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EXEL - Attractive On The Outside But Lets Take A Deeper Look

|Includes: Exelixis, Inc. (EXEL)

I had a few people message me today asking me why in tar I was shorting this and I felt like writing a quick article and may get in the habit of doing these.

Lets sit down and look at all the facts, which by the way are all mostly negative.

1) Cash sitting around $100M last Quarter suggests currently running VERY thin on cash and the quarter update is coming in just a few days. I am expecting an offering very soon. Filing is ready.

2) The company is sitting on a massive $350M++ debt pile

3) The company was 760 Million market cap last trading day and is now 1.15 Billion due to news of a drug that could IF works will bring only $400M revenue peak speculative sales sometime in the future if they capture 100% of the market. Remember this is not a under 100M Market cap company this is over $1 Billion we are talking.

4) Perhaps the largest negative is a competitor just released results for the same indication with better results and was stopped for how well it was doing. This news was released when the price was already under $6 which I find very important. The pull back under $5 suggests the feeling and the rest of the day is simply day 1 momo for phase 3 good news

5) As per company quote: This is only a step forward until 2016 for next step... Nobody is leaving money at $6 here for a year. Sorry.

6) The data failed to show stat significance on survival rate, why invest here when BMY is steaming ahead?

7) A run-up of at least 50% is already factored into the news prior as per typical biotech

Conclusion

Despite this encouraging news and a confused Jim Cramer and a silly rating upgrade to $6 by Piper I see no reason to justify such a move, in fact after financing announcement, hype die down and the waiting for 2016 it would not surprise me for the stock to return to the 3's where it came from before the next up date by August. The stock is thickly traded and I expect it to fade off from 6 area starting in the next few days depending on momentum squeeze and any upgrades/company updates. As always never be too biased but this is why I am short overnight and didn't cover any after hours into the pulls.

Disclosure: I am/we are short EXEL.

Additional disclosure: This is personal opinion only and should not be considered investment advice.