Exelixis Inc. (EXEL), a biotechnology company, is engaged in the development of small molecule therapies for treating cancer. It has an FDA-approved product, Cometriq, in the market for the treatment of progressive metastatic Medullary Thyroid Carcinoma (MTC). The company is also trying to find new applications of Cometriq and a number of clinical trials are underway to asses it for other indications. The drug is also under review for a European Union approval.
The company has collaborations with various large pharmaceuticals to develop and commercialize various compounds. These collaborations include Bristol Myers Squibb Company (BMY), Sanofi (SNY), Genentech Inc., GlaxoSmithKline (GSK), Merck (MRK), and Daiichi Sankyo Company Limited. The company receives milestone and other payments from these collaborations, and is eligible to receive approximately $3.1 billion. Furthermore, the company has contracted the manufacturing of its product, raw materials and active pharmaceutical ingredient (API) to third parties.
The company's product, Cometriq, directly competes with AstraZeneca's (AZN), Caprelsa, for the same indication. Other off label use competitors for the treating metastatic MTC includes Sorafenib, of Bayer and Onyx Pharmaceuticals (ONXX), and sunitinib, of Pfizer (PFE).
Cometriq & Related Trials
Cometriq (cabozantinib) was launched in the U.S. in January 2013 for the treatment of metastatic medullary thyroid carcinoma (MTC). The company is currently awaiting approval for its Marketing Authorization Application (MAA) in Europe; however it did receive positive opinion from the European Committee for Medicinal Products for Human Use (CHMP). Cometriq is an inhibitor of the multiple tyrosine kinases, including RET, MET and vascular endothelial growth factor receptor 2 (VEGFR2). These receptors are found in signaling pathways in various other cancers, thus cabozantinib has potential outside the MTC market. The company is exploring additional indications for cabozantinib including prostate, renal, hepatocellular, breast, and non-small-cell lungs cancers. It is being explored in multiple trials, but notably in five pivotal trials viz. EXAM, two COMET, METEOR, and CELESTIAL, for different indications.
EXAM (Efficacy of XL184 (Cabozantinib) in Advanced Medullary Thyroid Cancer) is a phase III trial for Cometriq for progressive metastatic MTC; evaluating the mature overall survival. The analysis of the data is to be provided following the occurrence of 217 events (deaths). The trial has enrolled 330 patients, and evaluates the safety and efficacy of Cometriq, and data suggests that 30% of the patients remained progression free for more than two years.
The two COMET phase III trials are exploring the use of cabozantinib in treating castration resistant prostate cancer (CRPC). COMET-1 and COMET-2 evaluates patients who have already failed treatment with Janssen's Zytiga or Astellas' Xtandi and/or Sanofi's Taxotere. COMET-1 recently achieved full patient enrollment of 960 patients, whereas enrollment in COMET-2 is still ongoing. The primary endpoint of COMET-1 is overall survival, and the secondary endpoint is bone scan response, assessed by an independent radiology facility (IRF). The COMET-2 trial is evaluating reduction in bone metastases associated pain, by cabozantinib.
METEOR is a phase III trial evaluating Cometriq in metastatic renal cell carcinoma (RCC) patients, who showed progression or are refractory to initial VEGFR-TKI therapy. The study is expected to enroll a total of 650 patients and results are expected in late 2015. The primary endpoint of the study is progression free survival and the secondary endpoint is overall survival.
CELESTIAL is a phase III trial evaluating Cometriq in advanced hepatocellular carcinoma (HCC) patients, previously treated with Nexavar of Bayer and Onyx Pharmaceuticals. The primary endpoint of the trial is overall survival and the secondary endpoint is progression free survival. The trial is expected to enroll 760 patients and data is expected in late 2016.
The pipeline of the company consists of ten candidates, being developed under collaboration with various pharmaceuticals. The company discovered a number of compounds and then out-licensed them to various pharmaceuticals, where they are in various stages of development. These candidates are developing treatments for various diseases which include inflammatory disorders, cancer, and cardiovascular disorders.
