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What's in the Cards for Exelixis (EXEL) in Q2 Earnings?

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Exelixis, Inc. (EXEL - Free Report) is scheduled to report second-quarter 2017 results on Aug 2, after the market closes.

Exelixis’ track record is outstanding. The company has surpassed expectations in all the four trailing quarters, with an average positive earnings surprise of 512.1%.

Exelixis’ share price has increased 82.6% year to date compared with the Zacks classified industry’s gain of 11.7%.

Factors Likely to Impact Results

Exelixis received a major boost with the FDA approval of Cabometyx tablets in Apr 2016 for the treatment of patients with advanced renal cell carcinoma (RCC).

The initial uptake of the drug was encouraging and is expected to propel the top line in the forthcoming quarters in 2017. The sequential increase in Cabometyx sales is also a positive. Moreover, Cabometyx was also approved in the EU.

Meanwhile, Exelixis is developing cabozantinib in a broad development program. In Oct 2016, the company announced positive results from the phase II CABOSUN study on cabozantinib versus sunitinib in formerly untreated advanced RCC, which was presented at ESMO 2016. 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.

In early 2017, Exelixis collaborated with Bristol-Myers Squibb (BMY - Free Report) 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. Exelixis will also evaluate Cabometyx 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. These collaborations allow Exelixis to earn milestone payments and royalties that boost its top line.

However, expenses will continue to increase. Exelixis expects total costs and operating expenses for 2017 in the range of $290 million–$310 million.

Exelixis, Inc. Price and EPS Surprise


Exelixis, Inc. Price and EPS Surprise | Exelixis, Inc. Quote

Earnings Whispers

Our proven model does not conclusively show that Exelixis is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to be able to beat earnings. That is not the case here as you will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -33.3% since the Most Accurate is 2 cents while the Zacks Consensus Estimate is pegged at 3 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Exelixis sports a Zacks Rank #1 which is favorable. However, this when combined with a negative ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 and #5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some health care stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.

Vertex Pharmaceuticals Incorporated (VRTX - Free Report) has an Earnings ESP of +33.3% and a Zacks Rank #1. The company is scheduled to release results on Jul 26. You can see the complete list of today’s Zacks #1 Rank stocks here.

Alexion Pharmaceuticals, Inc. (ALXN - Free Report) has an Earnings ESP of +6.48% and a Zacks Rank #3. The company is scheduled to release results on Jul 27.

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