+ Watch EXEL
on My Watchlist
A development-stage biotechnology company dedicated to the discovery and development of novel small molecule therapeutics for the treatment of cancer and other serious diseases.
My experience with Exelixis tells me they have some tough times ahead before initial data from the COMET trials makes an appearance in 2014. The modest-appearing 4.5 share price conceals a market cap north of 800M, and the 675M in cash is counterbalanced by 335M in long-term debt. Meanwhile, they now have to market their first FDA approved drug, Cometriq, which will require an outlay of resources that may never be compensated by sales. Once the reality of this sinks in, I see Exelixis dropping back below 4 for the first time since September 2010.
This sounds reasonable. I did, however, park a very large sum of money on EXEL between end of August and now (average entry point ~ 4.40), so I'd love to hear any additional thoughts you may be willing to share. Back in September I thought that the structure of the warrants that EXEL sold this summer would limit long-time fluctuations of their stock price to the range of 4.25 to 5.31 for much of 2013 and then the option pricing in the fall suggested a target of around 6.2 post approval. I mentally thought that 4.0 would be the lowest possible price for EXEL after approval, but now you mention the possibility of dropping below 4. I like EXEL and their long-term goals, but I get concerned when I let emotions influence my trading (and in fact, I sometimes successfully short my emotions). I like the collaboration of Exelixis with Roche and I hope that vemurafenib becomes a better drug in the future. I like cabo's reductions in bone metastases and its sustained efficacy with lower, better tolerated doses. I especially love the flat pricing of Cometriq, which was determined by the needs of a rare disease but will be used when targeting additional indications with larger needs, so I am thinking of holding out with EXEL until 2015 and beyond. My strategy has a huge opportunity cost, however, so I'm open to reconsidering.
I can see how the pricing of warrants could limit the rise of a stock, but not how they could limit its decline. If you're thinking about 2015, you're a different kind of investor than I am. One year is my horizon, after that I consider the future hopelessly unpredictable. You should read Feuerstein's bear case for the COMET trials. Exelixis has always been a favorite son in the sector for reasons I do not understand, and has almost always been overvalued for its accomplishments and future prospects.Exelixis isn't a scam, and they're far from the worst biopharma stock out there. On the other hand, I don't think you'd have to look very hard to find better prospects. Sometimes when a stock isn't meeting your expectations, it's best to take a look at something new and see how it compares. Check out Incyte and Celldex for somewhat similar companies, or Theravance and Halozyme for something completely different.
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