Biotech Gem Exelixis Is Compelling Only for the Long Term

Aug.19.11 | About: Exelixis, Inc. (EXEL)

It wasn't long ago Exelixis (NASDAQ:EXEL) ran over $12 on buyout speculation, but now the stock sits at $6.18, plummeting along with the overall market.

Let's see...

  • Cabo is, without a doubt, a drug with blockbuster potential. Data from the MTC trial should be coming in Q3. If approved in this small indication, off-label use could be very substantial. The company is currently designing Phase III pivotal trials for CRPC (and going for an SPA).
  • Goldman was hired for strategic alternatives, and we all know how big pharma loves to buy out promising biotechs at a discount (think Bristol-Myers Squibb (NYSE:BMY) stealing Medarex all over again... Yervoy has huge safety issues too but still worked out well).
  • The company has $350 million in cash and reduced expenses.
  • Cabo presents a revolutionary treatment for bone metastases, which are common in lung, breast, prostate, kidney, thyroid cancers and multiple myeloma, to name a few.

The Conclusion

EXEL could easily plunge, who knows, another 20%, as the debt crisis gets worse and we slide back into slow global growth or possibly even recession. However, it's a stock that I would be comfortable buying around these levels for the long term. I guess that's the highest compliment I can give.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in EXEL over the next 72 hours.