Increasing No-Moat Exelixis' FVE to $25.50 Following Compelling Trial Data in Kidney Cancer

Exelixis is best known for its discovery of cabozantinib, a tyrosine kinase inhibitor (TKI) that was first approved in 2012 for medullary thyroid cancer (MTC). The small molecule was later approved in renal cell carcinoma (RCC), as well as hepatocellular carcinoma (HCC). The cabo opportunity has room to grow further, with late-stage trials in differentiated thyroid cancer (DTC) and in immuno-oncology combinations in prostate cancer and lung cancer. Although we anticipate robust returns from cabozantinib, we believe the long-term outlook is uncertain given the company's pipeline outside of cabo, which is early-stage and relatively sparse. This is exacerbated by cabozantinib's eventual patent expiration; we believe generics could enter as early as 2026 (when the composition of matter patent expires) or later, depending on whether secondary patents are upheld in court and where label expansions go.