Exelixis Earnings: Cabometyx Posts Strong Sales, but Patent Expirations Present Long-Term Concerns

Exelixis’ EXEL third-quarter results were highlighted by quarterly net product revenue of nearly $426 million, representing a 16% increase from the prior-year period. Including license and collaboration revenue, third-quarter revenue totaled nearly $472 million. Greater sales volume and a higher average net selling price drove Exelixis’ revenue. We continue to forecast roughly $1.84 billion in total revenue in 2023, driven by strong performance from the cabozantinib franchise. We maintain our fair value estimate of $18.90 per share, High Uncertainty Rating, and no economic moat rating. We view shares as fairly valued, currently trading in 3-star territory.

Our no-moat rating for Exelixis is based on its concentration in crowded oncology indications and approaching patent expirations for Exelixis’ lead molecule, cabozantinib, which is the active ingredient in two of the company’s three approved drugs: Cabometyx (for renal cell carcinoma) and Cometriq (for thyroid cancer). 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 of 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 $1.1 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.