Stock Analysis & Valuation Exelixis, Inc. (0IJO.L)

• Previous Close: £41.50
• Sector Valuation Confidence Level: High

Valuation method	Value, £	Upside, %
Artificial intelligence (AI)	n/a	n/a
Intrinsic value (DCF)	18.38	-56
Graham-Dodd Method	12.60	-70
Graham Formula	35.20	-15

Strategic Investment Analysis

Company Overview

Exelixis, Inc. (LSE: 0IJO.L) is a leading oncology-focused biotechnology company headquartered in Alameda, California, specializing in the discovery, development, and commercialization of innovative cancer treatments. The company’s flagship products, CABOMETYX and COMETRIQ, are derived from cabozantinib, a multi-tyrosine kinase inhibitor targeting MET, AXL, RET, and VEGF receptors, used for advanced renal cell carcinoma and metastatic medullary thyroid cancer. Additionally, Exelixis markets COTELLIC, a MEK inhibitor for advanced melanoma, and MINNEBRO for hypertension in Japan. The company has a robust pipeline, including XL092 (a next-gen tyrosine kinase inhibitor), XB002 (an antibody-drug conjugate), and XL102 (a CDK7 inhibitor), positioning it strongly in the competitive oncology space. With strategic collaborations with major pharmaceutical players like Ipsen, Takeda, and Roche, Exelixis leverages partnerships to expand its global reach and therapeutic impact. As a key player in the $150B+ oncology market, Exelixis combines innovative R&D with commercialization expertise to address unmet medical needs in cancer treatment.

Investment Summary

Exelixis presents a compelling investment case with its strong oncology portfolio, led by CABOMETYX, which continues to drive revenue growth ($2.17B in FY2024). The company’s pipeline, including late-stage candidates like XL092, offers potential upside, while partnerships with Ipsen and Takeda provide geographic diversification. However, reliance on cabozantinib for ~90% of revenue poses concentration risk, and competition in renal cell carcinoma (RCC) from Merck’s Keytruda and Bristol-Myers Squibb’s Opdivo could pressure market share. Financially, Exelixis is profitable ($521M net income) with solid cash flow ($700M operating cash flow), but its zero dividend policy may deter income-focused investors. The stock’s low beta (0.25) suggests defensive characteristics, but pipeline setbacks or slower-than-expected adoption of new therapies could weigh on valuation.

Competitive Analysis

Exelixis competes in the high-stakes oncology market, where its primary advantage lies in its focused expertise in tyrosine kinase inhibitors (TKIs), particularly cabozantinib-based therapies. CABOMETYX’s approval in second-line RCC and hepatocellular carcinoma (HCC) gives it a niche, but it faces intense competition from immuno-oncology (IO) leaders like Merck (Keytruda) and BMS (Opdivo/Yervoy), which dominate first-line RCC. Exelixis mitigates this with combination trials (e.g., CABOMETYX + IO), though IO therapies’ superior efficacy in some settings remains a challenge. The company’s small-molecule focus contrasts with larger peers’ diversified platforms (e.g., Roche’s antibody-drug conjugates, AstraZeneca’s PARP inhibitors), but its lean operations enable efficient R&D spend. Partnerships (e.g., Ipsen for ex-U.S. commercialization) amplify reach without heavy infrastructure costs. Pipeline diversity is improving (XB002, XL102), but late-stage assets are still cabozantinib-centric, risking over-reliance on one mechanism. Pricing pressure in the U.S. and slower ex-U.S. uptake (per Ipsen’s execution) are additional headwinds. Exelixis’ competitive edge hinges on executing label expansions and demonstrating superiority in niche indications where TKIs outperform IO.

Major Competitors

• Merck & Co. (MRK): Merck’s Keytruda (pembrolizumab) dominates the IO space, with first-line approvals in RCC and HCC, directly competing with Exelixis’ CABOMETYX. Merck’s vast resources and global commercial footprint give it an edge in market access, but its reliance on Keytruda (~40% of revenue) mirrors Exelixis’ cabozantinib dependence. Merck’s broader pipeline (e.g., HPV vaccines, cardiometabolic drugs) diversifies risk.
• Bristol-Myers Squibb (BMY): BMS’s Opdivo (nivolumab) and Opdivo/Yervoy combo are key rivals in RCC and HCC. BMS’s strong IO portfolio and recent acquisitions (e.g., Celgene) provide depth, but integration challenges and patent cliffs loom. Exelixis’ smaller size allows agility in niche indications where BMS’s focus is diluted by larger therapeutic areas.
• Roche Holding AG (RHHBY): Roche’s Tecentriq (atezolizumab) competes in HCC and RCC, often combined with Avastin. Roche’s strength in biologics (e.g., antibody-drug conjugates like Polivy) contrasts with Exelixis’ small-molecule focus. Roche’s diagnostics division provides synergies, but Exelixis’ lower cost structure may benefit in price-sensitive markets.
• Pfizer Inc. (PFE): Pfizer’s Inlyta (axitinib) is a direct TKI competitor in RCC, though it lacks CABOMETYX’s broader indications. Pfizer’s scale and recent acquisitions (e.g., Seagen) bolster its oncology pipeline, but Exelixis’ pure-play focus may yield faster decision-making in niche oncology segments.
• Novartis AG (NVS): Novartis’ Votrient (pazopanib) competes in RCC, and its radioligand therapies (e.g., Pluvicto) represent a differentiated approach. Novartis’ global reach and diversified portfolio (e.g., CAR-T) are strengths, but Exelixis’ targeted R&D could outmaneuver in specific kinase-driven cancers.