Better Buy: Exelixis, Inc. vs. Novartis AG
Novartis (NYSE: NVS) stands out as one of the biggest pharma companies with a broad array of products, including several of the most powerful cancer drugs on the market. Exelixis (NASDAQ: EXEL) only has three products on the market right now, but it ranks as one of the most promising rising stars in the treatment of cancer.
If you bought shares of both stocks, you'd be much happier with Exelixis so far in 2017. The biotech's share price has soared more than 70% year to date, while Novartis stock is up less than 15%. But which of these stocks is the better pick now? Here's how Exelixis and Novartis compare.
Both Exelixis and Novartis have great drugs to fight cancer. Image source: Getty Images.
Current products
Exelixis has three currently approved products: Cabometyx, Cometriq, and Cotellic. Technically, however, Cabometyx and Cometriq are two forms of the same drug, cabozantinib. The most important of the three, by far, is Cabometyx. Exelixis won Food and Drug Administration approval for the drug in 2016 for patients with previously treated renal cell carcinoma (RCC).
The biggest opportunities for Cabometyx could be just around the corner, though. The FDA is scheduled to make an approval decision for the drug as a first-line RCC treatment by Feb. 15, 2018. Exelixis also plans to file for approval of Cabometyx in treating advanced hepatocellular carcinoma (HCC), the most common form of liver cancer, in the first quarter of 2018.
Novartis has too many products to name one by one. The big pharma company is organized into three segments: innovative medicines, Sandoz, and Alcon. Innovative medicines markets a number of drugs, with especially strong growth for autoimmune disease drug Cosentyx and heart failure drug Entresto. Sandoz sells biosimilars and generic drugs. Alcon market surgical and vision-care products.
In August, Novartis' Kymriah became the first chimeric antigen receptor T-cell (CAR-T) therapy to win FDA approval. CAR-T is an exciting area of cancer research, and Novartis ranks as a top leader in the field. But while the company has great new products like Kymriah, sales for some of its older products, particularly cancer drug Gleevec, are declining in the face of generic competition.
Pipeline
Other than the late-stage studies on which Exelixis' first-line RCC and advanced HCC regulatory filings are based, the only other clinical trial the biotech is itself sponsoring is a late-stage study in partnership with Bristol-Myers Squibb. Exelixis and BMS are evaluating Cabometyx in combination with either Opdivo or Yervoy as a first-line treatment for RCC.
However, there are quite a few other clinical studies underway that are being conducted by other parties. Cabometyx is being evaluated in combination with other drugs in treating various types of cancer. Also, Exelixis' partner, Roche, has several studies in progress with Cotellic in combination with Tecentriq in treating different cancers.
Novartis' pipeline includes more than 200 programs in clinical development. Late-stage studies are underway targeting additional cancer indications for Kymriah. The company has new drugs for treating diseases including multiple sclerosis, breast cancer, non-small cell lung cancer, Cushing's disease, and sickle cell disease that could be submitted for regulatory approval in 2018.
Financial position
Both Exelixis and Novartis are profitable. However, Exelixis' revenue and earnings are growing strongly, while Novartis' revenue growth has stalled and its earnings are slipping due to generic competition for older products.
Novartis has the bigger cash stockpile, with $9.4 billion in cash, cash equivalents, and marketable securities, commodities, and derivatives at the end of the third quarter. Exelixis reported a cash position of $149.4 million at the end of the third quarter.
Also, Novartis' strong cash flow allows it to pay out a dividend to shareholders. The dividend currently yields 3.3%. Exelixis, like most other biotechs, doesn't pay a dividend.
Better buy
Which of these two stocks is the better buy? It depends entirely on what your investing style is.
If you're seeking income, go with Novartis. If you're a value investor, you'll probably find Novartis more to your liking. But if you want growth, pick Exelixis.
My personal choice is Exelixis. I like the potential for Cabometyx. The biotech should be able to use the cash spun off from this successful franchise to build its pipeline and grow even more over the long run. I also view Exelixis as a prime acquisition target for larger companies wanting to beef up their oncology portfolio.
More From The Motley Fool
6 Years Later, 6 Charts That Show How Far Apple, Inc. Has Come Since Steve Jobs' Passing
Why You're Smart to Buy Shopify Inc. (US) -- Despite Citron's Report
Keith Speights has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Exelixis. The Motley Fool has a disclosure policy.
