An Excellent Investment in the Biotech Space?

According to the American Cancer Society, more than 60,000 new cases of thyroid cancer will be diagnosed in the U.S., and about 1,850 people are expected to die from the disease in 2013. Limited treatment options are available for advanced thyroid cancer -- known as medullary thyroid cancer, or MTC -- and Cometriq from Exelixis  (NASDAQ: EXEL  )  is among them. Cometriq is well accepted in the treatment of MTC and also may be used for multiple indications due to its unique biological properties. While opinion on Exelixis' potential are mixed, there are reasons to keep this biotech stock on your radar.

Other options in the market are limited
Besides Cometriq, there are two more products against MTC -- Caprelsa from AstraZeneca  (NYSE: AZN  )  and Nexavar from Onyx Pharmaceuticals  (UNKNOWN: ONXX.DL  ) .

Caprelsa is indicated for advanced MTC. The product was approved back in 2011 and has yet to realize its peak sales potential estimated at between $120 million and $200 million by various analysts. Last year, it made less than $30 million. AstraZeneca, already beset with loss of exclusivity of several brands, might be focusing on drugs that have more potential to bring in sales.

The other drug, Nexavar, approved for liver and kidney cancer, is under evaluation for MTC therapy. According to Exelixis' last 10-Q, the drug is prescribed off-label for MTC and is also a competitive threat. Nexavar is well-accepted across the U.S. for its approved indications, and has been around for a while. Its recent quarter sales was of $81.8 million, up by 13% over the prior year. The additional MTC indication could help boost sales of the drug. If the product is approved early, that will negatively affect Cometriq's market potential. Right now, however, Cometriq is one of the few contenders in the MTC race.

Opportunity for Exelixis in MTC
Exelixis expects an average of 1,200 patients for Cometriq therapy in the U.S., each generating revenue of around $9,900 per month. The company expects to generate peak sales of approximately $12 million to $15 million from the U.S. Cometriq had sales of $4 million in the most-recent quarter. So, if these expectations are correct, sales should start to slowly ramp up in the coming quarters.

Additional indications
The company expects to expand the usage of cabozantinib, the active ingredient of Cometriq, in other solid tumors. The ongoing COMET trial, with likely completion in 2014, has two essential phase 3 studies for the treatment of a rare disease known as metastatic castration-resistant prostate cancer, or CRPC. Of this, COMET-1 is to study the efficiency of cabozantinib versus prednisone, and COMET-2 is for comparative study against mitoxantrone and prednisone. In addition, the initiation of METEOR study is a phase 3 trial to evaluate the efficacy of cabozantinib in patients with metastatic renal cell cancer. These additional trials may give wider opportunity for cabozantinib, and on approval, this will enhance the company's performance.

Solid financial position
The company has a strong balance sheet with cash balance of $131.8 million as of last quarter. However, the company is still not profitable, as most of its funds are utilized in R&D and marketing expenses. The net loss during the second quarter of this year was $62.2 million, or $0.34 per share. The addition of Comeriq's sales has already improved overall revenue, but the company still needs time to reach profitability.

Conclusion
Exelixis has a number of positives going for it to make it worth a second look. It has a solid product in a niche area where there's hardly any focused competition and a robust pipeline. All of these factors put together make Exelixis a very interesting company for potential investors.

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  • Report this Comment On September 20, 2013, at 6:05 PM, duckduffer wrote:

    While I'm also an bull on EXEL, this article is not going to help you understand why it's such a potential winner. First and most importantly, metastatic castration resistent prostate cancer (mCRPC) unfortunately is not rare. Nowhere near as rare as MTC, which Exelixis estimates as a market of 700-800 per year. mCRPC and two other indications (RCC and HCC) are the big opportunities for EXEL's Cometriq (cabozantinib) if approved. EXEL has Phase 3 trials active or enrolling in each indication. MTC's importance for the company is that Cometriq was approved by the FDA as a treatment for this type cancer. That was the first approval for this drug paves the way for additional indications if the Phase 3 data bears out. Another error in the article is EXEL's cash position. EXEL has over $500M in cash and expects to finish 2014 with over $400M.

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