Company Overview
Exelixis, Inc. (NASDAQ: EXEL) is a pharmaceutical company that develops and commercializes medicines to improve care and outcomes for cancer patients. The company’s current roster of drugs is comprised of products derived from cabozantinib, an inhibitor of multiple tyrosine kinases, and cobimetinib, a selective inhibitor of the MEK pathway. Applications include the treatment of advanced kidney cancer, progressive, metastatic medullary thyroid cancer (MTC), and melanoma. Exelixis was formed in 1994, and is headquartered in South San Francisco, California.
Pipeline and Products
Since inception, Exelixis has developed three drugs which have received regulatory approval and are sold commercially. Following is a summary of the company’s approved and marketed products:
Cometriq (cabozantinib) was the company’s first marketed product after receiving FDA approval in November 2012 for the treatment of progressive MTC. In March 2014, the European Commission granted a similar authorization. Cometriq is marketed in the E.U. by Ipsen Pharma SAS, Exelixis’ marketing partner. In 2016, the company generated $39 million of net revenue in the U.S. from the sale of Cometriq, and $2.5 million from distribution partners.
Cabometyx (cabozantinib) is currently approved in the U.S. (as of November 2016) for the treatment of patients with advanced renal cell carcinoma (RCC) who have received prior anti-angiogenic therapy. The drug also received approval in the European Union in September 2016. Outside the U.S. and Japan, Cabometyx is marketed by Ipsen. In 2016, Exelixis generated $94 million of net revenue in the U.S. from the sale of Cabometyx.
Cotellic (cobimetinib) was approved by the FDA in November 2015 as part of a combination regiment (with vemurafenib) for the treatment of patients with advanced melanoma. Cotellic is marketed under a collaboration with Genentech (a member of the Roche group). It has also been approved in the E.U, Switzerland, and Canada. In 2016, Exelixis recognized $3 million of collaboration revenues from ex-U.S. sales of Cotellic.
Both cabozantinib and cobimetinib have shown potential in several forms of cancer and are part of several clinical development programs. Cabozantinib has elicited objected responses from more than 20 individual tumor types. The drug is currently being evaluated in a broad development program which is comprised of more than 45 active or planned clinical trials. A summary of cabozantinib development activities can be found below:
Source: Company Filing
Market Opportunity
The American Cancer Society cites kidney cancer as one of the ten most commonly diagnoses forms of cancer among both men and women in the United States. The second and later-line RCC is market is large and still growing. Studies suggest that the drug eligible population includes 17,000 patients in the United States and 37,000 globally. As noted above, Exelixis is pursuing additional label indications for cabozantinib, including approval for first-line treatment of kidney cancer, which would greatly expand its customer base.
Recent Developments
- On October 16, 2017, Exelixis announced that its Phase III Celestial trial of cabozantinib met its primary endpoint of overall survival (OS) in patients with advanced hepatocellular carcinoma (HCC). According to the company, the study provided a statistically significant and clinically meaningful improvement in median overall survival compared to placebo. As a result, the study has been halted. The company plans to submit a supplemental new drug application in the first quarter of 2018. Full data from the study will be released at an upcoming medical meeting.
- Separately, the company announced that the FDA has granted a priority review to Cabometyx for the treatment of patients with previously untreated RCC. The PDUFA date is February 15, 2018. As noted above, Cabometyx was approved in April 2016 for the treatment of patients with advanced RCC with prior anti-angiogenic therapy.
Second Quarter Earnings Review
In the quarter ended June 30, 2017, Exelixis reported revenue of $99 million as compared to $36.3 million for the same period in 2016. The company reported $88 million of net product revenue from cabozantinib, a 28 percent increase from the first quarter of 2017 and a 178 percent increase from the same period one year ago. The remaining $11 million consists of collaboration revenues with Ipsen, Takeda, and Genentech.
Research and development costs increased 23 percent year-over-year to $28 million. This was primarily due to clinical trial costs. Selling, general, and administrative expenses also increased 14 percent to $40.8 million due to an increase in headcount. Net income in the second quarter was $17.7 million ($0.06 per share) as compared to a net loss of $34.8 million ($0.15 per share) for the same period one year ago.
Cash and equivalents totaled $380.3 million at June 30, 2017, as compared to $479.6 million at December 31, 2016. As of June 30, 2017, the company did not list any long-term debt on its balance sheet.
Guidance
The company expects that costs and operating and expenses for the full year (2017) will fall between $290 and $310 million.
Stock Influences
- Greater sales for Cabometyx;
- Readouts from the company’s ongoing clinical trials;
- FDA decision for Cabometyx label expansion for untreated RCC; and
- Additional collaboration revenues from Cotellic.
Risk Factors
- The company is heavily dependent upon the commercialization of Cabometyx and the further clinical development of cabozantinib for additional indications;
- The company is dependent on Genentech for the development, approval, and commercialization of cobimetinib;
- The company has several ongoing clinical trials which may not yield any results; and
- The company may fail to expand its development pipeline.
Stock Performance
As of October 17, 2017, shares of Exelixis closed at $28.30 after losing 2.5 percent on the day, yielding a market capitalization of $8.3 billion. The stock has done well in the past year (up 150 percent) due to improving sales and optimism surrounding expanded applications for the company’s approved products. Although the shares lost 17 percent in September, they gained 17 percent following the suspension of the Celestial trial.
Following are selected analyst ratings and price targets:
| Analyst | Firm | Rating | Price Target | Date |
| Andrew Peters | Deutsche Bank | Hold | $29.00 | 10/11/2017 |
| Kennen MacKay | RBC | Outperform | $33.00 | 10/4/2017 |
Summary
The recent data from the Celestial study is a certainly positive development, and if the company submits a new drug application in the first quarter of 2018, FDA approval could come as soon as the end of next year. Perhaps more encouraging is the scheduled review for Cabometyx as a first-line treatment for RCC.
With plenty of cash and reduced debt, the company is positioned to grow in a sustainable manner. Additional upside will come from ongoing clinical trials.
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