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Stockholders’ Equity | 12 Months Ended
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Dec. 29, 2023
Share-Based Payment Arrangement [Abstract] |
STOCKHOLDERS’ EQUITY | STOCKHOLDERS’ EQUITY Stock-based compensation We allocated the stock-based compensation expense for our equity incentive plans and our ESPP as follows (in thousands):
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
Research and development | $ | 34,320 |  |  | $ | 45,350 |  |  | $ | 46,654 |
Selling, general and administrative | 72,025 |  |  | 62,224 |  |  | 73,166 |
Total stock-based compensation expense | $ | 106,345 |  |  | $ | 107,574 |  |  | $ | 119,820 |
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
Stock options | $ | 7,771 |  |  | $ | 12,790 |  |  | $ | 19,048 |
Restricted stock units | 70,462 |  |  | 69,775 |  |  | 53,629 |
Performance stock units | 23,938 |  |  | 21,616 |  |  | 43,428 |
ESPP | 4,174 |  |  | 3,393 |  |  | 3,715 |
Total stock-based compensation expense | $ | 106,345 |  |  | $ | 107,574 |  |  | $ | 119,820 |
We have several equity incentive plans under which we granted stock options and RSUs, including PSUs, to employees and directors. As of December 31, 2023, 27.9 million shares were available for grant under the 2017 Equity Incentive Plan (as amended and restated, the 2017 Plan). The share reserve is reduced by 1 share for each share issued pursuant to a stock option and 2 shares for full value awards, including RSUs. The Board of Directors delegated responsibility for administration of our equity incentive plans to the Compensation Committee of our Board of Directors, including the authority to determine the term, exercise price and vesting requirements of each grant. Stock options granted to our employees and directors generally have a four-year vesting term and a one-year vesting term, respectively, an exercise price equal to the fair market value on the date of grant, and a seven-year life from the date of grant. RSUs granted to our employees and directors generally have a four-year vesting term and a one-year vesting term, respectively. PSUs granted pursuant to our equity incentive plans vest upon specified service conditions and the achievement of a performance target or market condition. We have adopted a Change in Control and Severance Benefit Plan for certain executive officers. Eligible Change in Control and Severance Benefit Plan participants include employees with the title of vice president and above. If a participant’s employment is terminated without cause during a period commencing three months before and ending fifteen months following a change in control, as defined in the plan document, then the Change in Control and Severance Benefit Plan participant is entitled to have the vesting of all their outstanding equity awards accelerated and the exercise period for their stock options extended to no more than one year. We have an ESPP that allows for qualified employees (as defined in the ESPP) to purchase shares of our common stock at a price equal to the lower of 85% of the closing price at the beginning of the offering period or 85% of the closing price at the end of each six-month purchase period. As of December 31, 2023, we had 1.7 million shares available for issuance under our ESPP. Pursuant to the ESPP, we issued 0.9 million, 0.6 million and 0.5 million shares of common stock at an average price per share of $14.56, $16.63 and $17.76 during the years ended December 31, 2023, 2022 and 2021, respectively. Cash received from purchases under the ESPP for the years ended December 31, 2023, 2022 and 2021 was $12.7 million, $10.1 million and $9.5 million, respectively. We used a Black-Scholes Merton option pricing model to value stock options and ESPP purchases. The weighted average grant-date fair value per share of stock options and ESPP purchases were as follows:
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
Stock options | $ | 9.45 |  |  | $ | 8.36 |  |  | $ | 9.04 |
ESPP | $ | 4.67 |  |  | $ | 5.80 |  |  | $ | 6.12 |
The grant-date fair value of stock option grants and ESPP purchases was estimated using the following weighted average assumptions:
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
Stock options: |  |  |  |  |
Risk-free interest rate | 4.14 | % |  | 2.35 | % |  | 0.74 | %
Dividend yield | — | % |  | — | % |  | — | %
Volatility | 44 | % |  | 48 | % |  | 51 | %
Expected life | 5.6 years |  | 4.6 years |  | 4.6 years
ESPP: |  |  |  |  |
Risk-free interest rate | 5.07 | % |  | 1.49 | % |  | 0.08 | %
Dividend yield | — | % |  | — | % |  | — | %
Volatility | 40 | % |  | 45 | % |  | 47 | %
Expected life | 6 months |  | 6 months |  | 6 months
We considered both implied and historical volatility in developing our estimate of expected volatility. The assumption for the expected life of stock options is based on historical exercise patterns and post-vesting termination behavior. The risk-free interest rate is based on U.S. Treasury rates with the same or similar term as the underlying award. Our dividend rate is based on historical experience and our investors’ current expectations. The fair value of RSUs, including PSUs, was based on the closing price of the underlying common stock on the date of grant. Activity for stock options during the year ended December 31, 2023 was as follows (in thousands, except per share amounts):
