Exelixis Earnings: Cabometyx Achieves Strong Sales and Pipeline Makes Progress; Shares Fairly Valued

Exelixis’ EXEL second-quarter results were highlighted by quarterly net revenue of nearly $410 million, representing an 18% increase from the prior-year period. Cabometyx drove the increase in net product revenue was thanks to greater sales volume and a higher average net selling price. Exelixis’ lead molecule, cabozantinib, is the active ingredient in two of the company’s three approved drugs: Cabometyx and Cometriq. We continue to forecast over $1.8 billion in total revenue in 2023, driven by strong performance from the cabozantinib products. We maintain our fair value estimate of $18.90 per share, High Uncertainty Rating, and no economic moat rating. Furthermore, we view shares as fairly valued, currently trading in 3-star territory.

Our no-moat rating for Exelixis is due to its concentration in crowded oncology indications and approaching patent expirations, as the key patent covering cabozantinib’s composition of matter expires in 2026. We expect Exelixis will experience declining sales in the low-single digits in the latter half of our forecast period due to this key patent loss. We believe the combination of Exelixis’ upcoming patent expirations, pricing pressure from generic entry, competition from other branded drugs, and largely relying on one active ingredient creates a substantial threat of major value destruction, which further supports our High Uncertainty and no-moat ratings. While Exelixis’ pipeline outside cabozantinib is largely in the early stages of development, it is continuing to make progress, and we await additional data readouts later this year.

We appreciate that Exelixis remains in a healthy financial position, as it ended the quarter with about $1.3 billion in cash and short-term investments. This should help fund Exelixis’ research and development efforts and external business development opportunities as it works to expand its pipeline.