As Thanksgiving approaches, 2022 is coming to a close -- and what a year the stock market had. The S&P 500 is still down 21% year to date. Most growth stocks have taken a beating this year. But amid this downfall, some companies still shone, giving investors a glimpse of hope.
One such company is oncology drugmaker Exelixis (EXEL 1.84%). Its star product has captured everyone's attention. But the company has more in store to drive growth in the coming years. Here are some reasons why this growth stock is my winner this year.
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Exelixis had another outstanding quarter
Cancer drug Cabometyx (cabozantinib), Exelixis' crown jewel, helped the company report another stellar quarter. This drug is used to treat advanced renal cell carcinoma (RCC) and other cancer types. Additionally, it is used in combination with Bristol Myers Squibb's Opdivo (nivolumab) to treat advanced RCC in patients who have not previously received any treatment.
In its third quarter, total revenue jumped 26% year over year to $412 million. In Q3, Cabometyx alone generated $361 million in revenue, or 88% of the total. Cometriq, a variation of Cabometyx used to treat thyroid cancer, also made a contribution of about $5.1 million during the quarter. The adjusted net profit for the quarter increased by 58% year over year to $102 million.
In addition, the company's partnership with its non-American partners, Ipsen Pharma and Takeda Pharmaceutical brought in $30.3 million in royalty revenue.
For the nine months ended Sept. 30, Cabometyx has generated $1.0 billion in revenue.
Despite the success of its star product, Exelixis stock has dropped 9% this year. Investors are concerned that the company's reliance on a single product will limit its growth. Fortunately, the company is aware of the problem. Management is optimistic about its upcoming compounds: XL092, XB002, and XL102.
These drug candidates could bring in some positive news next year, according to the management. Revenue for the full year is expected to be in the $1.5 billion to $1.6 billion range.
Is this stock worth the risk?
No doubt, biotech companies are risky because clinical trials may fail or regulatory approvals may be delayed, negatively impacting stock performance. However, Exelixis has already proven its worth by using gene therapies to address difficult-to-treat cancers.
Though oncology is a competitive field, it is also the fastest-growing, with a lot of room to run. This market could grow at a compound annual rate of 8%, reaching $536 billion by 2029. Exelixis already has a successful drug in its portfolio, which will continue to aid revenue growth as it undergoes clinical testing for use as a combination treatment. But the drugmaker also has many potential products in the pipeline that could succeed in the coming years.
Meanwhile, the balance sheet looks to be in good shape. Exelixis ended the quarter with cash and cash equivalents of $2.1 billion that could help fund its growing pipeline.
A consensus of Wall Street analysts sees the stock as a strong buy and predicts a 55% increase in the price over the next 12 months, according to TipRanks. Even a small investment in this biotech stock could yield enormous long-term returns.
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