| Shares |  | Weighted Average Exercise Price |  | Weighted Average Remaining Contractual Term |  | Aggregate Intrinsic Value
Stock options outstanding at December 31, 2022 | 10,882 |  |  | $ | 19.49 |  |  |  |  |
Granted | 357 |  |  | $ | 20.41 |  |  |  |  |
Exercised | (2,340) |  |  | $ | 12.84 |  |  |  |  |
Cancelled | (691) |  |  | $ | 21.66 |  |  |  |  |
Stock options outstanding at December 31, 2023 | 8,208 |  |  | $ | 21.24 |  |  | 2.7 years |  | $ | 24,115 |
Stock options exercisable at December 31, 2023 | 6,981 |  |  | $ | 21.31 |  |  | 2.3 years |  | $ | 20,207 |
As of December 31, 2023, there was $9.8 million of unrecognized compensation expense related to our unvested stock options. The compensation expense for the unvested stock options will be recognized over a weighted-average period of 1.9 years. The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between our closing stock price on the last trading day of fiscal year 2023 and the exercise prices, multiplied by the number of in-the-money stock options) that would have been received by the stock option holders had all stock option holders exercised their stock options on December 31, 2023. The total intrinsic value of stock options exercised during the years ended December 31, 2023, 2022 and 2021 was $16.7 million, $36.5 million and $76.0 million, respectively. Cash received from stock option exercises during the years ended December 31, 2023, 2022 and 2021 was $20.8 million, $13.9 million and $14.8 million, respectively. Activity for RSUs during the year ended December 31, 2023 was as follows (in thousands, except per share amounts):
| Shares |  | Weighted Average Grant Date Fair Value |  | Weighted Average Remaining Contractual Term |  | Aggregate Intrinsic Value
RSUs outstanding at December 31, 2022 | 11,294 |  |  | $ | 21.83 |  |  |  |  |
Awarded | 5,028 |  |  | $ | 21.65 |  |  |  |  |
Vested and released | (2,950) |  |  | $ | 20.81 |  |  |  |  |
Forfeited | (1,498) |  |  | $ | 21.81 |  |  |  |  |
RSUs outstanding at December 31, 2023 | 11,874 |  |  | $ | 22.72 |  |  | 1.7 years |  | $ | 284,856 |
As of December 31, 2023, there was $172.7 million of unrecognized compensation expense related to our unvested RSUs which will be recognized over a weighted-average period of 2.5 years. Activity for PSUs during the year ended December 31, 2023 was as follows (in thousands, except per share amounts):
| Shares |  | Weighted Average Grant Date Fair Value |  | Weighted Average Remaining Contractual Term |  | Aggregate Intrinsic Value
PSUs outstanding at December 31, 2022 | 4,964 |  |  | $ | 23.26 |  |  |  |  |
Awarded | — |  |  | $ | — |  |  |  |  |
Vested and released | (764) |  |  | $ | 22.48 |  |  |  |  |
Forfeited | (309) |  |  | $ | 24.57 |  |  |  |  |
PSUs outstanding at December 31, 2023 | 3,891 |  |  | $ | 23.60 |  |  | 1.3 years |  | $ | 93,351 |
In April 2023, we awarded to certain employees an aggregate of 0.8 million RSUs (the target amount) that are subject to a total shareholder return (TSR) market condition (the 2023 TSR-based RSUs). The TSR market condition is based on our relative TSR percentile rank compared to companies in the Nasdaq Biotechnology Index during the performance period, which is December 31, 2022 through January 2, 2026. Depending on the results relative to the TSR market condition, the holders of the 2023 TSR-based RSUs may earn up to 175% of the target amount of shares. 50% of the shares earned pursuant to the 2023 TSR-based RSU awards will vest at the end of the performance period, and the remainder will vest approximately one year later, subject to an employee’s continuous service. These 2023 TSR-based RSUs will be forfeited if the market condition at or above a threshold level is not achieved at the end of the performance period on January 2, 2026. In March 2022, we awarded to certain employees an aggregate of 1.0 million RSUs (the target amount) that are subject to a TSR market condition (the 2022 TSR-based RSUs). The TSR market condition is based on our relative TSR percentile rank compared to companies in the Nasdaq Biotechnology Index during the performance period, which is January 1, 2022 through January 3, 2025. Depending on the results relative to the TSR market condition, the holders of the 2022 TSR-based RSUs may earn up to 175% of the target amount of shares. 