Exelixis Earnings: Pipeline Makes Progress Amid 2026 Patent Losses; Shares Fairly Valued

Exelixis EXEL reported first-quarter results in line with our expectations, highlighted by quarterly net revenue of nearly $363 million, representing a 17% increase from the prior year. Exelixis remains in a healthy financial position, as it ended the quarter with over $1.3 billion in cash and short-term investments. We think this will help fund its research and development expenses as it develops its pipeline candidates. Exelixis is tracking our expectations, and we maintain our fair value estimate of $18.90 per share, no-moat rating, stable moat trend, and High Morningstar Uncertainty Rating. We view shares as fairly valued, currently trading in 3-star territory.

Exelixis’ lead molecule, cabozantinib, is the active ingredient in two of the company’s three approved drugs: Cabometyx and Cometriq. We forecast over $1.8 billion in total revenue in 2023, driven by continued strong performance from the cabozantinib franchise.

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 low-single-digit declines in total sales in the latter half of our forecast period due to this key patent loss. Exelixis’ stable moat trend rating is based on our expectation that the patents on cabozantinib will largely protect the company from generic entry until 2026. The label expansions of Exelixis’ existing portfolio and the continued development of its pipeline candidates should also support the stabilization of the company’s intangible assets.

While Exelixis’ pharmaceutical partners help offset some of its clinical development costs, we continue to forecast research and development expenses will remain high as a percentage of sales as cabozantinib is evaluated in other indications and the company develops its largely early-stage pipeline candidates.