Why Is $7B Valued Cancer Focused Exelixis Trading Lower Today?

Sunday, Exelixis Inc EXEL provided financial guidance for fiscal year 2024 and delivered an update on its business.

The company announced preliminary FY23 revenue of $1.83 billion versus the consensus of $1.84 billion, with net product revenues of ~ $1.630 billion.

For FY24, Exelixis forecasts revenues of $1.825 billion - $1.925 billion versus the consensus of $2.06 billion.

Exelixis authorized a $450 million share repurchase in 2024 after the $550 million share repurchase was completed in 2023.

The company announced corporate restructuring, resulting in a workforce reduction of approximately 175 employees or 13%. 

Exelixis expects to complete the restructuring in the first quarter of 2024 and recognize a restructuring charge of approximately $25 million.

William Blair writes that Exelixis enters 2024 at an inflection point, in which the growth of its flagship Cabometyx franchise is stabilizing while pipeline programs are years from potentially contributing to the company's P&L statement. 

The upcoming presentation of Cabometyx's full data for prostate cancer on January 25 holds significant potential for positive outcomes, which could significantly impact investors' perceptions of the franchise's growth prospects in the mid-term. However, this evaluation considers the competitive landscape, including radioligands like Novartis AG's NVS Pluvicto and PNT2002, PARP inhibitors, and emerging hormone therapies from Merck & Co Inc MRK.

Despite acknowledging the intense competition, Exelixis is viewed as offering a defensively strong investment profile due to its cash flow generation and positive EPS. This defensive nature is particularly appealing, considering historical trends where healthcare stocks underperform during election years.

William Blair's analyst keeps the Outperform rating on Exelixis shares.

Price Action: EXEL shares are down 5.38% at $21.99 on the last check Monday.

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