On Monday, Citi reaffirmed its Buy rating on Exelixis (NASDAQ:EXEL) with a steady price target of $31.00. The endorsement follows Exelixis' announcement of a new clinical development collaboration with Merck, focusing on Exelixis' next-generation tyrosine kinase inhibitor (TKI), zanzalintinib.
The partnership is set to explore the combination of zanzalintinib with Merck's anti-PD-1 therapy, Keytruda (pembrolizumab), in a Phase 3 STELLAR-305 trial aimed at treating head and neck squamous cell carcinoma (HNSCC). Additionally, the collaboration will test zanzalintinib with Merck's oral HIF-2α inhibitor, Welireg (belzutifan), in an upcoming Phase 1/2 trial and two pivotal Phase 3 trials for renal cell carcinoma (RCC).
The collaboration is perceived as an affirmation of zanzalintinib's clinical potential and its capability to be integrated with other treatments. This strategic partnership is expected to enhance the clinical development of zanzalintinib by leveraging Merck's established therapies in oncology.
Separately, attention remains on the judicial outcome of the MSN II Abbreviated New Drug Application (ANDA) litigation concerning cabozantinib, Exelixis' other key cancer drug. The court's decision, initially expected in the first half of 2024, is anticipated to determine the earliest date when a generic version of cabozantinib could potentially enter the market. As of now, the final judgment on this matter is still pending.
In other recent news, Exelixis has been making significant strides in its financial performance and clinical development. The company's Q2 revenues reached a robust $637.2 million, primarily driven by its leading product, cabozantinib, which contributed $437.6 million. Furthermore, the company's diluted net income of $0.77 per share notably exceeded earlier projections.
Exelixis has also been involved in a clinical development collaboration with Merck, focusing on the combination of KEYTRUDA with cabozantinib. The biotechnology firm is advancing the development of zanzalintinib in combination with WELIREG to solidify its position in the renal cell carcinoma market. Analysts from Stephens and UBS have maintained a neutral stance on Exelixis, citing potential intellectual property risks and a wait-and-see approach to assess market dynamics and legal challenges.
Citi, H.C. Wainwright, and several other firms have reaffirmed their Buy rating on Exelixis shares, following the presentation of positive results from various Phase 3 trials. These trials demonstrated significant improvement in progression-free survival for patients with advanced neuroendocrine tumors and metastatic castration-resistant prostate cancer.
A decision on a patent dispute over Cabometyx, which will determine the drug's market exclusivity period, is imminent, while the FDA has accepted a supplementary New Drug Application for cabozantinib in the treatment of neuroendocrine tumors, with a target action date set for April 2025.
InvestingPro Insights
Exelixis (NASDAQ:EXEL) is showing strong financial performance that aligns with the positive outlook from Citi's Buy rating. According to InvestingPro data, the company's revenue growth is impressive, with a 35.61% increase in the most recent quarter. This robust growth could be further bolstered by the new collaboration with Merck, potentially accelerating the development and market potential of zanzalintinib.
InvestingPro Tips highlight that Exelixis holds more cash than debt on its balance sheet, which provides financial flexibility to support its clinical development programs and collaborations. Additionally, the company's high shareholder yield and management's aggressive share buybacks demonstrate a commitment to returning value to investors.
The company's profitability is also noteworthy, with an EBITDA growth of 159.1% over the last twelve months. This strong financial performance supports the ongoing development of its drug pipeline, including zanzalintinib and cabozantinib.
For investors interested in a deeper analysis, InvestingPro offers 11 additional tips for Exelixis, providing a comprehensive view of the company's financial health and market position.
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