Biotechnology stocks are highly sensitive with any sort of setback in operations causing a stock crash. However, sometimes this stock can soar with market perception as well. This volatility in biotech stocks can make it a riskier yet a more valuable stock to purchase. However, it may be tricky as to which stock to choose and carry forward with.
Exelixis (NASDAQ:EXEL) is one biotech stock that has dropped about 75% this year. The stock is heavily in line with the failure of COMET-1; its late stage trial. This drug measures the cabozantinib in men with cancer known as metastatic castration-resistant prostate.
It has been estimated that full year sales may be around $25 million with the performance of the drug in Q1 of the current year. The problem comes in with the shortfall of annual sales of $56 million in 2017. This is while considering the indication of Cometriq.
While taking into account cobimetinib, for melanoma, its late-stage results looked good but it may not be too feisty in commercial potential. With the drug sharing revenue with co-developer Roche (VTX: ROG) and considering the drugs for melanoma already on the market, the company won’t gain more than about $50 million for the year.
The company may only generate about $100 million revenue for 3-4 years which isn’t really valuable. Although the company tried to increase its value, it was bound to fail with the COMET-1.
Exelixis (NASDAQ:EXEL) shares should be bought for its liver or kidney cancer trials as well as the Celestial and Meteor trials. However the debate still goes on as to whether the failure in prostate cancer can work on the liver and kidneys. It has done well with the thyroid but approvals for the other two still remain.
The data for the prostate cancer as well as the thyroid cancer was good enough to show the activeness of Cometriq. However, if it is approved for liver or kidney cancer then there is a good chance that the company will be worth $2 billion with sales of $400 million and price-to-sales ratio at 5.
This will be 6 times more than Exelixis’ (NASDAQ:EXEL) current value. With the increase in the share count, there may be potential for the share to triple with them already going double if the approval is granted. Exelixis (NASDAQ:EXEL) is definitely the company for you to invest in if you want to wait for the shares to triple with the trials of CELESTIAL and METEOR gaining a success rate of 33%.
Cobimentinib should not be forgotten as the valuation decreases, then co-developer Roche (VTX: ROG) may buy out the company in order for it to refrain from sharing U.S. sales. However, results for METEOR won’t be public till 2015 but for those who want to wait then the biotech company looks like a good enough investment for the future. Even at this level, the company is likely to shoot up to a better position soon enough.