Shares of Exelixis (NASDAQ:EXEL), a biopharmaceutical company focused on the development of therapies to treat cancer, surged another 15% during the month of September according to data from S&P Global Market Intelligence. Shares of the company have more than tripled since March. During September, two key catalysts pushed shares higher, while one bit of tepid news weighed down what could have been enormous monthly gains.
To begin with, on Sept. 13, in what was deemed as little surprise by Wall Street, the European Commission approved Cabometyx as a second-line treatment for advanced renal cell carcinoma. After Cabometyx delivered a trifecta of clinical improvements stateside – statistically significant improvements in overall survival, progression-free survival, and objective response rate – an approval in the EU seemed highly likely. Given that Exelixis forged a licensing agreement with Ipsen for the development and marketing of Cabometyx in most countries outside the United States, the approval triggered a $60 million milestone payment to Exelixis, which should further shore up its balance sheet.
Secondly, Exelixis received a boost from its Sept. 6 press release which announced the outcome of its first planned interim analysis of CELESTIAL, a phase 3 trial analyzing Cabometyx as a treatment for advanced hepatocellular carcinoma. Given that 50% of the defined events (disease progression or death) had taken place, the independent data monitoring committee suggested the trial continue as planned. The primary endpoint of this study is a statistically significant improvement in overall survival, thus the IDMC's suggestion that the trial continue implies that Cabometyx has some chance of succeeding and meeting that endpoint. Another planned analysis will occur when 75% of events have been reached.
On the downside, late in September Exelixis' stock was hit after phase 1 data showed that a combination of Cabometyx and Bristol-Myers Squibb's cancer immunotherapy Opdivo led to 9 of the 24 patients receiving a dose reduction due to adverse events in urothelial and genital cancer studies. Opdivo is currently the market share leader in second-line renal cell carcinoma, and there's been high hopes among Exelixis' shareholders that a combination therapy could yield benefits for both companies. Keep in mind that early data here does not imply that a combination of Cabometyx and Bristol-Myers' Opdivo in renal cell carcinoma wouldn't work. It's simply too early to tell either way.
As a shareholder of Exelixis, I'm clearly intrigued and excited about its future. Having the aforementioned trifecta of efficacy in renal cell carcinoma should allow it to chip away at Opdivo's market share, and the continuation of the CELESTIAL trial should be viewed positively by investors.
Furthermore, Exelixis appears to have a genuine shot at expanding the label for Cabometyx beyond just second-line in renal cell carcinoma. The CABOSUN study recently demonstrated superior results over the current first-line standard-of-care. If a late-stage study continues to demonstrate similar efficacy, Cabometyx's patient pool could more than double.
With the approval of Cabometyx in the U.S. and EU, and label expansions looking likely in the coming years, Exelixis has a genuine shot at being profitable on an ongoing basis by as early as 2018. In sum, it probably should be on your radar.
Sean Williams owns shares of Exelixis and is short Exelixis October $16 calls, but has no material interest in any 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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