What: Shares of Exelixis (NASDAQ:EXEL), a biotechnology company focused on the development of therapies to treat cancer, soared 41% in May, according to data from S&P Global Market Intelligence. The reason behind the surge can be solely traced to excitement surrounding Exelixis' lead drug, Cabometyx.
So what: Following the approval of Cabometyx (scientific name cabozantinib) for the treatment of second-line advanced renal cell carcinoma (RCC) in late April, Exelixis' shares really soared after the company announced encouraging results from its midstage CABOSUN trial testing Cabometyx as a first-line therapy for advanced RCC.
CABOSUN, which featured a head-to-head against Pfizer's Sutent, showed that Cabometyx delivered a statistically significant improvement in progression-free survival in treatment-naïve patients compared to Sutent. The next step for Exelixis is to meet with the Food and Drug Administration, most likely to design a Phase 3 study for Cabometyx as a first-line therapy.
Mind you, this trial news comes after Exelixis recently announced that Cabometyx is the only drug approved to treat advanced RCC that hit the "trifecta" of a statistically significant improvement in overall survival, progression-free survival, and overall response rate. The hope, based on CABOSUN, is that more label expansions may be in Cabometyx's future.
Now what: Things are starting to get exciting for Exelixis, and shareholders could absolutely argue that there's some bias in that assertion.
Even with Bristol-Myers Squibb's cancer immunotherapy Opdivo treating the lion's share of second-line advanced RCC patients, Exelixis will still have plenty of opportunity to pick up market share in RCC.
My contention has always been that a fairly safe market-share estimate for Cabometyx, considering the aforementioned "trifecta," is about a 10% share of second-line RCC. This alone gives Cabometyx $250 million to $400 million in peak annual sales potential by the end of the decade.
If Cabometyx can also gain first-line approval within a few years, we could be looking at north of three-quarter of a billion dollars in peak annual sales from just RCC. And of course, don't forget that Bristol-Myers and Exelixis are exploring a phase 1b study that combines Opdivo with Cabometyx. If this duo works better than each medicine separately, Exelixis' share and revenue could shoot even higher.
Over the intermediate term, the next big catalyst is CELESTIAL, a pivotal Phase 3 study of Cabometyx in patients with advanced hepatocellular carcinoma, a type of liver cancer. This is a smaller market than RCC; but if approved, Cabometyx would likely tack on $100 million-plus in additional peak annual sales.
My suggestion? Get Exelixis on your radar.
Sean Williams owns shares of Exelixis, but has no material interest in any other companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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