Morningstar | Exelixis Beats Expectations With Cabozantinib Revenue; Shares Undervalued With Unchanged $28 FVE
No-moat Exelixis reported a solid fourth quarter, with cabozantinib revenue exceeding our expectations, resulting in product revenue of $176 million and collaboration revenue of $52 million. Full-year revenue of over $852 million represents an 88% increase from last year, illustrating the traction that cabozantinib has gained, especially in renal cell carcinoma patients. Further, after adjusting for a $240 million noncash tax benefit (from the release of the valuation allowance of deferred tax assets), the company beat our earnings expectations and analyst consensus. After incorporating management guidance into our 2019 operating expense assumptions, we do not expect a material change to our fair value estimate of $28 per share.Cabozantinib volume growth continued to be strong in the fourth quarter. We believe this momentum will continue throughout our explicit forecast period, especially given the opportunity of cabozantinib in combination with checkpoint inhibitors. Recent positive results from the combination of Merck's Keytruda and Pfizer's Inlyta in RCC reinforces the potential of Exelixis' tyrosine kinase inhibitor in combination with immuno-oncology drugs. As the preferred TKI in renal cancer, cabozantinib should withstand competition in first- and second-line RCC and is a good candidate for immuno-oncology combinations, in our opinion.
Our outlook for 2019 includes incremental growth from the recent approval of cabozantinib in second-line hepatocellular carcinoma. Further, we've adjusted research and development spending up to account for two phase 3 trials initiated in the last several months: cabozantinib in second-line differentiated thyroid cancer and cabozantinib (monotherapy and in combination with Roche's Tecentriq) in first-line HCC. Additionally, Exelixis announced a phase 1 trial with a new TKI candidate, XL092, in solid tumors, affirming the company's focus on oncology.
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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