Morningstar | Competition Picks Up in Liver Cancer With Lenvima Approval; Decreasing Exelixis FVE to $28. See Updated Analyst Note from 21 Aug 2018
On Aug. 16, the Food and Drug Administration approved Eisai's and Merck's Lenvima (lenvatinib) in first-line hepatocellular carcinoma, displacing Bayer's Nexavar (sorafenib), which has become the standard of care in advanced liver cancer since its approval in 2007. After taking a fresh look at our expectations for Exelixis' cabozantinib in second-line liver cancer, we are lowering our fair value estimate for no-moat Exelixis by about 5% to $28 per share. However, we believe that the 8% correction in Exelixis' share price since Lenvima's approval was an overreaction, and we continue to believe that the no-moat company is undervalued, with the market underappreciating the strength of cabozantinib in medullary thyroid cancer and renal cell carcinoma.We have slightly reduced our expectations of patient share after analysis of the competitive landscape ahead. Based on its phase 3 trial results, Lenvima's efficacy surpasses that of Nexavar, which remained unmatched for about a decade, highlighting how difficult it is to treat liver cancer. Lenvima's strong results will slightly decrease the number of patients eligible for second-line therapy, and Nexavar could start competing for second-line share. The current opportunity in a third-line setting is small, given that that patients with advanced liver cancer usually do not live much longer than a year, although this is extending as treatments improve. Approved second-line treatments include Bristol's Opdivo (checkpoint inhibitor) and Bayer's Stivarga (kinase inhibitor). We continue to model an 80% chance of approval for cabozantinib in the second-line setting, with an FDA decision expected in January 2019.
Exelixis is an oncology-focused biotechnology company that involved in the discovery, development and commercialization of new medicines for cancers. The company's marketd products are: CABOMETYX? (cabozantinib) tablets for renal cell carcinoma and previously treated hepatocellular carcinoma; and COMETRIQ? (cabozantinib) capsules for progressive, metastatic medullary thyroid cancer. The company's products resulting from its discovery efforts are: COTELLIC? (cobimetinib), an inhibitor of MEK approved as part of a combination regimen to treat melanoma; and MINNEBRO? (esaxerenone), an oral, non-steroidal, selective blocker of the mineralocorticoid receptor approved for the treatment of hypertension in Japan.
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