Source: Exelixis Website
Exelixis is developing GDC-0973 (XL518) in collaboration with Genentech, subsidiary of Roche (OTCQX:RHHBY), for treating metastatic melanoma. The compound was internally discovered by Exelixis, and in 2006 it entered in a co-development agreement with Genentech. GDC-0973 (cobimetinib) is currently in a number of trials for metastatic melanoma, with results expected throughout 2014.
The shares of Exelixis appreciated 35.92%, which given a product launch is slightly worrying. The stock prices should have doubled following the product launch; however this was not the case. The sales of the drug are expected to pick up slowly, but will not reap billion dollar profits, owing to its limited treatment group. Thus the shares, with the current indication, may not rally as such.
The company has mean price target of $6 and a high price target of $9 and the low price target is of $4.50. The company has a number of catalysts approaching and the share prices are expected to remain above the mean price target.
The rating from the analysts covering the company is a Neutral, with two analysts rating it a buy and five rating it neutral. The average price target is $5.80, with a high target of $8 from Stifel Nicolaus and low target of $4 from Canaccord Genuity.
The company will be presenting at the JP Morgan Healthcare Conference on the 15th of January, 2014. This event is of importance, since the development plans for Cometriq will be discussed, along with the company's corporate strategy, financial outlook, and other general updates. Thus news from the event will help to boost the share prices.
The company will be announcing topline data for COMET-1 and COMET-2 trials this year, which will be a catalytic event for the company. Other data to be announced include overall survival analysis from EXAM trial, and phase III trial data from Genentech's Zelbarof alone or with cobimetinib for malignant melanoma treatment, is also expected this year. These events hold major importance for the company, and positive results will cause the share prices to rally.
Fundamentals and Potential Risks
The company in the third quarter reported revenues of $5.5 million, out of which $4.8 million comprised of the Cometriq's revenue. The expenses have increased with the large number of trials underway for additional indications for Cometriq and also for the sales and distribution of the drug. Additionally, the company also went through restructuring and has recorded expenses related to it, and is expected to continue doing so till the end of 2017. The net loss for the third quarter, resultantly, was $67.1 million, or $0.36 per share, suggesting that the company still has a long way before it turns to profitability.
The cash as of September 30, 2013 was $464.7 million, with a burn rate of approximately $57 million per quarter; it currently is estimated to have cash of around $400 million. The company expects the cash to suffice for the next twelve months. Thus it does have a strong cash position and with the revenue expected from Cometriq's sales, cash shouldn't be a problem.
Like all biotechnology companies, Exelixis is also faced with the uncertainty of failure in future trials. The investors and patients alike are pining on to the approval of Cometriq for other indications, more specifically for prostate cancer, and any negative result will greatly affect the share prices.
Cometriq is competing with AstraZeneca's Caprelsa, which is the first drug approved for metastatic MTC. The sales of Cometriq have not been very encouraging, owing to the market already captured by Caprelsa and also due to the rarity of the disease - only 4% of the thyroid cancers. Thus, the drug may not be able to generate stellar revenues, and its approval for additional indications is cardinal.
Exelixis is a promising company, with a number of trials, stable cash position, right collaborations, and an approved product. The product is expected to pick up sales in the quarters to come, which will help the company financially and in regards to share prices. Additionally, with the studies ongoing for expanding the indications of Cometriq, there is a major profit potential. Not only this, the company is also eligible to receive sales related royalties from the candidates in its pipeline.
The upcoming catalysts, with four phase III pivotal trials data readout expected this year, the company is all set for a stellar year. With a market capitalization of $1.11 billion and institutional holdings of 85.30%, the company not only has bright prospects but has also garnered investor interest. Therefore, Exelixis is all set for growth and is a strong buy with an approved product and number of upcoming catalysts.