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What: Shares of Exelixis (NASDAQ:EXEL), a biotechnology company focused on developing drugs to treat cancer, rocketed higher by 18% during July, according to data from S&P Global Market Intelligence. Although no specific news event can be singled out for the move, two broader themes likely contributed to Exelixis' share price ascent.

So what: First, the U.S. stock market had a pretty strong rebound from its Brexit-based lows during July, which acted as a driving force for the biotech sector as a whole. It's not uncommon for biotech stocks to be more volatile than the overall market, meaning they'll overshoot to the upside when the stock market is gaining steam, and overshoot to the downside when it's pulling back. With the S&P 500 tacking on nearly 4% in July, biotech as a whole witnessed a nice bump.

However, I suspect the bigger driving force for Exelixis remains the hope behind Cabometyx and Cotellic. Remember that less than a year ago, the only drug approved for sale from Exelixis was Cometriq, a medication designed to treat a rare form of advanced medullary thyroid cancer. Even at its peak, this is perhaps a $75 million-per-year indication. Exelixis needed something else, and it got it with the approval of Cotellic in combination with Roche's (OTC:RHHBY) Zelboraf for the treatment of advanced metastatic melanoma, and Cabometyx for the treatment of second-line advanced renal cell carcinoma.

Recent data on Cabometyx in the CABOSUN trial also demonstrated strong efficacy in treatment first-line renal cell carcinoma, signaling to investors that Cabomeytx may have a label expansion to first-line RCC in its future.

Long story short, shareholders like myself are excited about seeing a rapid uptick in sales and label expansion opportunities coming to fruition.

Image source: Getty Images.

Now what: What happens next for Exelixis is the big unknown. Shareholders can fully expect Exelixis' sales to expand rapidly with Cabometyx and Cotellic hitting pharmacy shelves, but profitability is still likely a good two or three years out. In short, clinical data will probably continue to rule the roost.

Moving forward, the next big event to eye are the top-line results from CELESTIAL, which are expected in 2017. The CELESTIAL trial is examining Cabomeytx as a treatment for advanced hepatocellular carcinoma (i.e., liver cancer), with a statistically significant improvement in median overall survival (OS) as the primary endpoint.

What'll happen in this study is really anyone's guess. In the COMET studies involving cabozantinib (the scientific name for Cabometyx) for metastatic castration-resistant prostate cancer, Cabomeytx didn't even come close to a statistically significant improvement in median OS. Yet in the METEOR studies for renal-cell carcinoma, it hit a statistical improvement in progression-free survival and median OS relative to the placebo.

As for me and other Exelixis shareholders, I see no reason to jump off this train. Cabomeytx, if successful in CELESTIAL, could have peak annual sales potential north of $1 billion. With biotech stocks often conservatively valued at two to three times the peak annual sales estimates of their lead drug, Exelixis' current $2.1 billion valuation could still prove inexpensive.

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.