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Topline Summary and Update
Exelixis, Inc. (NASDAQ:EXEL) is a stock I've followed for years with substantial interest, given that they've shown what a company with one blockbuster drug can accomplish. In my analysis of this ticker from back in March, I reflected on optimism for their foray into neuroendocrine tumors, but ultimately came away with an overall risk-averse, cautious tone, even going so far as to give it a "Sell" rating. This was based on the fact that they were trying to move the needle in refractory mCRC with a new drug, two things that carry massive risk, and I saw too much downside for the near term.
This has proven to be poorly placed caution, as the company's stock has continued to appreciate since March, and now we have big news justifying that ongoing appreciation. Let's dive in further.
Pipeline Updates
Cabozantinib
As always, the main drug for EXEL is cabozantinib, a multi-targeted tyrosine kinase inhibitor that is approved in a range of malignancies, including liver cancer, kidney cancer, thyroid cancer, and most recently neuroendocrine carcinoma. While this agent has formed the bedrock of EXEL's investment thesis for going on a decade, it has been a bumpy road, with numerous trial failures giving false starts to new hopes in quite a few indications.
Most recently, the combination of cabozantinib and immunotherapy failed to move the needle in metastatic prostate cancer and first-line kidney cancer, coming as a pretty big blow. This bad news was tempered by the positive readout of the CABINET trial and subsequent approval in NETs, which I covered in the last article.
Since that coverage in March, we have not received any further clinical updates related to cabozantinib development, other than approval in the EU.
Zanzalintinib
Attention has mostly turned to the prospects of a would-be heir to cabozantinib: the multikinase inhibitor zanzalintinib. I covered the rationale for using this agent in my last article, but there have been some updates for this agent.
First, EXEL presented findings from a phase 1/2 study at ASCO 2025, showing that adding zanzalintinib to nivolumab (with or without the LAG3 inhibitor relatlimab) treatment yielded encouraging activity in patients with advanced clear-cell kidney cancer. The response rates for the zanzalintinib plus nivolumab or plus nivolumab-relatlimab were 63% and 40%, respectively. Hypertension and diarrhea were among the most frequent grade 3/4 adverse events, but these findings do paint an encouraging early picture of this combination approach to kidney cancer.
However, the big coup came a bit later. In late June, EXEL announced that the phase 3 STELLAR-303 trial met its primary endpoint, with the combination of zanzalintinib and atezolizumab beating regorafenib (one of a few standard of care options) in patients with refractory metastatic colorectal cancer (mCRC). Notably, these patients had no evidence of high microsatellite instability (MSI-H).
We do not yet know the actual results, but I expect they will be presented later this year, most likely at the ESMO Congress in mid-October. The other primary endpoint in STELLAR-303 is overall survival as well, but only in the patients with no active liver metastases at baseline. Patients with liver metastases seem to have less activity using immunotherapy in patients with metastatic CRC, so this readout will be of high interest, as well.
Overall, a positive readout of STELLAR-303 marks several keys "firsts" for the field of mCRC:
- Zanzalintinib's first positive phase 3 trial
- For the first time, an immunotherapy-based regimen has been shown to be effective in patients with refractory mCRC
- For the first time, an immunotherapy-based regimen has been shown to improve survival in patients with non-MSI-high disease
Seeing the full readout is going to be critical, but this has real potential to move the needle in a very, very challenging space.
Financial Overview
As of their latest quarterly filing, EXEL held over $1 billion in liquid assets, as well as $619 million in non-current securities. Net product revenue was $513.3 million, up from $378.5 million the same quarter in 2024. Operating expenses were $368.6 million, and after interest and taxes, EXEL's net income for the quarter was $159.6 million, more than triple the net income of Q1 2024. Positive cash flow for the quarter was $211.4 million.
These improvements year over year are consistent with management guidance increasing revenue projection by $100 million for FY 2025. They have already completed a share buyback using some of the liquidity they have.
Strengths and Risks, Revisited
Strength - Cabozantinib sales growth
EXEL is continuing to execute with precision on growing the cabozantinib franchise, with increasing demand and rather encouraging year-over-year improvements. The increased revenue guidance further cements this ongoing strength for the company.
Strength - Careful curation of an heir apparent to cabozantinib
The company has also proceeded deliberately in developing agents outside of cabozantinib, and they've finally found what appears to be a success. This remains a strength, as well, since there are other preclinical agents that are being brought up in the pipeline.
Risk - Early zanzalintinib data are not derisked with certainty
This was true, but now we can be much more certain that zanzalintinib is going to be some kind of success, thanks to the positive phase 3 trial readout. To be clear, we still face the risk that the combination will be very toxic and unmanageable. We also face the risk that the overall survival findings do not really prove "clinically significant," no matter what the statistics say.
There will also be questions about the use of regorafenib as the control for STELLAR-303, instead of physician's choice. This is important because another standard of care option, the SUNLIGHT regimen, showed superiority to single-agent TAS-102 (another standard-of-care option) a few years ago. So it remains to be seen whether STELLAR-303 will simply join the mix of a growing cadre of options in refractory mCRC, or if it will become the standard of care itself.
Risk - Patent expiration is only delayed, and EXEL does not yet have the heir
Zanzalintinib appears to be a success, which raises my excitement for the agent almost as much as the first time I saw the cabozantinib readouts for kidney cancer, circa 2015. It will very likely be the heir, and this is much less a risk now.
Bottom-Line Summary
I went into writing this article already knowing I would be upgrading my sentiment to a "Hold," at least correcting what has clearly proven to be a mistake (as the commenters in my previous article would no doubt agree!). I felt that the EXEL investment thesis was too reliant on big unknowns to continue justifying their valuation.
That was before enhanced sales guidance for cabozantinib. That was before STELLAR-303. We now know that EXEL is poised to mark critical firsts for refractory mCRC. The only question that remains is how deep the impact of this phase 3 trial is going to be. That will take a few more months, but it's incredibly exciting.
More importantly, it opens a big, wide door to expand their sales substantially. Regorafenib sales, for example, are over $100 million per quarter around the world, based largely on refractory CRC (it is also approved in liver cancer and GIST).
In short, so many aspects of the EXEL investment thesis have been de-risked, that I now feel the upside potential is real. While there is a lot to continue to execute on, EXEL looks to me to be very much worthy of consideration, hence the upgrade all the way to a "Buy" sentiment at these levels.
