Buy note -- EXEL
I took advantage of the broad downturn today to pick up some more shares in one of my favorite small biotechs, Exelixis (Nasdaq: EXEL). I wrote yesterday about how much I like the company, and particularly what I find impressive about their use of SPEs to help finance their clinical trials, so I won't go into much more detail here.
Though I haven't acted on it yet, I've also been very tempted by Amgen (AMGN) lately -- AMGN and Genentech (DNA) really seem to be this generation's Pfizer and Merck, and AMGN appears remarkably low priced given their solid pipeline and very strong earnings. I don't generally spend a lot of time looking at larger companies like these, but AMGN at a forward PE of less than 17 seems absurd. I'll be watching closely to see what happens around their earnings next week.
For the record, I bought additional shares this afternoon of EXEL at $10.75, which is about 15% down from the peak EXEL hit a couple weeks ago in the mid-12s. I don't see any reason for the decline, other than perhaps some profit taking after a nice year, and given EXEL's potential with such a broad and deep pipeline and array of partnership agreements I really like the risk/reward ratio here.
I've written a bunch about EXEL and their lead compounds in the past -- they've got two Phase II drugs and two just about to enter Phase II, all of which look pretty compelling, to go with several Phase I compounds and one nearing approval in Phase III. In total, they now have an active pipeline of eight drugs going through the clinic, and a commitment to keep moving about three drugs per year into the clinic from their deep bench of preclinical compounds. That provides a much greater opportunity for success compared to many companies, even if you don't look at EXEL's great reputation and strong partners and just assume that the overall odds apply, which would put the chances of any one drug that enters the clinic being approved at a bit less than 10% (the odds go up dramatically with each phase, so once you've got a Phase III drug it has odds of about 75%, by my understanding).
If you'd like to see a lot more detail about the specifics of the drug programs and financials, you can also access the recent buy recommendation and full analysis from WR Hambrecht here (PDF file).
Suffice to say, having a deep pipeline of drugs is great for companies that have to live with such an uncertain approval process, and I'd be surprised if at least a couple of EXEL's lead compounds didn't gain approval.
Though of course, I could be wrong -- and it will be years before most of them are actually ready for the marketplace, so patience is definitely called for. With so many compounds in active trials, we should receive fairly regular updates over the coming year on preliminary results and final results of any of these trials, which could easily move the stock dramatically if they are strongly positive or negative. I'm particularly interested in seeing preliminary Phase II results from XL999 (various cancers) and XL784 (diabetic kidney disease), both of which began Phase II trials within the last few months, and in news on XL647 and XL880, both of which target tumors, which should finish up Phase I shortly (880) and begin Phase II soon (647) if all continues to go well. (The pipeline is detailed here if you're interested.)
I've now bought EXEL on three occasions in the past year, at $7.66, $8.66, and today at $10.75. I've been buying larger portions on the way up, so my current cost per share now stands at about $9.75.
Other recent Exelixis comments:
Exel's no ENE
Exelixis upgraded with good reason
Annual Checkup -- EXEL
Though I haven't acted on it yet, I've also been very tempted by Amgen (AMGN) lately -- AMGN and Genentech (DNA) really seem to be this generation's Pfizer and Merck, and AMGN appears remarkably low priced given their solid pipeline and very strong earnings. I don't generally spend a lot of time looking at larger companies like these, but AMGN at a forward PE of less than 17 seems absurd. I'll be watching closely to see what happens around their earnings next week.
For the record, I bought additional shares this afternoon of EXEL at $10.75, which is about 15% down from the peak EXEL hit a couple weeks ago in the mid-12s. I don't see any reason for the decline, other than perhaps some profit taking after a nice year, and given EXEL's potential with such a broad and deep pipeline and array of partnership agreements I really like the risk/reward ratio here.
I've written a bunch about EXEL and their lead compounds in the past -- they've got two Phase II drugs and two just about to enter Phase II, all of which look pretty compelling, to go with several Phase I compounds and one nearing approval in Phase III. In total, they now have an active pipeline of eight drugs going through the clinic, and a commitment to keep moving about three drugs per year into the clinic from their deep bench of preclinical compounds. That provides a much greater opportunity for success compared to many companies, even if you don't look at EXEL's great reputation and strong partners and just assume that the overall odds apply, which would put the chances of any one drug that enters the clinic being approved at a bit less than 10% (the odds go up dramatically with each phase, so once you've got a Phase III drug it has odds of about 75%, by my understanding).
If you'd like to see a lot more detail about the specifics of the drug programs and financials, you can also access the recent buy recommendation and full analysis from WR Hambrecht here (PDF file).
Suffice to say, having a deep pipeline of drugs is great for companies that have to live with such an uncertain approval process, and I'd be surprised if at least a couple of EXEL's lead compounds didn't gain approval.
Though of course, I could be wrong -- and it will be years before most of them are actually ready for the marketplace, so patience is definitely called for. With so many compounds in active trials, we should receive fairly regular updates over the coming year on preliminary results and final results of any of these trials, which could easily move the stock dramatically if they are strongly positive or negative. I'm particularly interested in seeing preliminary Phase II results from XL999 (various cancers) and XL784 (diabetic kidney disease), both of which began Phase II trials within the last few months, and in news on XL647 and XL880, both of which target tumors, which should finish up Phase I shortly (880) and begin Phase II soon (647) if all continues to go well. (The pipeline is detailed here if you're interested.)
I've now bought EXEL on three occasions in the past year, at $7.66, $8.66, and today at $10.75. I've been buying larger portions on the way up, so my current cost per share now stands at about $9.75.
Other recent Exelixis comments:
Exel's no ENE
Exelixis upgraded with good reason
Annual Checkup -- EXEL
This article posted by One Guy @ 4/11/2006 02:08:00 PM 0 comments
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