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Tuesday, Guggenheim maintained a Buy rating on Exelixis (NASDAQ:EXEL) shares and increased the price target to $42 from $33. The adjustment follows a detailed evaluation of the company's late-stage pipeline asset, zanzalintinib, and its potential impact on the company's valuation. This analysis comes after gaining clarity on the market exclusivity period for Exelixis's key drug, Cabometyx, which is expected to last until 2030.
The firm's analysts highlighted the potential for zanzalintinib, a multi-kinase inhibitor, to provide additional value beyond Cabometyx. They believe that the current valuation of Exelixis, in the low $30s, is supported by Cabometyx, but that zanzalintinib offers upside optionality which is not yet fully reflected in the stock price.
The report discusses the promising early clinical profile of zanzalintinib and Exelixis's strategy to develop it for solid tumor indications. However, the analysts also noted the importance of upcoming clinical trial results to further understand the drug's efficacy.
Specifically, the Phase III STELLAR-303 trial results, along with data from the STELLAR-001 study expected to be presented at the ASCO GI conference in January, are seen as key milestones that could influence the stock's direction.
Guggenheim's updated model for Exelixis now includes a 40-60% probability of success (PoS)-adjusted estimates for zanzalintinib. The analysts estimate that zanzalintinib could achieve approximately $3.2 billion in peak sales in the United States alone, based on its Phase III target indications.
They anticipate that the stock could see significant upside potential of over 30% with only a modest downside risk of 5-10% based on the forthcoming data updates over the next 12 months.
In conclusion, the firm's price target increase reflects their confidence in the potential commercial success of zanzalintinib and its ability to drive Exelixis's growth beyond the established product, Cabometyx. Guggenheim's analysts see a favorable setup for Exelixis stock, with the recent price target adjustment underscoring their positive outlook.
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