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Exelixis (NASDAQ:EXEL) just hit a speed bump. Oppenheimer downgraded the stock from Outperform to Perform, dialing back its price target to $33. The reason? Fresh data from ASCO-GI failed to prove that its next-gen cancer drug, zanzalintinib, has a meaningful edge over its blockbuster cabozantinib. That's a red flag for investors banking on the company's pipeline to fuel future growth. But let's not get ahead of ourselvesExelixis still boasts a rock-solid balance sheet, a 96% gross margin, and a stock that's climbed 39% in 2024, outpacing the Nasdaq Biotechnology Index. With cabozantinib sales jumping 11% year-over-year and new label expansions on the horizon, there's plenty to keep bulls interested.
The big question: Can zanzalintinib deliver? Exelixis is going all in, running six pivotal trials across multiple cancers, with results expected in late 2025. Analysts see blockbuster potentialpossibly $5 billion in U.S. sales by 2033but recent setbacks, like the CONTACT-02 trial missing its survival target in metastatic prostate cancer, have some investors wary. Meanwhile, the company's patent fight over cabozantinib is heating up. A favorable court ruling in October could extend exclusivity to 2030, keeping generics at bay and securing a longer revenue runway. But if that ruling gets overturned? The clock on its flagship drug runs out a lot sooner, which would force Exelixis to scramble for new growth drivers.
Wall Street is split. JMP Securities is sticking with its $41 target, betting on long-term pipeline success, while Oppenheimer is playing it safe at $33. To boost investor confidence, Exelixis is rolling out a $500 million share buybackalways a bullish signal. The company is guiding for 2025 revenues between $1.95 billion and $2.05 billion, but whether that's enough to keep the rally going depends on two things: zanzalintinib proving itself in trials and cabozantinib holding onto its patent protection. Bottom line? The next 12 months are make-or-break for Exelixis.
This article first appeared on GuruFocus.