Exelixis Faces Upcoming Patent Losses and First-Line Trial Setback; FVE of $18.90, Shares Overvalued

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). This small molecule was later approved in renal cell carcinoma (RCC), as well as hepatocellular carcinoma (HCC). The cabozantinib opportunity has room to grow further with several late-stage trials evaluating combination therapies. Although cabozantinib has generated strong returns, we believe the long-term outlook has a high degree of uncertainty given the company's relatively early-stage pipeline outside of cabozantinib. This is exacerbated by cabozantinib's eventual patent expiration. We believe generics could impact Exelixis' sales as early as 2027 after cabozantinib's composition of matter patent expires in 2026. The severity of the patent loss would depend on whether secondary patents are upheld in court and whether label expansions are approved.