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).
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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.
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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