improvements related to our build-to-suit lease at our corporate campus. As we fund these tenant improvements, our restricted cash becomes available for operations.
Cash, Cash Equivalents, Restricted Cash Equivalents and Investments
Cash, cash equivalents, restricted cash equivalents and investments consisted of the following (in thousands):
September 30, 2021
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
Debt securities available-for-sale:
Commercial paper$886,323 $73 $ $886,396 
Corporate bonds503,707 1,967 (126)505,548 
U.S. Treasury and government-sponsored enterprises58,965 21 (1)58,985 
Municipal bonds10,670 41  10,711 
Total debt securities available-for-sale1,459,665 2,102 (127)1,461,640 
Cash80,828   80,828 
Money market funds119,538   119,538 
Certificates of deposit134,106   134,106 
Total cash, cash equivalents, restricted cash equivalents and investments$1,794,137 $2,102 $(127)$1,796,112 
December 31, 2020
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
Debt securities available-for-sale:
Commercial paper$569,456 $372 $ $569,828 
Corporate bonds543,520 5,244 (7)548,757 
U.S. Treasury and government-sponsored enterprises208,326 232 (4)208,554 
Municipal bonds28,680 83 (1)28,762 
Total debt securities available-for-sale1,349,982 5,931 (12)1,355,901 
Cash82,176   82,176 
Money market funds40,761   40,761 
Certificates of deposit60,004   60,004 
Total cash, cash equivalents, restricted cash equivalents and investments
$