EP Vantage Analysis: Exelixis Needs to Get Products Off the Shelf
If Exelixis were running a dating agency it might have cause to feel a little anxious. Despite having what on the surface appear to be several attractive looking oncology candidates, the U.S. biotechnology group cannot seem to find a partner for any of them.
The lack of interest and cash from a deal has left the group with no option but to halt development of its second major candidate, XL647, until some kind suitor with deep pockets comes and whisks away one or more of its four phase II compounds. It has also contributed to the slide in the group’s shares that have fallen by 28 percent over the year to USD 6.24 due to lack of catalysts.
Slamming the brakes on XL647 is a reversal of strategy for the group, which promised to take the treatment for non-small cell lung cancer into phase III; but the harsh reality of funding large scale trials, for a hard-to-treat indication in which many compounds have failed to show efficacy, without the safety net of a partner was probably a big deciding factor.
Knight in shining armor
Exelixis is now under pressure for its existing collaboration partner, GlaxoSmithKline (Glaxo), if not to save it, to at least provide increasingly wary investors with some good news.
The two groups have a six-year alliance that gives Glaxo the rights to 10 of Exelixis’ 14 cancer treatments. So far the UK giant has only chosen to exercise the rights to one of them, the renal cancer treatment GSK089.
With the clock ticking to the end of the association on October 27, Exelixis is hoping that Glaxo might go for thyroid cancer treatment XL184. The UK group has been given data sets for the treatment and has to make up its mind by an October 22 deadline. If it does say yes, Exelixis will be entitled to a USD 55 million milestone payment.
But if Glaxo chooses to walk away with just GSK089, Exelixis will see not only its shares head further down, but the investor sentiment, that has until recently kept the shares reasonably stable, will start to evaporate.
Lack of execution
One of the problems with Exelixis is that while the group can almost effortlessly churn out compounds that have on occasion attracted the interest of other big pharma groups including Bristol-Myers Squibb and Genentech, what it is less successful at is commercializing any of those compounds.
Its shot-gun approach to drug development and poor track record on execution means, that despite a huge R&D spend, it has yet to have a drug make it into phase III and stay there.
These concerns about lack of accomplishment are exacerbated by the overly rich-looking valuation of the company. Exelixis, despite any obvious success, has a market capitalization of USD 659 million, but according to EvaluatePharma’s NPV Analyzer the group’s pipeline only has an ascribed valuation of USD 183 million, which is also on a best-case scenario.
This big disparity between the group’s market capitalization and the value of its products mean that if Exelixis does not manage to convince Glaxo to do the right thing by the October deadline, or secure a match for any of the other wallflowers in its pipeline, the inevitable share price fall will almost certainly break investors’ hearts.
This story is written, edited and published by EP Vantage and is distributed by EvaluatePharma Ltd. All queries regarding the content should be directed to: news@epvantage.com.
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