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Exelixis (EXEL) Down 14.1% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Exelixis (EXEL - Free Report) . Shares have lost about 14.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Exelixis due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Exelixis Earnings Beat on Strong Cabometyx in Q2

The company reported earnings of 28 cents, beating the Zacks Consensus Estimate of 15 cents, up from 6 cents earned in the year-ago quarter.

Net revenues came in at $186.1 million, up from $99.0 million in the year-ago quarter. The reported number surpassed the Zacks Consensus Estimate of $153.3 million but was down from $212.3 million reported in the previous quarter.

Quarter in Detail

Net product revenues came in at $145.8 million, up from $88.0 million in the year-ago quarter. The FDA approved a tablet formulation of cabozantinib, (distinct from the capsule form) under the brand name Cabometyx in April 2016, for the treatment of advanced renal cell carcinoma (“RCC”) in patients who have received prior anti-angiogenic therapy. The upside in the quarter was driven by growth in the second and later-line advanced RCC business, and the impact of additional sales following the FDA’s approval in December 2017 of the expanded indication for Cabometyx, for the treatment of previously untreated advanced RCC.

Cabometyx generated $141.1 million net product revenues, driven by growth in demand due to expanded indication. Demand was driven by increases in market share, refills for patient already on therapy and continued expansion of the prescriber base.

Cometriq (cabozantinib capsules) for the treatment of medullary thyroid cancer generated $4.7 million in net product revenues.

Total collaboration revenues were $40.3 million compared with $11 million earned in the year-ago quarter due to a $25.0 million commercial milestone payment from partner Ipsen Pharma, earned in the second quarter of 2018 upon Ipsen’s achievement of $100.0 million of net sales cumulatively over four consecutive quarters.

In the reported quarter, research and development expenses increased 50.7% to $42.5 million, stemming from higher personnel expenses, clinical trial costs, and consulting and outside services. Selling, general and administrative expenses were $51.9 million, up 27.5%, driven by increases in consulting and outside services, and personnel expenses.

Pipeline Update

In May 2018, Exelixis announced that its partner Ipsen received European Commission’s (EC) approval for Cabometyx 20 mg, 40 mg and 60 mg for an expanded indication that includes the first-line treatment of adults with intermediate- or poor-risk advanced RCC in the EU.  Per the terms, Exelixis is obligated to receive a milestone payment of $50 million for the EC approval, of which approximately $46 million was recognized as collaboration revenues in the first quarter of 2018.

In May, Exelixis also announced that the FDA accepted the company’s sNDA for Cabometyx tablets as a treatment for patients with previously treated advanced hepatocellular carcinoma (HCC). The FDA has determined that the application was sufficiently complete to permit a substantive review. The FDA assigned a Prescription Drug User Fee Act (PDUFA) action date of Jan 14, 2019.

Exelixis inked agreements with Bristol-Myers and Roche Holding to develop cabozantinib in combination with immunotherapy agents in 2017. In June 2018, Exelixis announced plans to add 10 expansion cohorts COSMIC-021, the phase Ib trial of cabozantinib in combination with Roche’s anti-PDL1 antibody Tecentriq, in patients with locally advanced or metastatic solid tumors.

Consequently, there are now a total of 18 cohorts in the expansion stage of the study, for which the primary goal remains to determine the objective response rate in each cohort.

Meanwhile, IMblaze370, the phase III trial evaluating Cotellic in combination with Tecentriq in patients with heavily pre-treated locally advanced or metastatic colorectal cancer did not meet its primary endpoint. The other two phase IIII trials — IMspire150 and IMspire170 — are ongoing.  The IMspire150 (TRILOGY) trial, which evaluates the combination of Cotellic, Tecentriq, and Xelboraf in first-line BRAF V600 mutation-positive metastatic or unresectable locally advanced melanoma, has completed enrolment.  The IMspire170 trial is evaluating the combination of Cotellic and Tecentriq versus Merck’s Keytruda in first-line BRAF wild-type metastatic or unresectable locally advanced melanoma.

2018 Guidance Reiterated

Exelixis expects total costs and operating expenses for 2018 in the range of $430-$460 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 37.32% due to these changes.

VGM Scores

Currently, Exelixis has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for momentum investors than growth investors.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Interestingly, Exelixis has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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