Exelixis is a biotechnology company within the healthcare sector based out of California, USA. They have been primarily focused on developing small molecule therapeutics for cancer treatment and other serious diseases. Since their flagship product Cabometyx has become the first line of treatment for the most common form of kidney cancer, sales have accelerated, driving revenue growth.
Strong Historical Performance
In the most recent quarter, their financial reports exhibited a 136.3% increase in revenue and a 58% increase in net earnings in comparison to their last fiscal year end. When looking at the company management, they have excelled, as the company had a ROA of 27.95% and a ROE of 63.82%, and produced a 55.40% ROI in the past year. On the balance sheet, Exelixis has a cash balance of $634.62M and has increased their total assets by $113,208,000 while their long-term obligations have decreased by $18,752,000.
Additionally they have a strong capacity to finance expansion with a debt to equity ratio of 1.64 and are very liquid with an 8.66 current ratio and 8.50 quick ratio, making them a stable company, built to continue operations and generate long-term growth. The stock is on an overarching uptrend, demonstrated by a SMA50 of 14.22% and an SMA200 of 6.32%, showing strong potential for the stock price to rise in the upcoming months. Current estimations from analysts reflect bullish opinions for the future of Exelixis. Their EPS in the next quarter is predicted to rise by 50% and increase 46.0% over the next five years, and sales are projected to reach $2 billion in a few short years. Consensus estimates have moved sharply higher as analysts have stated they are capable of a compound annual growth rate of 30% through 2021.
The stock is on an overarching uptrend, demonstrated by a SMA50 of 14.22% and an SMA200 of 6.32%, showing strong potential for the stock price to rise in the upcoming months. Current estimations from analysts reflect bullish opinions for the future of Exelixis. Their EPS in the next quarter is predicted to rise by 50% and increase 46.0% over the next five years, and sales are projected to reach $2 billion in a few short years. Consensus estimates have moved sharply higher as analysts have stated they are capable of a compound annual growth rate of 30% through 2021.I
Exelixis is within a promising industry, in biotechnology, as there is an increasing demand for cancer treatments and accelerating technology will enhance their innovative product line. Overall, the global market for biotechnology shows promise, as it is estimated to reach $22.6 billion by 2022, with a CAGR of 18.0%. Recently in the US economy, many major industries have faced serious declines in share price, but Exelixis has continued to grow despite market conditions.
Promising Drug Pipeline
On January 14, 2019, the FDA is likely to approve the use of Exelixis’ Cabometyx on patients with liver cancer (as it has already been approved by the EC for use in the entire European Union). This would reduce competitive pressures from companies with kidney treatments (but they will be able to maintain their current market share), diversify their products and give Exelixis access to the huge market for liver cancer. In this case, the share price is likely to increase drastically, magnified by investor attraction towards healthcare stocks in uncertain economic climates. In 2019, they are continuing pivotal studies on immunotherapies and thyroid cancer and will have large announcements on new breakthroughs, generating excitement for investors and a projected $1 billion in sales in 2019.
Margin of Safety
Exelixis operates within the healthcare sector, which has historically been recession resilient, as healthcare stocks continue to do well in these times because companies within it provide necessity goods that do not experience large fluctuations in demand. This means that if American and global economies continue to struggle and remain volatile, Exelixis’ stock will still be able to make gains in a bear market, and gains would be boosted further by a bull market and new developments within their sector.
In 2018, their shares are down 30%, caused by increasing competition from Bristol-Myers cancer drug combination Opdivo+Yervoy for kidney cancer. This is not a large concern for investors, as when analyzing sales growth, Cabometyx has remained competitive with other leading drugs, and product diversification and company expansion will reduce pressure to excel in kidney cancer and drive margins through revenue streams from other treatments.
Ultimately, Exelixis is a company built to succeed and are currently trading below their true value on the stock market. They will be a strong company to invest in for the upcoming year of 2019 and are probable to demonstrate growth and provide investors with solid returns even in a shaky economic climate.
Since the writing of this report on January 3rd Exelixis has appreciated 22%
We anticipate further appreciation