Exelixis Q4 Earnings Beat and Buybacks Highlight Near-Term Execution Amid Persistent Risks

What happened

Exelixis reported Q4 earnings and revenues that exceeded estimates, driven by continued Cabometyx sales growth and supported by new share buyback announcements. The company's flagship drug, Cabometyx, maintained its strong performance in RCC and NET markets, contributing to robust cash flows. Zanzalintinib, the pipeline drug for colorectal cancer, is advancing toward FDA review, a key milestone for future revenue diversification. However, this positive news does not address the deep-seated risks of heavy Cabometyx dependency, upcoming patent cliffs, and pricing pressures from policy reforms. Investors should recognize this as a confirmation of short-term momentum rather than a resolution of long-term structural vulnerabilities.

Implication

Exelixis's Q4 outperformance and enhanced buybacks demonstrate effective capital allocation from Cabometyx cash flows, reinforcing near-term financial stability. Zanzalintinib's progression toward FDA review is a necessary step for reducing reliance on Cabometyx, but regulatory approval and commercial success are far from guaranteed. The stock's recent 28% rise over 12 months has likely priced in much of this optimism, leaving limited upside without material de-risking of the pipeline. Persistent threats, such as generic competition post-2026 and IRA-driven pricing reforms, could swiftly undermine margins and growth projections. Therefore, while the news validates execution, it does not justify altering the cautious 'WAIT' stance, and investors should remain patient for better entry points or clearer pipeline validation.

Thesis delta

The Q4 results and buyback initiatives affirm Exelixis's ability to deliver on Cabometyx growth and shareholder returns, aligning with the base scenario in the DeepValue report. However, this does not shift the investment thesis, as zanzalintinib remains an unapproved asset with binary regulatory risk, and Cabometyx's dominance faces imminent patent and pricing headwinds. The 'WAIT' rating and need for a pullback to ~$38 or evidence of sustained outperformance remain unchanged, given the unchanged risk-reward profile.