Morningstar | Exelixis' Cabozantinib Withstands Increasing Competition in Kidney Cancer; Maintaining $28 FVE
Exelixis reported total revenue of $225 million in the third quarter, up 48% from last year and 21% from last quarter. Revenue came in stronger than we had anticipated, and operating expense came in slightly lower due to the timing of clinical trials before year-end. After some near-term adjustments in our model, we are maintaining our fair value estimate of $28 per share for no-moat Exelixis. Although the oncology landscape is increasingly more competitive, we believe the market is underappreciating Exelixis' cabozantinib franchise and its opportunities for label expansion.Notably, U.S. cabozantinib sales in renal cell carcinoma of $158 million, up 75% from last year and 12% sequentially, represent solid growth even after the Food and Drug Administration approval of Bristol's Opdivo and Yervoy in front-line renal cell carcinoma in April. While we expect the immuno-oncology landscape to be competitive, we believe that cabozantinib's efficacy and safety profiles make it an attractive second-line therapy. The firm reported low-single-digit sequential volume growth in new prescriptions for cabozantinib in renal cell carcinoma for the second and third quarters of this year (following the April Bristol launch) while volume for several other tyrosine kinase inhibitors in kidney cancer was flat or declining. We model U.S. cabozantinib sales in renal cell carcinoma to exceed $1 billion by 2024, driven by increased share in both first- and second-line treatment and potential combination therapies with checkpoint inhibitors.
Exelixis presented results of two analyses at the European Society for Medical Oncology conference in October. First, the company presented the outcome of an analysis from previous pivotal trials in first- and second-line RCC, which indicated that cabozantinib resulted in improvements over baseline regardless of the patient's PD-L1 expression. Efficacy in PD-L1-negative patients could be an important differentiator to winning first-line share over checkpoint inhibitor therapies, but it's difficult to draw a distinctive conclusion from a post-hoc analysis, in our opinions. Second, Exelixis reported positive results from a phase 1 study of cabozantinib in combination with Roche's Tecentriq in front-line kidney cancer, which paves the way for continued study of combination therapies.
The company ended the quarter with $750 million in cash and equivalents. We believe Exelixis is in a strong position to acquire oncology candidates to expand its portfolio and complement it with potential combination therapies.
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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