Exelixis (NASDAQ:EXEL) is facing a proxy battle with Farallon Capital, a hedge fund with a 7.2% stake in the biotechnology company, making it the largest active shareholder. While the company faces a proxy battle, Wall Street is optimistic about EXEL’s prospects.
In a letter to Exelixis’ Board, Farallon stated that the company had disappointed its investors. The hedge fund argued that regardless of the commercialization of front-line cancer medicine, which generates over $2 billion in annual revenue, EXEL has not made any money for its shareholders.
The hedge fund highlighted that Exelixis generated a total shareholder return of less than 1% per year since its IPO, which was roughly 23 years ago.
Farallon Capital has consistently invested in EXEL stock since 2018. The hedge fund believes that the company’s Cabozantinib franchise (a medication used to treat thyroid cancer) and related IP (Intellectual Property) are durable. Moreover, the firm sees substantial growth opportunities from the commercialization of Zanzalintinib (a medication for the treatment of solid tumors).
Farallon Capital recommends the company to focus on R&D efforts and spending, distribute excess capital to shareholders, and nominated three director candidates to EXEL’s Board.
In response to Farallon’s letter, the company stated that its Board expressed willingness to consider the directors nominated by it and almost reached a near-final agreement to appoint two of its nominees to avoid a proxy contest. However, the company highlighted that Farallon’s demand for in-depth access to the data about its R&D pipeline and the clinical trial is a non-negotiable part of any settlement, and it cannot agree to it.
Furthermore, the company stated in a press release that it does not “believe that Farallon’s changes to the Board are in the best interests of shareholders.” Meanwhile, EXEL announced a $550 million share repurchase plan to enhance its shareholders’ value.
Is EXEL Stock a Good Buy?
While EXEL faces a proxy contest, Wall Street is bullish about its prospects. EXEL stock has received 12 Buy and two Hold recommendations for a Strong Buy consensus rating. Analysts’ average price target of $24.85 implies 24.94% upside potential.
