It’s rare to find rapid growth coupled with a relatively low valuation in the biotech industry, but that’s what you get with cancer-drug developer Exelixis (Nasdaq: EXEL). Its lead drug, Cabometyx, approved to treat renal cell carcinoma (the most common form of kidney cancer), has turned it into a cash cow for the foreseeable future. (Exelixis’most recent quarterly report featured net product sales growth of 69 percent, driven almost entirely by Cabometyx.) The drug is also expected (but not guaranteed) to win approval to treat advanced hepatocellular carcinoma, the most common form of liver cancer, next year.
With strong pricing power for Cabometyx, Exelixis may collect $1 billion annually from the drug by 2021.
Biotech stocks can be risky, as many of their drugs in development end up failing to win approval from the Food and Drug Administration. It helps when the company has one or more drugs already on the market, as Exelixis does. In its third quarter, Exelixis posted year-over-year growth of more than 50 percent for both earnings and income from operations.
Exelixis does face competition, but it’s expected by some (though not guaranteed) to grow by 30 percent annually through 2021, and its price-to-earnings (P/E) ratio was recently in the teens. If you can stomach some volatility and risk, consider Exelixis for your long-term portfolio.
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