Exelixis Downgraded to Market Perform Despite Price Target Increase to $40
On Thursday, Exelixis Inc. (NASDAQ: ) experienced a shift in stock rating as BMO Capital Markets adjusted its view from Outperform to Market Perform. The revision comes despite an increase in the price target for the company's shares to $40.00, reflecting a more cautious outlook on the biotechnology firm's growth prospects. According to InvestingPro data, the stock has shown remarkable strength with a 56% gain over the past six months, while maintaining a GREAT financial health score.
The analyst at BMO Capital Markets explained the decision to downgrade Exelixis, noting that the primary catalyst for the previous Outperform rating has been realized favorably.
The focus now turns to Exelixis's drug zanzalintinib, a multi-kinase inhibitor currently undergoing trials for colorectal cancer (CRC). While the probability of success for zanzalintinib in CRC has been increased to 50% from the prior 35%, the analyst views the outcome of the trial as uncertain, labeling it a "toss-up." The company's strong financial position, with a 96.25% gross profit margin and robust cash reserves exceeding debt, provides a solid foundation for its drug development initiatives.
The uncertainty is partly due to the historical performance of cabometyx, Exelixis's first-generation multi-kinase inhibitor, which, when combined with Tecentriq (atezolizumab), has a mixed track record in treating the same indication. This historical context has led to a more balanced perspective on the risk/reward profile for the drug's potential market performance in the coming year.
BMO Capital's new price target of $40.00 represents an upward revision based on the updated success probability of zanzalintinib in CRC. However, the firm maintains a neutral stance on the stock, suggesting that the potential gains from the drug's success are already reflected in the current valuation.
Exelixis investors and market watchers are now looking ahead to further developments regarding zanzalintinib's clinical trials, which will be a critical factor in the company's future trajectory and stock performance.
In other recent news, Exelixis Inc. has experienced notable developments. BofA Securities recently adjusted the rating for Exelixis from Buy to Neutral, despite raising the price target to $39.00 from $35.00, due to a balanced risk/reward scenario following the stock's significant surge. Exelixis has reported strong financial performance with a 9% increase in net product revenues, reaching $478 million, leading to a raised full-year revenue guidance for 2024.
The U.S. Food and Drug Administration (FDA) has scheduled an Oncologic Drugs Advisory Committee (ODAC) meeting for Exelixis's supplemental New Drug Application (sNDA) for CABOMETYX, with a decision expected by April 3, 2025. Meanwhile, Stephens reiterated an Equal Weight rating for Exelixis, maintaining a $29.00 price target, as the market awaits the outcome of the ODAC review.
Exelixis is also expanding its oncology portfolio, including a collaboration with Merck (NS: ) for zanzalintinib, and is shifting focus towards diversifying its portfolio.
BofA Securities anticipates a catalyst-light year for Exelixis in 2025 due to several reasons including the only phase 3 data catalyst for Zanza being in late-line colorectal cancer, which is factored into the current stock price.