Exelixis Gains 20.7% in Three Months: Is This the Right Time to Buy?

Shares of Exelixis, Inc. EXEL have risen 20.7% in the past three months compared with the industry's growth of 6.3%. The stock has also outperformed the sector and the S&P 500 Index.

Exelixis has been a consistent outperformer in the year so far on the back of the strong performance of its lead drug Cabometyx and encouraging pipeline progress.

EXEL Outperforms Industry, Sector & S&P 500

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Cabometyx Boosts EXEL

Cabometyx maintained its status as the leading tyrosine kinase inhibitor (TKI) for the treatment of renal cell carcinoma (RCC) in 2023. This was mainly attributable to its use in combination with Bristol Myers' Opdivo in the first-line setting. The drug also maintained growth in the hepatocellular carcinoma indication.

BMY's Opdivo is one of the leading immuno-oncology drugs, approved for various oncology indications.

Management is also focused on the label expansion of Cabometyx. The FDA accepted EXEL's supplemental new drug application (sNDA) for cabozantinib for patients with previously treated advanced pancreatic neuroendocrine tumors (pNET) and those with previously treated advanced extra-pancreatic NET (epNET). The FDA assigned a standard review with a target action date of April 3, 2025. The FDA also granted the orphan drug designation to cabozantinib for the treatment of pNET.

A potential label expansion should further propel its growth prospects.

Exelixis also intends to submit an sNDA with the FDA later this year for cabozantinib, in combination with Tecentriq (atezolizumab), for metastatic castration-resistant prostate cancer.

EXEL Makes Encouraging Pipeline Progress

The pipeline progress has been impressive as well, as Exelixis looks to expand its oncology portfolio beyond Cabometyx.

Other promising candidates in Exelixis' pipeline zanzalintinib, a next-generation oral TKI and XL309. In the first half of 2025, Exelixis intends to initiate a phase III study, STELLAR-311, to evaluate zanzalintinib compared with everolimus as a first oral therapy in patients with pNET and epNET.

The company also plans to advance phase I efforts for XL309 and XB010.

EXEL decided to discontinue the development of XB002. It plans to reallocate resources to new pivotal trials with zanzalintinib, advancing XL309 and its growing pipeline.

The successful development of additional drugs should broaden its portfolio and reduce its dependence on its lead drug, Cabometyx.

Exelixis' Efforts to Boost Shareholder Value

Exelixis is also making efforts to increase shareholder value through repurchases.  At the end of the second quarter, Exelixis completed its 2024 share repurchase program, having repurchased 20.3 million shares of the company's common stock for a total of $450 million.

Consequently, the company returned $1 billion to shareholders since the initial $550 million stock repurchase program was authorized in March 2023.

The board of directors has authorized the repurchase of up to an additional $500 million of the company's common stock through the end of 2025.

Valuation & Estimates

Going by the price/sales ratio, EXEL's shares currently trade at 3.64x forward sales, higher than its mean of 3.34x and the biotech industry's 1.79x.

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The Zacks Consensus Estimate for 2024 earnings per share has increased to $1.83 from $1.79 over the past 30 days.

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Conclusion

Large biotech companies are generally considered safe havens for investors interested in this sector. EXEL is a good stock to buy now, with good fundamentals and growth prospects.

The stock has performed well this year. Potential label expansion of Cabometyx should boost its growth. The company's efforts to expand its portfolio are encouraging as well. The successful development of additional drugs should broaden its portfolio and reduce its dependence on its lead drug, Cabometyx.

Zacks Rank & Other Key Picks

EXEL currently carries a Zacks Rank #2 (Buy). 

Some other top-ranked stocks in the biotech sector are Alnylam Pharmaceuticals ALNY and Krystal Biotech KRYS, both carrying a Zacks Rank #1 (Strong Buy) at present.

ALNY's loss per share estimate for 2024 has narrowed from $1.20 to 63 cents in the past 60 days and the same for 2025 has narrowed from 34 cents to 27 cents.

Krystal Biotech's earnings per share for 2024 have increased to $2.38 from $1.98 in the past 90 days. Shares of KRYS have surged 42.8% year to date.

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