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Exelixis (EXEL) to Report Q3 Earnings: What's in Store?

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Exelixis, Inc. EXEL is scheduled to report third-quarter 2018 results on Nov 1, after the market closes.

Exelixis’ shares have lost 52.7% in the year so far compared with the industry’s decline of 5.9%.

The company has a pretty good earnings surprise history, surpassing expectations in all of the trailing four quarters with an average beat of 110.73%.  In the last reported quarter, the company beat expectations by 86.7%.

Exelixis, Inc. Price, Consensus and EPS Surprise

 

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

Let’s see what is in store for this quarter.

Factors Likely to Impact Results

Exelixis delivered stellar second-quarter 2018 results on strong performance of Cabometyx and we expect the momentum to continue in the third quarter. Demand is being driven by increases in market share, refills for patient already on therapy and continued expansion of the prescriber base.

While the FDA approved Cabometyx tablets in April 2016 for the treatment of advanced renal cell carcinoma (“RCC”), the drug’s label was also expanded in December 2017 for the treatment of previously untreated advanced RCC. Since the drug is now approved for first-line RCC as well, the company can now cater to the entire patient population suffering from the disease.

In May 2018, Exelixis and partner Ipsen Biopharmaceuticals also obtained the European Commission (EC) approval for Cabometyx (20 mg, 40 mg and 60 mg) for the first-line treatment of adults with intermediate- or poor-risk advanced RCC. 

The approval will broaden the geographic reach of the drug as the market potential is significant for the first-line treatment of kidney cancer.

In September 2018, Exelixis announced that the National Comprehensive Cancer Network (NCCN) has updated its Clinical Practice Guidelines to include new recommendations for lead drug Cabometyx. As a result of the update, Cabometyx is now recommended by the NCCN for the treatment of advanced RCC, regardless of patient risk status (favorable-, intermediate- and poor-risk).

We expect sales to get a further boost, with an increase in the eligible patient population for Cabometyx in the United States. However, competition has increased in the RCC market, with the approval of Opdivo combined with Yervoy for the treatment of poor and intermediate risk first-line RCC.

Exelixis and partner Ipsen received a positive opinion from the Committee for Medicinal Products for Human Use (CHMP), the scientific committee of the European Medicines Agency (EMA), for the label expansion of Cabometyx tablets as a monotherapy for the treatment of hepatocellular carcinoma (HCC) in adults, who have been previously treated with Nexavar (sorafenib).

Exelixis recently announced encouraging results from the dose-escalation stage of the phase Ib COSMIC-021 study of Cabometyx in combination with Tecentriq in previously untreated advanced RCC. The combination was well tolerated and showed promising anti-tumor activity.

Meanwhile, investors are expected to focus on pipeline development. Exelixis is developing cabozantinib in a broad development program, comprising more than 45 clinical studies across multiple indications. Exelixis inked agreements with Bristol-Myers BMY and Roche RHHBY to develop cabozantinib in combination with immunotherapy agents.

Earlier this month, Exelixis initiated a phase III trial (COSMIC-311) of single-agent cabozantinib in patients with radioiodine-refractory differentiated thyroid cancer (DTC) who have progressed after up to two prior vascular endothelial growth factor receptor (VEGFR)-targeted therapies. The co-primary endpoints for the trial are progression-free survival and objective response rate.

We remind investors that Exelixis has submitted a supplemental New Drug Application (sNDA) to the FDA for advanced hepatocellular carcinoma (HCC). The EMA also accepted the company's application for the addition of HCC indication. The FDA has accepted the company’s sNDA for Cabometyx as a treatment for patients with previously treated advanced HCC and set a target action date of Jan 14, 2019.

Exelixis expects total costs and operating expenses for 2018 to be $430-$460 million.

Earnings Whispers

Our proven model does not conclusively show that Exelixis will beat on earnings this quarter. That 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 estimates. Unfortunately, that is not the case here, as you will see below.

Earnings ESP: Earnings ESP for Exelixis is -21.7%. The Zacks Consensus Estimate is pegged at 19 cents, while the Most Accurate Estimate is pegged at 15 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Exelixis carries a Zacks Rank #3 which is favourable. However, the negative ESP makes surprise prediction difficult.

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

Stock to Consider

Here is a company you may consider, as our model shows that it has the right combination of elements to deliver a beat this quarter.

Emergent Biosolutions Inc. (EBS - Free Report) has an Earnings ESP of +16.76% and a Zacks Rank #3.  The company is expected to release third-quarter results on Nov 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

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