Exelixis: Treatment Paradigm Winds See Cabometyx Falling Flat, For Now

Nov. 12, 2019 8:15 AM ETExelixis, Inc. (EXEL)19 Comments
Stephen Ayers profile picture
Stephen Ayers


  • Cabometyx revenue fell flat as the treatment paradigm for first-line renal cell carcinoma continues to take shape.
  • CheckMate 9ER continues to be the big event that could make or break Exelixis' prospects.
  • While we wait for data, Exelixis continues to stockpile their assets and appears markedly undervalued at these prices.
  • This idea was discussed in more depth with members of my private investing community, The Formula. Get started today »


My last article on Exelixis (NASDAQ:EXEL) was nearly a year ago. Back then, I noted the looming competition (immunotherapy) in first-line renal cell carcinoma,

Temporary slowing revenues may precede volatility in shares of Exelixis.

Source: Clover Biotech Research

Immunotherapy was due to take a significant portion of the first-line market, pushing Exelixis' blockbuster drug, cabometyx, into a smaller market (second-line RCC).

Since the last article, Exelixis has fallen, underperforming the broader market by 27%:

Source: Seeking Alpha

While investors were spooked by slowing cabometyx sales,

I am confident the future of Exelixis remains bright. The following article will provide insight on Exelixis' most recent quarterly earnings and the path ahead.

Quarterly Earnings Spook

For the first time in a while, cabometyx didn't see sequential growth, coming in with just $187.4M:

Source: Exelixis

The large amount of collaboration revenue did inspire an earnings beat, however.

Management attributed the slowdown to changes within the treatment paradigm for RCC:

TKI market has been growing steadily over the last several quarters, as immune checkpoint inhibitors or ICI combinations have begun to dominate the first-line setting, which bodes well for cabozantinib if the CheckMate 9ER study generates competitive data.

Cabozantinib net product revenue was essentially flat quarter-over-quarter due to a delay in the transition of ICI TKI progressing patients from first to second-line.

Source: Seeking Alpha

Source: Exelixis

A Turning Point

As I pointed out before, the results of the CheckMate 9ER will be crucial for Exelixis. The study will assess cabo + ICI for first-line RCC. Success for cabozantinib would secure a first-line setting, which is far more lucrative than second-line. Data is expected to start becoming available in 2020.


Exelixis now has $1.25B in cash and investments with no significant debt.

ChartData by YCharts

I often like to utilize charts like the one above. Just glancing at a chart of share price does not give us a true sense of how a stock has been valued over time. Market capitalization, however, draws a clearer picture. EXEL's highest point of valuation (market capitalization) happened in the beginning of 2018, with a rich ~$9B valuation. This is nearly twice of what it is today.

Adjusting for assets, Exelixis' enterprise value is a mere ~$3.5B with steady, reliable revenue over $800M per annum.

Analysts are projecting steady growth ahead, with peak annual revenue nearing $2B:

Source: Seeking Alpha

There is, however, one kicker: the state of first-line RCC treatment is in constant change and motion. It is difficult to predict whether or not cabometyx will stay relevant enough to merit higher valuations. CheckMate 9ER will be a major event.


As expected, cabometyx is seeing a decline in first-line RCC revenue as the treatment paradigm for RCC shifts towards ICIs. As CheckMate 9ER approaches, Exelixis will surely continue to build their cash load and advance other candidates and indications. If CheckMate 9ER is to be an overt success, meriting definite first-line RCC combination therapy, I believe Exelixis' valuation could double from these levels. In the short term, shares in EXEL may continue to feel pressure as cabometyx hits a wall. I would buy shares in EXEL in the event of positive CheckMate 9ER, as I suspect the initial response will not do its relevance justice. I do believe, at the moment, shares of EXEL appear markedly undervalued, as the market appears to be pricing in a lot of pessimism.

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This article was written by

Stephen Ayers profile picture
Healthcare provider (RN, BSN) | Focus: Biotech/Tech | Avid Reader | LT Mindset (10-20 yrs) | I'm not a financial expert, but that's probably a good thing | Follow me on Twitter, too ☛

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Disclaimer: The intention of this article is to provide insight, not investment advice. While the information provided in this article is intended to be factual, there is no guarantee and prospect investors are encouraged to do their own fact-checking and research before investing in a company. One must also consider one's own financial standings, risk tolerance, portfolio diversification, etc. before making a decision to buy shares in a company. Many of my articles detail biotechnology companies with little or no revenue. These stocks are, therefore, speculative and volatile. Even when prospects seem promising, there is no predicting the future. Losses incurred may be significant.

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