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Exelixis: A Busy Year Ahead For Company Buoyed By High-Profile Trial Win

Jun. 08, 2020 1:49 PM ETExelixis, Inc. (EXEL)18 Comments


  • Exelixis is an oncology-focused biotech developing treatments for difficult to treat cancers. Its flagship molecule is Cabozantinib - an inhibitor of multiple tyrosine kinases.
  • The company's flagship product Cabometyx - a tablet form of Cabozantinib for treatment of kidney and liver cancer - was responsible for 98% of Exelixis' net product sales in 2019.
  • The company has 3 other approved treatments including another Cabozantinib derivative Cometriq, indicated for a rare form of thyroid cancer.
  • The strong efficacy profile of Cabozantinib is highly promising - the drug is currently involved in 85 ongoing or planned clinical trials.
  • Crucial to the company's fortunes are 6 key data readouts due in 2020 including Cabozantinib in combination with Opdivo, Tecentriq and as a first-line monotherapy.
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Investment Thesis

Exelixis 1-year share price performance. Source: TradingView.

Exelixis (NASDAQ:EXEL) stock surged 61% in late April to a price of $26.3 on news that its flagship drug, the tyrosine kinase inhibitor ("TKI") Cabozantinib, had met its primary endpoint in a combination trial alongside Bristol-Myers Squibb's (BMY) best-selling cancer drug Opdivo for previously untreated advanced Renal Cell Carcinoma ("RCC").

The market had gone a little cold on Exelixis since the company's shares traded at an all-time peak (excepting a brief period in 2000) of $30.4 in January 2018, probably due to the fact that, despite its notable achievement of successfully commercializing Cabozantinib against the odds - securing approval for 2 derivative drugs, Cabometyx and Cometriq - sales have been somewhat sluggish, not quite meeting the blockbuster targets that analysts forecasted.

The strong efficacy profile of Cabozantinib, however, means it has the potential to become an effective first-line treatment for a range of cancers, either as a monotherapy or in combination with other treatments such as Opdivo, or Tecentriq - Roche's (OTCQX:RHHBY) $5.5bn selling treatment for bladder and lung cancer.

Whilst Exelixis is heavily dependent on the long-term success of Cabozantinib - since its pipeline will take time to develop and its other commercialized drugs require more time to build sales - the signs look very promising. Cabozantinib is currently the subject of 85+ clinical trials, many of which are evaluating the drug as a first-line treatment, meaning Exelixis will have the opportunity to target these more lucrative markets going forward.

Whilst the company has forecast an overall decrease in revenues for 2020, based on broadly flat sales of Cabometyx and Cometriq and fewer milestone payments from its collaboration partners, the future revenue streams that the company can achieve more than outweigh the short-term headwinds, in my view. With 6 major data readouts from trials

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This article was written by

Edmund Ingham profile picture
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Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in EXEL over 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.

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