Investing

Exelixis Targeted as Activist Farallon Capital Partners Reveals 7.2% Holding

Ben Ward

Published: March 21, 2023 10:20 pm

It has been an eventful start to the week for investors of genomics-based drug discovery outfit Exelixis (US:EXEL), after the company announced a share buyback worth $550 million pre-market and received an activist filing post-market.

The company stated that the buyback has been authorized until the end of 2023. News of the buyback sent shares 4.4% higher in trading on Monday.

Following the market close, activist investor Farallon Capital Partners filed a Form 13D with the SEC revealing a 7.2% stake in the company, totaling 23.47 million shares.

In Tuesday’s premarket trading at last look, the EXEL stock price is up another 1.9%.

In the filing, the San Francisco-based asset manager stated that it has already been in discussions with Exelixis’ board and management team and intends to continue dialogue.

Farallon said that the topics of discussion included the company’s performance, business, operations and also governance.

Key Concerns

The key concern was around ‘poor share price performance’ with the activist insisting the company ‘refresh its board’. The fund manager also said the company should rationalize its R&D efforts, improve communication with investors and return further capital to shareholders with a buyback and ongoing dividends.

Exelixis’ share price is down around 14.1% over the 12 months after the stock failed to stage a recovery in 2023 with the rest of the broader market. On a five-year view, the stock has trended sideways with share price fluctuations from the $15 to $25 range on a repeated basis. The stock has a $6 billion market cap and has never paid dividends out to investors in its 20-plus year life as a listed company.

To be sure, EXEL stock has outperformed peers, as the iShares Genomics Immunology and Healthcare ETF (US:IDNA) is down more than 30% in the last 12 months. Exelixis shares are that exchange-traded fund’s fourth-largest holding, at 4.96% of the 51-stock portfolio.

Farallon also said in the filing that it has held discussions with third parties including another shareholder, Caligan Partners LP. More specifically with the managing partner David Johnson, which resulted in the formation of a group between the parties.

Caligan Partners, in turn, filed 13D, too, on Monday afternoon, disclosing its 0.26% stake in Exelixis from the ownership of 850,000 shares.
EXEL shares traded up a further 3.6% in extended trading on Monday evening as investors digested the filings that may result in further accretive shareholder activities.

Institutional Interest

Research from the Fintel platform shows Exelixis is experiencing above-average levels of institutional buying activity, evident in a bullish Fund Sentiment Score of 77.78 which ranks EXEL in the top 16% out of 36,042 globally screened securities.

There are 954 institutions on the EXEL register that collectively own 317.25 million shares. The largest shareholders include BlackRock Inc., Vanguard Group Inc, Renaissance Technologies Llc, State Street Corp (sponsor of the IDNA ETF), JP Morgan Chase & Co and Farallon Capital.

In other news, earlier this month Wells Fargo analyst Derek Archila initiated coverage on the stock with an overweight recommendation and a $23 price target. The recommendation was highlighted on the Fintel analyst forecast page for EXEL.

Archila likes the near-term growth prospects for Exelixis’ Cabozantinib — a potential treatment for a wide variety of cancers — and thinks it could be a catalyst for the stock. The firm also notes the large cash pile and asset pipeline should generate value for the company.

Fintel’s consensus target price of $25.69 suggests the stock could recover 40% this year back above annual highs.

Last month, Exelixis reported fourth-quarter results to investors with sales of $424 million beating market forecasts. Management restated full year 2023 expectations telling investors that it should generate sales of $1.78 billion to $1.89 billion over the year with research and development expenses of around $1.00 billion.

EXEL will next update investors in early May with first quarter results.

This article originally appeared on Fintel