Exelixis, Inc. (EXEL) is quickly establishing itself as a major force in the rapidly evolving cancer treatment landscape. Reporting exceptional results for its fiscal third quarter, the company has not only exceeded analyst expectations but is also driving forward with a strong portfolio of innovative therapies.

At the heart of EXEL's success is its impressive pipeline of emerging cancer therapies. The company’s flagship product, CABOMETYX®, continues to make waves alongside promising treatments like Zanzalintinib, XB010, and XL495. With many of these therapies still in trial phases or awaiting FDA approvals, EXEL is relentlessly working to create better treatment options.

EXEL’s achievements are clearly reflected in its stock performance, which has been nothing short of remarkable. In the last three months, the stock surged 31.3%, while over the past year, it rose by an impressive 54.1%, closing the last trading session at $36.07.

So, let us dive into the factors that could shape EXEL’s performance in the near future.

Recent Developments

On October 14, EXEL announced a collaboration with Merck & Co., Inc. (MRK) to evaluate the combination of EXEL’s zanzalintinib with MRK’s KEYTRUDA® for the treatment of patients with head and neck squamous cell carcinoma and with renal cell carcinoma. The collaboration has the potential to elevate EXEL’s already impressive cancer treatment pipeline.

Earlier this year, on August 6, EXEL caught the attention of the medical community with the FDA’s acceptance of cabozantinib for the treatment of adults with pancreatic neuroendocrine tumors and extra-pancreatic neuroendocrine tumors.

The acceptance gives the company a powerful tool in the fight against neuroendocrine tumors, one of the more complex and challenging cancer types. This step also strengthens EXEL’s position in the oncology market, with more treatment options to offer.

Sound Historical Growth

Over the past three years, EXEL has demonstrated consistent growth across key financial metrics. Its revenue grew at a CAGR of 18.4%, while EBITDA rose faster at 45%. Operational income (EBIT) and total assets expanded at CAGRs of 46.3% and 6.5%, respectively.

Moreover, net income surged at a CAGR of 41.7%, and EPS climbed even higher at 44.8%, showcasing robust profitability.

Strong Financials

For the fiscal 2024 third quarter that ended September 30, EXEL’s total revenues increased 14.3% year-over-year to $539.54 million. Its income from operations came in at $136.08 million, compared to a loss from operations of $17.58 million in the previous year’s quarter.

Additionally, non-GAAP net income and non-GAAP net income per share rose 322.6% and 370% from the prior year’s quarter to $135.66 million and $0.47, respectively.

Favorable Analyst Estimates

Analysts predict EXEL’s revenue and EPS for the fiscal fourth quarter ending December 2024 to increase 17.1% and 42.4% year-over-year to $561.61 million and $0.38, respectively. In addition, the company exceeded the consensus revenue and EPS estimates in three of the four trailing quarters.

For the full fiscal year 2024, ending December 2024, EXEL’s revenue and EPS are expected to rise 18.1% and 162.6% from the previous year, reaching $2.16 billion and $1.71, respectively.

Discounted Valuation

EXEL is currently trading at a forward P/E of 21.13x, which is 28% lower than the industry average of 29.33x. Moreover, the stock’s forward EV/EBIT multiple stands at 15.89, 4% lower than the industry average of 16.55x. This indicates that EXEL is undervalued compared to the broader market, offering potential upside for investors.

Robust Profitability

EXEL’s trailing-12-month gross profit margin of 96.25% is 65% higher than the industry average of 58.35%. Its trailing-12-month EBITDA margin stands at 30.55%, 415.7% higher than the industry average of 5.92%.

Additionally, EXEL’s trailing-12-month levered FCF margin of 20.72% outperforms the industry average of 2% by 933.5%. Moreover, the company boasts a trailing-12-month asset turnover ratio of 0.70x, which is 69.6% above the sector average of 0.41x.

POWR Ratings Reflects Optimism

EXEL’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

EXEL earns an A grade for Value, driven by its discounted valuation metrics relative to the industry average. It also holds an A for Quality, supported by profitability measures that exceed industry benchmarks. Additionally, EXEL holds a B grade for Sentiment, reflecting the positive outlook from analyst estimates.

Within the Biotech industry, the stock is ranked #5 out of 334 stocks. Beyond what is stated above, we have also given EXEL grades for Momentum, Growth, and Stability. Get all EXEL ratings here.

Bottom Line

EXEL is on the verge of significant success as more and more of the drugs in its pipeline are gaining approval from the FDA and other global regulatory bodies. In addition to its promising pipeline, the company boasts a strong portfolio of cancer therapies that are already making a mark in the market.

With these treatments gaining traction, the company is exceptionally well-positioned to benefit from the rapid growth of emerging cancer therapies. What sets EXEL apart is its combination of high profitability, strong financials, and a valuation that is currently lower than the industry average.

This unique positioning has garnered attention from analysts, who see great potential for the company in the coming years. Thus, now might be the ideal time to consider adding EXEL to an investment portfolio.

How Does Exelixis, Inc. (EXEL) Stack Up Against Its Peers?

Although EXEL’s near-term outlook appears sound, it may be worthwhile to explore its industry peers, who also exhibit strong POWR Ratings. So, consider these A (Strong Buy) stocks from the Biotech industry:

Gilead Sciences, Inc. (GILD)

Genmab A/S (GMAB)

Jazz Pharmaceuticals plc (JAZZ)

To explore more A or B-rated Biotech stocks, click here.

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EXEL shares were unchanged in premarket trading Tuesday. Year-to-date, EXEL has gained 50.35%, versus a 28.87% rise in the benchmark S&P 500 index during the same period.

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.

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