Morningstar | Exelixis' Cabozantinib Continues to Gain Share; Maintaining $29.50 FVE
No-moat Exelixis reported strong top-line and bottom-line growth that largely fell in line with our expectations, with revenue growth driven by cabozantinib sales in renal cell carcinoma, or RCC. In May, cabozantinib was approved in Europe for frontline treatment in advanced RCC, matching last year's Food and Drug Administration approval in the U.S. Cumulative net cabozantinib sales in Europe surpassed $150 million, pushing royalty rates to tiers of 22%-26% from tiers of 2%-12%. After adjusting for these higher near-term royalty rates and slightly lower-than-expected research and development spending in the first half of the year, our fair value estimate is unchanged at $29.50 per share.While we expect the approval of cabozantinib in frontline RCC in both the U.S. and Europe to be an important driver for Exelixis as the drug faces declines in medullary thyroid cancer, the tyrosine kinase inhibitor will face competition from immuno-oncology combination therapies in the long term. Even with the CHMP's negative opinion of Bristol's Opdivo and Yervoy combination in frontline RCC at the end of July, we believe that immuno-oncology therapies will ultimately prove a worthy competitor in the first-line setting. With constant data readouts and new biomarker information, it's still too early to tell where cabozantinib will land in the long-term shakeout. However, we note that cabozantinib continued to post gains in RCC even with the FDA approval of Opdivo and Yervoy in April. Further, label expansion in liver cancer (filed for approval earlier this year) and in differentiated thyroid cancer (currently in phase 2 trials) will sharpen the firm's competitive edge. Ultimately, to consider upgrading the firm to a positive trend rating, we're looking for evidence of cabozantinib becoming the choice TKI in RCC, as well as efficacy in combination with checkpoint inhibitors, so we'll be watching these two factors in coming quarters.
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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Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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