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Shares of Exelixis (NASDAQ: EXEL), a biotech company primarily focused on developing drugs to treat cancer, rallied more than $2 per share during the month of August, according to data from S&P Global Market Intelligence, adding $626 million to Exelixis' market cap in the process. The reasons for the move? Look no further than the company's second-quarter earnings report and its recent supplemental new drug application (sNDA) filing for Cabometyx with the Food and Drug Administration (FDA).
Arguably the biggest catalyst for Exelixis in August was the early month release of its second-quarter earnings results. The report continued to show that demand for Cabometyx, the company's lead drug, is expanding at a rapid pace. For the quarter, Cabometyx generated $80.9 million in sales as a treatment for second-line renal cell carcinoma (RCC), and an additional $7.1 million as an advanced medullary thyroid cancer treatment under the brand-name Cometriq. Exelixis also recognized $11 million in collaboration revenue, working out to $99 million in sales for the quarter. This strong sales growth allowed Exelixis to top Wall Street's profit expectations by $0.02 per share.
The other source of optimism derives from the company's Aug. 16 press release that it had filed an sNDA with the FDA regarding Cabometyx as a treatment for first-line RCC. The filing, which seeks to expand Cabometyx's label, is based on data from the midstage Cabosun trial that demonstrated a statistically significant improvement in progression-free survival for treatment-naïve advanced RCC patients taking Cabometyx relative to the current standard-of-care treatment, Sutent. Moving to first-line would notably expand Cabometyx's patient pool.
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For patient long-term investors, Exelixis has been a dream come true. Its lead drug has overcome a major failure in the Comet-1 study in metastatic castration-resistant prostate cancer to completely amaze Wall Street and investors in RCC. The next step will be determining whether it has a future as a treatment for advanced hepatocellular carcinoma in the phase 3 Celestial study. Assuming the late-stage trial finds its mark, Cabometyx would be fully expected to top $1 billion in peak annual sales.
Though there looks to be a clear path to success for Exelixis, and it may even draw buyout interest given the recent success of Cabometyx, it's also working in a very crowded space where it'll still have to fight to earn market share. For example, Bristol-Myers Squibb's (NYSE: BMY) cancer immunotherapy Opdivo, which is also being tested in combination studies in RCC with Cabomeytx, has a large chunk of second-line RCC market share. Also, just yesterday, Bristol-Myers Squibb announced that two of its key immunotherapies, Opdivo and Yervoy, were successfully tested in first-line RCC. In fact, Bristol-Myers wound up stopping the trial early because of strong efficacy. This suggests Exelixis will have to fight for market share -- it won't just be handed to the impressive midcap biotech company.
Nevertheless, as a long-term shareholder in Exelixis myself, I see little reason to sell now with the company, and Cabometyx, firing on all cylinders.
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