Nothing has ever been easy for Exelixis (EXEL) or its shareholders, but few biotechs can boast multiple drug approvals, let alone building to nearly $1 billion in revenue and positive free cash flow. While the company has established strong efficacy for its primary drug Cabometyx, combo therapy with Pfizer’s (PFE) rival tyrosine kinase inhibitor (or TKI) Inlyta and Merck’s (MRK) Keytruda has been taking share in the critical renal cell carcinoma (or RCC) market, and there’s ample uncertainty as to whether the most recent data on Exelixis’s own combo will be enough to drive Cabometyx past that $1 billion threshold.
I would describe myself as “cautiously bullish” on the prospects for Exelixis and Cabometyx in first-line RCC. The data from the CheckMate-9ER study weren’t as clean and unequivocal as bulls could have hoped, but they certainly didn’t shut the door on meaningful long-term revenue growth. With a risk-adjusted fair value of $29, driven largely by my expectation of $2.4 billion in peak U.S. revenue in RCC, I do think there’s enough upside to merit a closer look at this name.
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