Exelixis (EXEL -0.91%) is not the most popular drugmaker around, but there are several noteworthy things about this mid-cap stock. First, it is laser focused on just one area, oncology, which is the largest and one of the fastest-growing therapeutic areas in the industry.
Second, Exelixis has had tremendous success in recent years through just one product, Cabometyx, a cancer drug that has earned plenty of approvals and continues to do so. Even so, some investors may be turned off by the company's reliance on Cabometyx.
Despite this issue, there are solid reasons to bet on Exelixis. Let's consider why the company's shares are worth considering right now.
Cabometyx's continued success
Cabometyx is approved to treat renal cell carcinoma (RCC), a form of kidney cancer, and hepatocellular carcinoma (HCC), or liver cancer. Although plenty of other cancer medicines treat one -- or both -- of these illnesses, Cabometyx has become hugely successful, especially in RCC.
That is partly because it was the first RCC treatment approved by the U.S. Food and Drug Administration to demonstrate improvement in three critical efficacy measures in clinical studies: survival, progression-free survival, and objective response rate (the percentage of patients who respond to treatment).
In the third quarter, this medicine generated net revenue of $361.4 million, jumping by 39% year over year. Exelixis' total revenue increased by 25.4% year over year to $411.7 million. Cabometyx made up about 88% of Exelixis' top line.
Perhaps that is a reason to worry, but the medicine is still going strong, as these results and Exelixis' pipeline demonstrate. It is still being investigated in plenty of clinical trials, both as a stand-alone medicine and in combination with others.
Cabometyx earned a crucial approval in January 2021 that helped meaningfully improve its sales after showing positive results in treating advanced RCC in combination with Bristol Myers Squibb's Opdivo.
Investors can expect more approvals in the future. And in the meantime, the biotech company is working on diversifying its lineup.
Solid pipeline progress
Exelixis is developing other cancer medicines, seeking to replicate the success it has had with Cabometyx. Perhaps the company's most advanced candidate is zanzalintinib, formerly known as XL092. In June, Exelixis started a phase 3 clinical trial for zanzalintinib in treating metastatic colorectal cancer.
And on Dec. 22, the biotech kicked off another late-stage clinical trial for this medicine as a potential therapy for metastatic RCC. Both of these trials with zanzalintinib have something in common: there is a dire need for treatment options.
Colorectal cancer is fairly treatable when caught relatively early. But once it has metastasized, the five-year survival rate drops substantially. The same goes for metastatic RCC. Also, colorectal cancer is the third-leading cause of cancer death in the U.S.
Exelixis is working on other programs, too. In November, it established a license agreement with Sairopa B.V., a Netherlands-based clinical-stage company, to develop ADU-1805, a promising potential cancer treatment that could improve patients' ability to fight tumors.
The company has entered into similar agreements with a couple of other biotech companies, and that's in addition to the in-house early-stage programs it is working on, including XL102, which recently showed encouraging results in a phase 1 clinical trials in patients with advanced solid tumors.
Exelixis is working overtime to find a successor to Cabometyx. And at the same time, it continues to generate solid financial results from its crown jewel. Although this year hasn't been great for the biotech, it has the tools to turn the tables and continue rewarding shareholders for years.
At a mere $15 per share -- which is close to its 52-week low -- this biotech stock looks like a solid buy.
