Wells Fargo Expects Upcoming Cancer Treatment Data To Boost This Under-The-Radar Biotech Stock By 40%

Wells Fargo says Exelixis shares should be bought ahead of readouts on the biotech's cancer treatment.

‍

As part of his coverage of Exelixis, analyst Derek Archila gave the biotech company an overweight rating, citing the company's consistent revenue growth and the recent clarification regarding its cancer drug called cabozantinib, which will provide upside potential for the stock.

‍

"We believe that cabo's near-term growth prospects are favorable and that the upcoming clarity on its [loss of exclusivity] should serve as a catalyst for the shares to appreciate. In addition, EXEL's significant cash pile and collection of pipeline assets should, in our opinion, be a source of future value,” according to Archila, who wrote in a note posted on Thursday.

‍

There is a consensus expectation that cabozantinib will grow at 17% year-over-year in the next few years, according to the analyst, which makes the firm's 2023 guidance achievable. A further boost to this growth could be provided by readouts in the second half of 2023, which might mean a rise in estimates in the short run.

‍

“In terms of the upcoming data for cabo+atezo in the field of pre-chemo [metastatic castration-resistant prostate cancer], doctors are optimistic ... Because the trial has a control arm, our doctors expect the results to be positive,” Archila wrote.

‍

"The major question, however, is whether or not Cabo will be able to get approved on PFS or if OS will be required. This could be a $400 million opportunity for Cabo, which is a conservative estimate compared to what our documents indicate for this opportunity,” he added.

‍

Earlier this month, the company reported disappointing results from the study that evaluated cabozantinib and atezolizumab in some patients with renal cell carcinoma.

‍

The shares of Exelixis have gained 2% this year after falling by 12% in 2022. The analyst's $23 price target implies a 40% increase in the stock's price from the closing price of $16.36 on Wednesday.

‍

Stocks rose more than 3% in premarket trading on Thursday.