50% of the shares earned pursuant to the 2022 TSR-based RSU awards will vest at the end of the performance period, and the remainder will vest approximately one year later, subject to an employee’s continuous service. These 2022 TSR-based RSUs will be forfeited if the market condition at or above a threshold level is not achieved at the end of the performance period on January 3, 2025. In March 2021, we awarded to certain employees an aggregate of 1.0 million PSUs (the 2021 target amount), subject to a performance and a market condition (the 2021 PSUs). Pursuant to the terms of 2021 PSUs, the holders of the awards may earn up to 200% of the 2021 target amount, or up to 2.1 million total shares, depending on the level of achievement of the performance condition related to certain net product revenues and a TSR market condition. The TSR market condition for the 2021 PSUs is based on our relative TSR percentile rank compared to companies in the Nasdaq Biotechnology Index during the performance period, which was from January 2, 2021 through December 29, 2023. The performance condition of net product revenues relative to the 2021 PSUs was achieved at target level in the first quarter of 2023, representing 100% of the 2021 PSUs target amount. As of December 29, 2023 (end of the performance period), the TSR market condition was achieved at 125% level, resulting in 1.0 million shares earned (125% of the 2021 target amount). 50% percent of the shares earned subject to the performance and market conditions vested following the end of the performance period, and the remainder will vest approximately one year later subject to an employee’s continuous service. We used a Monte Carlo simulation model and the following assumptions to determine the grant date fair value of $26.05 per share for the 2023 TSR-based RSUs, $33.17 for 2022 TSR-based RSUs and $24.54 for the 2021 PSUs:
| 2023 TSR-Based RSUs |  | 2022 TSR-Based RSUs |  | 2021 PSUs
Fair value of Exelixis common stock on grant date | $ | 19.48 |  |  | $ | 20.70 |  |  | $ | 21.31 |
Expected volatility | 40.26 | % |  | 46.85 | % |  | 49.21 | %
Risk-free interest rate | 3.75 | % |  | 1.59 | % |  | 0.29 | %
Dividend yield | — | % |  | — | % |  | — | %
The Monte Carlo simulation model assumed correlations of returns of the stock prices of Exelixis common stock and the common stock of a peer group of companies and historical stock price volatility of the peer group of companies. The valuation model also used terms based on the length of the performance period and compound annual growth rate goals for TSR based on the provisions of the awards. During the year ended December 31, 2020, we awarded 2.3 million PSUs (the target amount) that will vest upon the achievement of performance targets related to (i) clinical trial positive top-line results and (ii) product approvals by the FDA (the 2020 PSUs). Pursuant to the terms of the 2020 PSUs, employees may earn up to 200% of the target amount, or 4.7 million total shares, depending on the volume and timing of achievement of the performance targets. The 2020 PSUs will be forfeited if the performance targets are not met by December 31, 2024. The performance condition for the achievement of a product approval by the FDA relative to the 2020 PSUs occurred in the third quarter of 2021, representing 25% of the target amount. In the third quarter of 2022, we achieved a performance condition for positive top-line results by the FDA relative to the 2020 PSUs, representing 25% of the target amount, and during the third quarter of 2023, we achieved additional performance conditions for positive top-line results relative to the 2020 PSUs, representing an additional 50% of the target amount. Expense recognition for PSUs commences when it is determined that attainment of the performance target is probable. Of the outstanding PSUs as of December 31, 2023, 1.5 million relate to awards for which we achieved the performance target. As of December 31, 2023, the remaining unrecognized compensation expense for the PSUs achieved or deemed probable of achievement related to the PSUs was $6.0 million, which will be recognized over a weighted-average period of 1.3 years. The total unrecognized compensation expense for the PSUs for which we have not yet determined that attainment of the performance target is probable was $41.4 million as of December 31, 2023. Exelixis, Inc. 401(k) Plan (the 401(k) Plan) We sponsor the 401(k) Plan under which we make matching cash contributions to our employees’ 401(k) accounts. We recorded compensation expense of $13.9 million, $11.7 million and $9.5 million for the years ended December 31, 2023, 2022 and 2021, respectively, for matching contributions. Common Stock Repurchases In March 2023, our Board of Directors authorized a stock repurchase program to acquire up to $550.0 million of our outstanding common stock before the end of 2023. As of December 31, 2023, we completed the repurchase of 26.2 million shares of common stock under our stock repurchase program for an aggregate purchase price of $550.0 million. In January 2024, our Board of Directors authorized a share repurchase program to acquire up to $450.0 million of our outstanding stock before the end of 2024. Share repurchases under the 2024 program may be made from time to time through a variety of methods, which may include open market purchases, in block trades, 10b5-1 trading plans, accelerated share repurchase transactions, exchange transactions, or any combination of such methods. The timing and amount of any share repurchases under the share repurchase program will be based on a variety of factors, including ongoing assessments of the capital needs of the business, alternative investment opportunities, the market price of our common stock and general market conditions.

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