There are plenty of successful biotech companies out there that have managed to avoid attracting too much mainstream attention. Many of these same companies, despite their obscurity, have the potential to become big winners in the long-term. Exelixis (EXEL -0.65%) might not be a name you've heard before, but it's definitely one you should keep on your radar.
This $6.7 billion market cap biotech company is up a solid 22.5% so far this year despite the uncertainty surrounding the coronavirus pandemic. Does this mean that you should add this stock to your portfolio ? Let's find out what this company has in store for the future.
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Approved therapies
Exelixis has forged a reputation for developing drugs to combat cancers considered more difficult to treat. This includes two flagship drugs that have managed to receive U.S. Food and Drug Administration (FDA) approval.
The first is Cabometyx, which was approved last year to treat the most common form of liver cancer, hepatocellular carcinoma (HCC). Cabometyx was also approved as a therapy for advanced kidney cancer in 2016. Exelixis' second treatment, Cometriq, targets medullary (inner) thyroid cancer, and received FDA approval in 2012.
These two drugs represent the majority of Exelixis' current revenue, with Cabometyx sales being the primary sales driver for the company. This isn't surprising , since Cabometyx has proven superior to other equivalent cancer drugs developed by much larger competitors. Back in 2019, Cabometyx demonstrated longer progression-free survival rates in advanced hepatocellular carcinoma patients compared to Strivarga, another cancer drug developed by Bayer.
Upcoming treatments
Exelixis has a relatively small pipeline, with only a handful of candidates in development right now. The most prominent of which is cobimetinib, which is currently being developed in partnership with Genentech, a Roche subsidiary. The drug aims to treat patients with metastatic melanomas -- a type of skin cancer that has spread to other areas of the body -- that are positive for a BRAF mutation. Around 80% of all melanomas are BRAF-positive, while other types of cancers don't see this mutation nearly as often.
The market for melanoma treatments has seen significant growth over the past few years. The global melanoma treatment market was valued at around $4.2 billion in 2016and is expected to grow to $12.4 billion by 2025.
While this is a big opportunity, there's also plenty of competition in this area . There are 30 cancer drugs approved to treat melanoma by the FDA as of June 2020. The list includes some of the biggest cancer drugs available, like Merck's Keytruda, as well as Bristol-Myer Squibb's Opdivo and Yervoy.
Exelixis certainly faces stiff competition, but cobimetinib only needs to snag a small portion of this market for it to be a financial success.
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Profitability is king
While many biotech companies fail to make the transition to profitability, Exelixis has managed to accomplish this smoothly. The company reported a total net income of $66.8 million for its second quarter based on total revenue of $259.5 million. These figures are relatively unchanged from last year, with the company's profit figure a bit lower while its revenue is slightly higher.
In addition to being profitable, Exelixis is very well funded. The company had $1.5 billion in cash and similar investments as of June 30. Considering Exelixis' $6.7 billion market cap, few companies of this size are going to have as much cash as this.
Given everything that's happened this year, it's reassuring for investors to know that Exelixis is a veritable financial fortress. Unlike some other biotech stocks on the market, Exelixis is a company that investors don't need to worry about running out of money anytime soon.
Is Exelixis a buy?
Exelixis is a pretty interesting company for what it offers. Despite its small portfolio, the company has found success with its existing treatments. In addition to being profitable, something that many biotech stocks are struggling to achieve during this coronavirus pandemic , Exelixis is flush with cash.
At the same time, the company definitely has major growth prospects with its upcoming metastatic melanoma drug. While maybe not as fast-growing as some of the other hot stocks on the market right now, Exelixis is a sound, safe, and profitable investment that's well-positioned to grow in the long-term .
