Image source: Getty Images.

Who said anything about selling in May and going away? Since May began, the broad-based S&P 500 index has gained nearly 5%, with a post-Brexit bounce and second-quarter earnings leading the way higher for the U.S. stock market.

This could be the best stock in August

But if there's one stock I could single out that could be primed to be August's best stock -- and if being a total "homer" is allowed -- I'd have to choose cancer-focused drug developer Exelixis (NASDAQ:EXEL). Shares of the company are already up 21% during the month of August through Aug. 4, and they're up 96% since the beginning of the year. As a shareholder of Exelixis, I can tell you the upward ride has felt long overdue -- but it may not be done yet.

The most recent catalyst for Exelixis was the release of its second-quarter earnings results after the closing bell on Wednesday, Aug. 3. Wall Street had been expecting Exelixis to report a loss of $0.27 per share on revenue of $18 million. Instead, Exelixis' loss came in at only $0.16 per share, and the company doubled expectations with $36.3 million in sales. Plus, management forecast that the company would end the year with a healthy $250 million to $270 million in cash and cash equivalents.

While I was certainly pleased with the results, no doubt along with other Exelixis shareholders, there's a much bigger picture to work with than just a single quarterly beat. Here are just some of the catalysts working in favor of Exelixis at the moment.

Cabometyx is king

Image source: Exelixis.

The clear growth driver for Exelixis has to be Cabometyx, which was approved in April by the Food and Drug Administration as a treatment for second-line advanced renal cell carcinoma (RCC). The path to success for Cabometyx won't be easy since Bristol-Myers Squibb's (NYSE:BMY) cancer immunotherapy Opdivo beat Cabometyx to market in second-line advanced RCC and has garnered substantial market share. But Cabo has a few tricks up its sleeve.

To begin with, Cabometyx is the only RCC therapy to demonstrate a trifecta of effectiveness. In clinical studies, Cabometyx led to a statistically significant improvement over Afinitor in terms of progression-free survival (the primary endpoint of the METEOR trial for second-line advanced RCC), overall survival, and overall response rate. Being the only therapy to claim this trifecta could net Cabometyx more second-line RCC scripts than some Wall Street analysts account for.

Secondly, Cabometyx has label expansion opportunities galore. In the more recently released CABOSUN data for first-line RCC, Cabometyx generated a statistically significant improvement in progression-free survival in treatment-naive patients compared to Pfizer's Sutent. Though a phase 3 study will be needed for confirmation, this data is encouraging and suggestive of a possible label expansion in the offing.

Image source: Bristol-Myers Squibb.

Likewise, Exelixis has also taken the "if you can't beat them, consider joining them" attitude. Cancer immunotherapies like Bristol-Myers' Opdivo have generally worked better in combination with existing therapies rather than as monotherapies. The two companies have ongoing combination trials that could set a new standard in advanced RCC treatment and boost Exelixis' market share in the process.

Looking ahead, Cabometyx could have a shot at further label expansion if the CELESTIAL data works in its favor. CELESTIAL is a late-stage study examining Cabometyx as a treatment for advanced hepatocellular carcinoma, with a statistically significant improvement in overall survival as the primary endpoint. Data from this study is expected sometime next year.

Cotellic and cash balance

Beyond Cabometyx, two additional factors are expected to provide a boost -- or at the very least buoy Exelixis' valuation.

On one hand we have Cotellic, an in-house therapeutic that licensing partner Roche (OTC:RHHBY) combined with Zelboraf to create a new combo drug for metastatic melanoma. In November, the FDA approved the combination, clearing the way for Exelixis to reap the rewards of a new channel of revenue. It's worth noting that Exelixis will be entitled to a large percentage of early revenue from the sale of Cotellic, but as sales grow, the lion's share of sales and profit will shift to Roche. Nonetheless, it's another source of revenue for the company beyond just Cometriq for the rare indication of metastatic medullary thyroid cancer, and Cabometyx for second-line advanced RCC.

Image source: Getty Images.

Additionally, Exelixis finally landed itself a marketing partner for Cabometyx earlier this year. Ipsen (OTC:IPSEY) agreed to give Exelixis $200 million in up-front cash to license Cabometyx globally, with the exception of the U.S., Canada, and Japan. Exelixis is also free to earn up to $545 million in regulatory, development, and sales-based milestones, as well as up to a 26% tiered royalty on global sales. Having Ipsen in Exelixis' corner means having an experienced sales staff to manage Cabometyx's overseas sales. More important, it means fewer worries about running out of cash while Cabometyx and Cotellic sales ramp up. 

Exelixis ended the second quarter with $384 million in cash, cash equivalents, and investments, which should be a comfortable level of capital to run its ongoing operations.

At the pace Exelixis has set with better-than-expected Q2 revenue, the company could be on pace for an annual profit as soon as 2018, and it may be cash flow positive as soon as the end of 2017. Drug developers that are profitable have a tendency to trade at multiple times the expected peak annual sales of their lead drug. With Cabometyx potentially bringing in around $1 billion annually at its peak (depending on the results of multiple ongoing studies), Exelixis' current $2.5 billion valuation could still prove to be a bargain.

Up 21% already in August, this top stock doesn't appear to be done just yet.

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.