Image source: Exelixis.

Exelixis (NASDAQ:EXEL) offered a first look at the launch of the biotech's new kidney cancer drug Cabometyx during its second-quarter earnings report. Investors seem to like the results, with shares up 21% at 1:05 p.m. EDT, but it takes a little manipulation of the numbers to see why.

Sorry, there's math involved.

Exelixis reported Cabometyx sales of $17.6 million for the nine weeks it was on the market in the second quarter, but management estimates that about $6.5 million to $7 million of that was from stocking, putting patient demand in the $10.5 million to $11 million range.

But -- and this is a big "but" -- Cabometyx is in an unusual situation because the same active ingredient is marketed as Cometriq for thyroid cancer. Management noted on the first-quarter conference call that some doctors were prescribing Cometriq off-label, based on the positive clinical trial results, before Cabometyx was approved.

While new post-approval patients are primarily being prescribed Cabometyx, a majority of patients that started on Cometriq have stayed on the drug rather than switching to Cabometyx. That's not too surprising, considering doctors' reluctance to change things that are working and the potential hassle of dealing with an insurance company to make the change. But it means that to get an accurate account of the sales for kidney cancer, investors have to factor in Cometriq's sales to kidney cancer patients.

The easiest way to do that is to start with the sales for both drugs and back out stocking and the previous demand for Cometriq as a thyroid cancer treatment, which has remained relatively constant. Back of the envelope: sales of $31.6 million for both drugs, minus $6.5 million to $7 million stocking, minus about $8 million for average sales of Cometriq before the off-label use started -- that puts kidney cancer sales for the quarter at about $16 million to $17 million.

Presumably those sales are accelerating, so the third quarter will have higher sales, but management didn't offer many details in the launch trajectory. The only interesting tidbit was that 75% of Cabometyx prescribers had not previously written a prescription for Cometriq, so there's clearly a broad interest in using the drug; this had been a worry of investors since Bristol-Myers Squibb's (NYSE:BMY) Opdivo was approved for kidney cancer in November, giving Bristol-Myers a several-month head start.

Expanding sales further

While Exelixis is off to a good start in kidney cancer, further expansion of Cabometyx into other cancers -- and earlier in the disease progression for kidney cancer -- will also have a substantial effect on future sales.

Next year Exelixis expects to complete its Celestial clinical trial, testing Cabometyx in liver cancer. But investors will get a pair of earlier looks, because the clinical trial has two interim analyses built in, when the trial reaches 50% and 75% of the deaths specified to end the clinical trial.

When asked on the conference call about whether the 50% level had been achieved, chief medical officer Gisela Schwab just reiterated what she'd said previously during the call, "We haven't guided on the timing of the interim analysis." Reading between the lines, we could see interim results shortly if the 50% level has been reached -- so Schwab didn't want to say "no" -- but the company hasn't released it yet because the independent data safety monitoring board hasn't reviewed the data. At the interim analysis, the trial would either be stopped early because it's clear Cabometyx is helping patients better than placebo, or be allowed to continue to the 75% interim look; there is no futility analysis built into the interim peek at the data.

Earlier this year, Exelixis announced that Cabometyx beat Pfizer's Sutent in a head-to-head clinical trial in previously untreated kidney cancer patients. The trial wasn't designed to get Cabometyx approved for the first-line kidney cancer, but it appears the data, which haven't been released yet, must be pretty good because according to Schwab, Exelixis has "initiated a dialogue with regulatory agencies about these results to determine the potential for regulatory filings."

Finally, in the ongoing frenemies saga with Bristol-Myers Squibb: Data testing the combination of Cabometyx and Opdivo in genitourinary tumors, including kidney cancer, is scheduled to be presented at the European Society for Medical Oncology congress in October. While the two companies battle it out for second-line kidney cancer patients, the drama may be short-lived if the combination works better than either drug alone.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.