Exelixis' Resilience Amid Clinical Trial Setbacks and Cabozantinib Strength

In the volatile world of biotech investing, resilience often separates enduring success from fleeting momentum. Exelixis Inc. (NASDAQ: EXEL) has faced a series of clinical trial setbacks in 2025, yet its flagship drug, cabozantinib (CABOMETYX), continues to deliver robust financial performance. This duality—of navigating pipeline turbulence while maintaining a strong revenue engine—offers a compelling case study for investors seeking to balance risk and long-term value in the sector.

Clinical Trial Setbacks: Strategic Reallocation or Red Flags?

Exelixis' zanzalintinib program, intended as a successor to cabozantinib, has encountered significant hurdles. The discontinuation of the Stellar-305 phase 2/3 trial in PD-L1-positive head and neck cancer and the delayed Stellar-304 trial in non-clear cell renal cancer (nccRCC) have raised questions about the molecule's commercial viability. The company cited “emerging competition” and a strategic pivot toward “larger commercial opportunities” as reasons for halting Stellar-305, a move that prompted HC Wainwright & Co. to cut its price target by 13.21%.

However, these setbacks are not without nuance. Exelixis has demonstrated agility in reallocating resources. The Stellar-303 trial in metastatic colorectal cancer delivered statistically significant survival improvements, prompting a regulatory filing. Meanwhile, the Stellar-311 trial in advanced neuroendocrine tumors (NET) is now a focal point, directly comparing zanzalintinib to everolimus, a current standard of care. These shifts suggest a calculated effort to optimize the pipeline rather than a collapse of confidence.

Cabozantinib: The Engine of Growth

While zanzalintinib's future remains uncertain, cabozantinib continues to anchor Exelixis' financial stability. In Q2 2025, the cabozantinib franchise generated $520 million in U.S. net product revenues, a 19% year-over-year increase. This growth is driven by CABOMETYX's rapid adoption in advanced NET, where it captured a leading share of new patient starts in second-line and later settings. The drug's recent European approval for NET further expands its commercial footprint.

The competitive landscape for cabozantinib in NET is favorable. While everolimus and sunitinib remain key comparators, CABOMETYX's clinical differentiation—evidenced by the phase 3 CABINET trial—has solidified its position. Additionally, Exelixis' patent protections and a settlement with Biocon Pharma (delaying generic entry until 2031) provide a buffer against near-term erosion of market share.

Risk-Rebalance: Navigating Uncertainty in Biotech

Biotech investing inherently involves balancing high-reward potential with clinical and regulatory risks. For Exelixis, the key risks in 2025 include:
1. Pipeline Delays: The delayed Stellar-304 trial and uncertainty around zanzalintinib's broader indications could slow revenue diversification.
2. Competition: Emerging therapies in NET and other oncology indications may challenge cabozantinib's dominance.
3. Regulatory Scrutiny: An ongoing securities fraud investigation adds a layer of operational risk.

Yet, the company's ability to pivot—prioritizing successful programs like Stellar-303 and Stellar-311—demonstrates a resilient strategy. The recent positive data in colorectal cancer and the potential for combination therapies (e.g., with Merck's HIF2α inhibitor Welireg) could reinvigorate zanzalintinib's prospects.

Investment Implications

For investors, Exelixis presents a nuanced opportunity. The cabozantinib franchise offers a stable cash flow generator, while the pipeline's strategic realignment hints at future growth. However, the stock's valuation must account for the risks of delayed trials and competitive pressures.

Recommendation: A cautious optimistic stance is warranted. Investors should monitor the progress of Stellar-303 and Stellar-311, as well as the regulatory timeline for zanzalintinib. Cabozantinib's continued outperformance in NET and the company's patent protections provide a floor for valuation, but upside depends on the success of its next-generation assets. Positioning in Exelixis should align with a diversified biotech portfolio, balancing its current strengths with the inherent volatility of its pipeline.

Historical data from 2022 to the present reveals that Exelixis' stock has demonstrated a strong post-earnings performance. A buy-and-hold strategy following earnings releases has yielded a 78.57% win rate over 3 days, 78.57% over 10 days, and an impressive 85.71% over 30 days. The maximum observed return of 7.87% over 30 days underscores the potential for near-term upside, particularly for investors who time their entries around earnings announcements.

In conclusion, Exelixis' story in 2025 is one of resilience and recalibration. While clinical setbacks are inevitable in biotech, the company's ability to leverage cabozantinib's strength and strategically navigate its pipeline challenges underscores its long-term potential. For investors willing to tolerate near-term uncertainty, the rewards could be substantial—if the science and execution align.
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