What happened

Exelixis (NASDAQ:EXEL) is down 12.3% at 2:18 p.m. EDT after an analyst at Leerink Partners downgraded the biotech to market perform. Management also sold some shares, which could be contributing to the downward direction of the share price.

So what

Exelixis is up 65% this year, even after today's sell-off, and it's up over 1,300% over the last three years; it's understandable if analysts and investors are wondering how much further the biotech can run. Of course, being called overvalued is one of the six signs of a Rule Breaker, so the worry isn't necessarily justified.

Freeway sign that reads "Downgrade next exit"

Image source: Getty Images.

Adding to the concerns, Stelios Papadopoulos, Exelixis' chairman, recently sold 200,000 shares worth about $5.5 million, and last week, Christopher Senner, Exelixis' chief financial officer, and CEO Michael Morrissey both executed some of their stock options and immediately sold the shares.

It's tempting to argue that the executives think the biotech is overpriced, but a quick look at SEC documents found that Senner sold shares at $4.20 last year, and Morrissey sold shares at $15. They're either bad at picking the top, or more likely, they needed the money for something else. Either way, the same is likely to be the case for these sales.

Now what

Rather than daily price movements, long-term investors should be more focused on how Exelixis is executing in selling Cabometyx and how the partnership selling Cotellic with Roche is going. In the second quarter, sales of Cabometyx were up 30% quarter over quarter, but Exelixis is going to have to keep the launch rolling to justify the current high valuation multiple.

Cabometyx is on track to expand sales with an upcoming FDA approval decision for use as a first-line treatment for kidney cancer, but Exelixis is going to face some tough competition from Bristol-Myers Squibb's immuno-oncology drugs that have also been shown to work in that patient population.