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Why Is Exelixis (EXEL) Up 35.9% Since Last Earnings Report?

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A month has gone by since the last earnings report for Exelixis (EXEL - Free Report) . Shares have added about 35.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Exelixis due for a pullback? 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 drivers.

Exelixis Q3 Earnings, Revenues Beat on Cabometyx Sales

Exelixis delivered better-than-expected results for third-quarter 2018, wherein both earnings and revenues beat estimates on strong performance by Cabometyx.

The company reported earnings of 41 cents, easily beating the Zacks Consensus Estimate of 19 cents. The bottom line was also up from 26 cents reported in the year-ago quarter.

Net revenues came in at $225.4 million, up from $152.5 million in the year-ago quarter. The top line also surpassed the Zacks Consensus Estimate of $166.4 million.

Quarter in Detail

Net product revenues came in at $162.9 million, up 69% from the year-ago quarter, driven by continued growth of Cabometyx in the United States for the treatment of advanced renal cell carcinoma (RCC).

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 RCC in patients who have received prior anti-angiogenic therapy. The FDA also expanded the drug’s label for the treatment of previously untreated advanced RCC in December 2017.

Cabometyx generated $158.3 million net product revenues. Demand grew 5% sequentially.

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

Total collaboration revenues were $62.5 million compared with $56.1 million in the year-ago quarter. The revenues included the recognition of milestone payments of $36.9 million and $5.0 million from the company’s collaboration with Ipsen Pharma SAS for the anticipated approval of Cabometyx for previously-treated HCC in the European Union and the approval of the drug in Canada for previously-treated RCC, respectively.

In the reported quarter, research and development expenses increased 56.8% to $44.7 million, stemming from higher personnel expenses, clinical trial costs, and consulting and outside services. Selling, general and administrative expenses were $48.1 million, up 26.3%, driven by increases in personnel expenses and stock-based compensation.

Pipeline Update

In September 2018, Exelixis announced that the National Comprehensive Cancer Network (NCCN) has updated its Clinical Practice Guidelines to include new recommendations for 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 remind investors that Exelixis has already 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 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.

In addition, 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.

In October 2018, Exelixis initiated a phase III trial (COSMIC-311) of single-agent cabozantinib in patients with radioiodine-refractory differentiated thyroid cancer (DTC) who have progressed 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.

Meanwhile, Exelixis inked agreements with Bristol-Myers and Roche Holding to develop cabozantinib in combination with immunotherapy agents in 2017.The phase III CheckMate 9ER study is evaluating cabozantinib in combination with Opdivo versus Pfizer’s Sutent among treatment naive RCC patients.

The study is enrolling patients globally  and being conducted by Bristol-Myers. The triplet combination of cabozantinib, Opdivo and Yervoy continues to be evaluated in the ongoing Phase 1b trial in patients with advanced genitourinary malignancies.

2018 Guidance Updated

Exelixis now expects total costs and operating expenses for 2018 to be $410- $420 million compared with the earlier projection of $430-$460 million. The range was updated due to timing of clinical trial expenses, primarily related to the planned and ongoing combination trials.
 

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 37.3% due to these changes.

VGM Scores

Currently, Exelixis has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

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

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Exelixis has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.




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