Cancer-Fighting Science

If you can tolerate risk and volatility and you’d like to invest in a biotechnology company, consider cancer drug developer Exelixis (Nasdaq: EXEL). Following a two-year stretch in which Exelixis’ share price rose roughly nine-fold, shares have recently lost more than a third of their value, presenting an opportunity.

What’s going on? Well, the Food and Drug Administration (FDA) approved Bristol-Myers Squibb’s combination therapy of Opdivo and Yervoy for first-line renal cell carcinoma, which competes with Exelixis’ lead drug, Cabometyx. In addition, the combination of Roche’s Tecentriq and Exelixis’ Cotellic in a phase-3 trial for patients with advanced colorectal cancer failed. While these are disappointing outcomes for Exelixis, there’s more to consider.

For example, Cabometyx seems on track to possibly be approved to treat hepatocellular carcinoma following a successful phase-3 trial. With strong pricing power, peak sales for Cabometyx may top $1 billion a year by 2021. The company is bolstering its pipeline via licensing and acquisitions, too.

According to Wall Street’s consensus estimate for 2021, Exelixis is on pace to nearly triple the sales it generated in 2017 — yet it has recently been trading with a price-toearnings (P/E) ratio only in the 20s. Biotech stocks can be volatile, and they rely on gaining FDA approvals. This one is worth considering. (The Motley Fool owns shares of and has recommended Exelixis.)