Finding great biotech stocks to invest in at a price point of $50 per share (or less) isn't easy. There are plenty of companies in the industry trading for far less money than that, but they tend to be extremely risky clinical-stage biotechs that may no longer exist in five years. On the other hand, the leaders in the sector are often attractive options, but their shares are much more expensive.
Fortunately, there are at least a few biotechs that sit somewhere in the middle. One of them is Exelixis (EXEL 1.30%), a drugmaker whose shares are currently trading hands for just under $39 apiece. This company looks like a buy right now. Here's why.
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Leading a small corner of a vast market
Exelixis' market cap is $10.4 billion as of this writing; it's a relatively small player compared to the biggest names in the biotech industry. However, it has carved out a niche in the ruthlessly competitive market for cancer drugs. Oncology is consistently one of the largest therapeutic areas in terms of sales, but also by investments in research and development (R&D). Some leading drugmakers have therapies in the field that generate over $5 billion in revenue. Exelixis' best-selling drug, Cabometyx, isn't at that level, but it's successful nonetheless.
The medicine is a tyrosine kinase inhibitor (TKI), a kind of targeted therapy that helps slow down (or stop) the growth of cancer cells. Cabometyx is approved for renal cell carcinoma (RCC), the most common type of kidney cancer. In the U.S., Cabometyx is the top-prescribed TKI in RCC, and it has been for quite some time. So, unlike smaller drugmakers, Exelixis has an approved therapy on the market that has earned many indications across RCC and several other forms of cancer, and that consistently generates growing sales.
Exelixis is also profitable, unlike the overwhelming majority of clinical-stage biotechs. In the second quarter, its revenue declined by 10.8% year over year to $568.3 million. There is an explanation for the drop. In the second quarter of 2024, Exelixis recorded a rare, $150 million milestone payment. Exelixis' earnings per share also moved in the wrong direction in the period for the same reason, but that's nothing to be worried about.
That aside, Cabometyx's sales are still moving in the right direction, as evidenced by Exelixis' net product revenue of $520 million, 18.8% higher than the year-ago quarter.
What the future holds
Cabometyx should continue driving strong top-line growth for Exelixis. The biotech was able to fend off generic threats for the medicine until early 2030, thanks to a major legal win. And with some ongoing clinical trials that could lead to more label expansions, the therapy is still on a roll.
However, Exelixis knows it will have to move past its crown jewel eventually. The drugmaker has been looking to develop newer cancer medicines.
Its most advanced candidate is called zanzalintinib, an investigational treatment for metastatic colorectal cancer (CRC). In June, Exelixis reported that in a phase 3 study, zanzalintinib in combination with Roche Holding's Tecentriq improved overall survival in patients with metastatic CRC, compared to Bayer's Stivarga (tested alone). There is an unmet need in this field since five-year survival rates for metastatic CRC are pretty low, and it's the second-leading cause of cancer death in the world.
Zanzalintinib is being investigated across several other cancers, though, and Exelixis has other candidates in development. Over the next few years, the company could launch zanzalintinib, advance earlier-stage programs to late-stage studies, and progress with its post-Cabometyx plans.
So the future remains bright for the biotech. It's far less risky than its smaller peers, because it generates steady revenue and profits from a well-established franchise in Cabometyx -- which has proven to be a pipeline in a drug -- and also has promising candidates that could eventually carry the torch. For all those reasons, Exelixis is one of the best biotech stocks to buy for $50 or less.
