Shares of Exelixis (NASDAQ:EXEL), a biotechnology company focused on the development of cancer therapeutics, surged 60% in November, according to data from S&P Global Market Intelligence. The basis for the move can be traced to two key catalysts.
Without question, the biggest upside push in November came from Exelixis' third-quarter earnings report on Nov. 3. For the quarter, Exelixis reported $62.2 million in revenue, a year-over-year increase of 531% and nearly $17 million higher than Wall Street had forecast. Second-line renal cell carcinoma (RCC) drug Cabometyx wound up hitting $31.2 million in sales, while Cometriq for advanced medullary thyroid cancer hit $11.5 million in revenue.
Exelixis' net loss for the quarter wound up shrinking to $11.3 million, or $0.04 per share, from a reported loss of $45.5 million, or $0.21 per share, in the prior-year quarter. Comparatively, Wall Street had been forecasting a much wider loss of $0.12 per share.
As another added bonus in its Q3 report, Exelixis announced that the approval of Cabometyx in all 28 EU countries triggered a $60 million milestone payment from licensing partner Ipsen, which will be recognized during the fourth quarter.
The other substantial catalyst for Exelixis was Donald Trump's winning the presidency. Though Hillary Clinton and Trump both consider drug pricing in the U.S. to be out of touch with reality, Clinton was the candidate who took a more hard-line approach to drug-pricing reforms. Trump may be too busy with other policy proposals to devote his time, at least early in his term, to prescription-drug reform. This gives Exelixis and other cancer drug developers a clean bill of health with regard to their pricing power for some time to come.
As a longtime shareholder of Exelixis, I couldn't be more pleased with its third-quarter report or the direction in which management is taking the company.
In particular, Cabometyx has a genuine shot at blockbuster sales if the cards keep falling its way. Cabometyx is the only second-line RCC drug that delivered a "trifecta" in clinical trials. In other words, it generated a statistically significant improvement over the placebo in overall response rate, overall survival, and progression-free survival. This alone should allow Cabometyx to garner a good chunk of market share, even if cancer immunotherapy Opdivo is currently dominant in second-line RCC.
There's also plenty of hope for label expansion opportunities with Cabometyx. In the midstage CABOSUN study against Pfizer's (NYSE: PFE) Sutent in first-line advanced RCC, Cabometyx demonstrated a statistically significant 31% reduction in the rate of disease progression or death. There's hope that Cabometyx could become a first-line RCC therapy sometime down the road.
Additionally, Cabometyx is being examined in the phase 3 CELESTIAL study as a treatment for hepatocellular carcinoma (liver cancer), with a top-line readout due in 2017. The primary endpoint of the CELESTIAL study is a statistically significant improvement in overall survival. Earlier this year, the independent data-monitoring committee suggested CELESTIAL continue as planned, which signifies Cabometyx has a shot at hitting its primary endpoint.
With Exelixis looking as if it could begin generating recurring profits within the next three to six quarters, this recent run in Exelixis' shares may not be over.
Sean Williams owns shares of Exelixis, but has no material interest in any other 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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