No-Moat Exelixis Faces Cabozantinib Patent Losses; Early-Stage Pipeline Makes Progress

Exelixis is best known for its discovery of cabozantinib, a tyrosine kinase inhibitor (TKI) that was approved in 2012 for medullary thyroid cancer (MTC). This small molecule was later approved for the treatment of renal cell carcinoma (RCC) as well as hepatocellular carcinoma (HCC). The cabozantinib opportunity has room to grow with several late-stage trials evaluating combination therapies. Although cabozantinib has generated strong returns, we believe Exelixis' long-term outlook has a high degree of uncertainty given the company's relatively early-stage pipeline outside of cabozantinib. This is exacerbated by cabozantinib's upcoming patent expiration. We believe generics could impact Exelixis' sales as early as 2027 after cabozantinib's composition of matter patent expires in 2026. The severity of the patent loss would depend on whether secondary patents are upheld in court and whether label expansions are approved.