The Clear Reason Exelixis, Inc. Rocketed Higher by as Much as 10%

What happened

Shares of Exelixis (NASDAQ: EXEL), a mid-cap drug developer with a focus on novel cancer therapies, rocketed higher by as much as 10% during Thursday's trading session after the company reported better-than-expected third-quarter earnings results following the closing bell on Wednesday.

So what

For the quarter, Exelixis reported $96.4 million in net product revenue, which included more than $90 million in net sales from Cabometyx, the company's advanced second-line renal cell carcinoma (RCC) drug, as well as $6.1 million from Cometriq in metastatic medullary thyroid cancer. Collaboration revenue added another $56.1 million, which included two milestone payments adding up to $45 million. The total revenue of $152.5 million for the third quarter was more than double the $62.2 million reported in the year-ago period, and it blew away the $104.9 million estimate from Wall Street.

In terms of the company's bottom line, Exelixis generated $81.4 million in net income, which worked out $0.26 in adjusted earnings per share (EPS). This is a marked improvement from the $0.04 per share it lost during the prior-year quarter, and it wound up being $0.18 per share higher than the Street had forecast.

The company also updated its full-year total costs and operating expenses to a new range of $285 million to $295 million from a prior forecast of $290 million to $310 million. Lower costs could lead to even higher margins for the fast-growing Exelixis.

Now what

Exelixis continues to hit on all cylinders with Cabometyx. Its lead drug, which delivered a statistically significant improvement in overall survival, progression-free survival, and overall response rate in second-line RCC, looks like it has a really good chance of expanding into a first-line RCC indication after successful results in the phase 2 Cabosun study. It also appears on track to expand its label into advanced hepatocellular carcinoma after Cabometyx met its primary endpoint in the Celestial study. It could very well become the blockbuster that Wall Street expects.

Its path to blockbuster status won't be a cakewalk with Bristol-Myers Squibb's Opdivo showing surprising strength in a first-line RCC study in combination with Yervoy, and Opdivo already commanding solid market share in second-line RCC. Nonetheless, Cabometyx's quick uptake following its launch signals that it should do just fine, even in a competitive indication.

With Exelixis making a habit of putting Wall Street's consensus estimate to shame, it's my belief as a long-term shareholder that there could very well be more upside.

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Sean Williams owns shares of Exelixis. The Motley Fool owns shares of and recommends Exelixis. The Motley Fool has a disclosure policy.