BMO Capital Markets has initiated the coverage of oncology-focused biotech Exelixis (NASDAQ:EXEL) with an Outperform recommendation arguing that the company shares are trading below a worst-case scenario implied for a potential entry of generics. The price target of $28 per share implies a premium of ~31% to the last close.
The ongoing legal case over the company’s leading revenue generator, Cabometyx, and the likely entry of its generics in 2026 with the expiry of a key patent are the biggest threats to the company, the analyst Etzer Darout points out.
After a discussion with a generic litigation expert, the analyst apportions an equal probability for a win, a loss, or settlement of the case.
“….a settlement or outright win are as likely (as a loss) and represent upside to current levels,” Darout wrote, cautioning that the outcomes of patent litigation cases are hard to predict.
Citing expert views, the analyst notes that Cabometyx is well-positioned against renal cell carcinoma and projects above-consensus 2024 – 25 sales estimates for the drug.
Exelixis (EXEL) currently has a Buy rating and a $26.56 per share target on average among Wall Street analysts.