I wrote about Louis Navellier’s “solar monopoly” pitch a little while ago, but there was a also a cancer-fighting stock teased in that ad… and a few folks have been asking about that second stock, so I’ll see what we can do to get the Thinkolator on the case.
Here’s a bit of the ad:
“… an up-and-coming biotech company on the verge of capitalizing on a major cancer breakthrough.
“What sets its drug apart from other treatments is that it stops cancer from spreading by inhibiting the growth of new blood vessels.”
OK, I’m no great source of wisdom on the science behind biotech stocks, to be sure, but even I know that’s a big part of the mechanism for lots of successful cancer drugs — Avastin, for example, was the first angiogenesis inhibitor (angiogenesis is the formation of new blood vessels) to get approval, back in 2004, and has been a wildly successful blockbuster drug for Genentech/Roche, and there have been many other successful drugs that aim to do the same thing in different ways or through different pathways.
So which one is this? More clues:
“Recently, a pivotal phase 3 trial led to one of its specialized treatments for renal cancer to receive a second FDA approval.
“The company is currently exploring this drug’s potential for treating other cancers through a clinical development program that includes 45 planned or ongoing trials.
“Should the company receive approval for its first-line cancer treatment, we expect to see the company’s stock price continue to soar far beyond its two-year gains of 331%.”
And one more tidbit:
“Seven top analysts agree, not only raising the company’s earnings expectations over the past 30 days but forecasting 196% earnings growth for this year and 137% earnings growth for next year.”
So who is this? Thinkolator sez our best match is Exelixis (EXEL), which is mostly focused on building the market for its Cabometyx in additional cancer treatments. Cabometyx did get approval from the FDA in December for an additional indication in renal cell carcinoma, though we have to step back and not promise to be 100% certain of this one, because it got that approval based on a Phase 2 trial, and that is now a first-line treatment for this particular cancer.
Cabometyx is being studies in a bunch of different cancers, often in combination with major drugs (like Yervoy or Opdivo), and analysts do see substantial growth and have been raising their estimates over the past month or two, as makes sense for a company that’s getting new approvals — the current estimates I see are for 70 cents in earnings this year and $1.27 next year (though GAAP earnings are higher than that), so it’s not currently an exact match for the percentages Navellier claims… but it’s in the neighborhood, and those numbers change frequently. EXEL will report its full year 2017 results two weeks from tomorrow. You can see Navellier’s Portfolio Grader stock report for EXEL here, and you can see a free article he posted about the company a couple months ago here.
Because most of the heavy lifting on clinical trials and marketing is handled by Exelixis’ partners, their profit margins are very high and a lot of the revenue comes in the form of milestone payments and licensing fees or royalties — which means that the stock has the potential to be even more levered to clinical success/failure than your average revenue-producing mid-size biotech stock, particularly because the overwhelming amount of their revenue is from a single compound.
If you think there’s a substantial chance of Cabometyx being approved in multiple cancers as a result of the very active clinical trial slate currently underway, then there’s certainly the potential for dramatically higher revenue a few years out… but I don’t know what the odds of success are for this one, so I’ll let those of you who enjoy researching biotech stocks dig in and see if you find anything exciting in EXEL’s future. I did own this stock for a while a decade or so ago, back when it was stuck in the doldrums, but have not looked into it in great detail since 2009 or so.
So… whaddya think? Excitement for an excelsior Exelixis? Exasperation at the extreme effervescence of the promises from Mr. Navellier? Exhausted by biotech in general? Let us know with a comment below.
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