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Shares of Exelixis, Inc. (EXEL - Free Report) have gained almost 4.68% on Aug 12. The company’s shares have rallied a whopping 77% this year so far, outperforming the 7.8% increase registered by the Zacks categorized Medical - Biomedical and Genetics industry during this period. Here we analyze the factors that led to the rally.

Exelixis is a biopharmaceutical company focused on developing and commercializing small-molecule therapies for the treatment of cancer.

Exelixis’ lead product, Cometriq, the capsule form of cabozantinib, was approved in the U.S. in 2012 for the treatment of progressive, metastatic medullary thyroid cancer (MTC).

Exelixis is developing cabozantinib in a broad development program comprising over 45 clinical studies across multiple indications. The company received a major impetus in Apr 2016 when the FDA approved the tablet formulation of cabozantinib, (distinct from the capsule form) under the brand name Cabometyx for the treatment of RCC in patients who have received prior anti-angiogenic therapy. Cabometyx was also approved in EU in Sept 2016 for the treatment of advanced RCC in adults who have received prior vascular endothelial growth factor (VEGF)-targeted therapy.

Results from the phase II CABOSUN study on cabozantinib versus Pfizer’s (PFE - Free Report) Sutentin formerly untreated advanced RCC were positive. Based on the CABOSUN results, the company has planned to submit a supplemental New Drug Application (sNDA) for cabozantinib for treating first-line advanced RCC in the third quarter of 2017.

The company presented further positive analysis from the trial in Jun 2017. A potential label expansion of the drug will further boost results.As per data from The American Cancer Society, kidney cancer is among the ten most commonly diagnosed forms of cancer among both men and women in the U.S. Hence, we believe Exelixis is poised to capture a major chunk of the market if approved for first-line kidney cancer.

Meanwhile, in early 2017, Exelixis inkedagreements with Bristol-Myers Squibb (BMY - Free Report) and Roche Holdings AG (RHHBY - Free Report) to develop cabozantinib in combination with immunotherapy agentsfurther. Exelixis collaborated with Bristol-Myers to evaluate cabozantinib in combination with Opdivo alone or in combination with Yervoy in a phase III trial in first-line RCC, and potentially in other tumor types including (HCC and bladder cancer). Both the companies have initiated a phase III trial, CheckMate 9ER in Jul 2017 to evaluate Opdivo in combination with Cabometyx or Opdivo and Yervoy in combination with Cabometyx versus Sutent in patients with previously untreated, advanced or metastatic RCC.

Exelixis has also collaborated with Roche to evaluate cabozantinib in combination with Tecentriq, an anti-PD-L1 antibody, in patients with advanced RCC or bladder cancer. In Jun 2017, Exelixis initiated the dose-escalation stage of a phase Ib trial of cabozantinib in combination with Tecentriq. The drug will be evaluated in patients suffering from locally advanced or metastatic urothelial carcinoma (UC) or RCC.

Label expansion into additional indications would give the product access to a higher patient population and increase the commercial potential of the drug.

Zacks Rank

Exelixis currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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