Exelixis (NASDAQ:EXEL) is scheduled to release earnings after the closing bell on Wednesday, when investors will get a first look at how quickly sales of its kidney cancer drug Cabometyx can blast off.
When the numbers are released, investors will probably need to do some math to figure out the early demand. Cabometyx's approval came in the end of April, so the revenue will account for only about two months of sales. From there, investors will need to subtract any stock at pharmacies, which hopefully the company will disclose.
Trying to figure the trajectory of demand based on two months of sales would normally be tough, but investors have a distinct advantage with Cabometyx because it has the same active ingredient as Exelixis' Cometriq, which has been on the market for thyroid cancer for a few years. On the first-quarter conference call, Exelixis' management noted that doctors were using Cometriq off label after the presentation of the phase 3 kidney cancer data last September, which drove a 33% increase in demand for Cometriq over the fourth quarter of 2015.
Those Cometriq sales should convert to sales of Cabometyx for the last two months of the second quarter since Cabometyx's label specifically says the drugs aren't interchangeable. The label also includes overall survival data that wasn't available last September, which should spur doctors' use further.
If Exelixis was operating in a bubble, it would be clear sailing from here since Cabometyx beat Novartis' (NYSE:NVS) Afinitor in a head-to-head clinical trial. Exelixis' new sales force just has to show the clear graph showing increased overall survival, and Cabometyx would be sure to quickly take market share from Novartis.
Unfortunately for Exelixis, Bristol-Myers Squibb's (NYSE:BMY) Opdivo also beat Novartis' Afinitor in its own head-to-head clinical trial, leaving the two companies to battle it out for second-line kidney cancer patients, the market previously dominated by Novartis.
Bristol-Myers Squibb has already reported second-quarter sales, but Opdivo's sales -- up 19% quarter over quarter -- aren't much help in forecasting a winner since Bristol-Myers Squibb is expanding Opdivo sales in lung cancer and melanoma in addition to kidney cancer. The precise impact of the new indications on overall sales, however, is unknown. Even if Bristol-Myers' management had the ability to accurately break out the sales between the different cancers -- which arguably might not be possible on a quantitative level -- it didn't share those numbers with investors.
The loser in kidney cancer treatment won't be shut out completely since doctors will likely use the other drug as a third-line treatment -- they both beat Afinitor after all -- but the difference in sales between second-line and third-line treatment can be substantial since some patients won't seek a third-line treatment, and the duration of treatment is likely to be longer for second-line patients since they're healthier.
With lots of moving parts, it may take a few quarters to know which treatment is going to come out on top, but at least Exelixis' investors can get an early indication this week.