What happened

Shares of Exelixis (NASDAQ:EXEL), a biopharmaceutical company focused on the development of drugs to fight cancer, continued an amazing two-year run by advancing another 12% during the month of December, according to data from S&P Global Market Intelligence. The reason behind Exelixis' solid performance can be traced to a favorable decision from the Food and Drug Administration regarding its lead cancer drug Cabometyx on Dec. 19.

So what

According to a press release from Exelixis, the FDA approved an expansion of Cabometyx's label for treatment-naive patients with advanced renal cell carcinoma (RCC). Cabometyx is already approved as a treatment for second-line advanced RCC. The expanded label was a result of strong clinical data from the phase 2 Cabosun trial, which demonstrated a statistically significant and clinically meaningful improvement in progression-free survival when compared to Pfizer's (NYSE:PFE) Sutent, the current standard-of-care in first-line advanced RCC.

A biotech lab technician holding a vial of blood and taking notes.

Image source: Getty Images.

To be more specific, Cabometyx reduced the rate of disease progression or death by an impressive 52%, and it led to an improvement in progression-free survival of 3.3 months (8.6 months versus 5.3 months for Sutent). 

It's worth pointing out that this approval comes just two months after Exelixis' development partner in most ex-U.S. countries, Ipsen, announced that the global phase 3 Celestial study in patients with advanced hepatocellular carcinoma (HCC) had also met its primary endpoint of a statistically significant and clinically meaningful improvement in median overall survival compared to patients taking a placebo. 

In other words, Exelixis has been racking up clinical victories of late.

Now what

The big question now is just how successful Cabometyx can be when going up against Pfizer's Sutent. As the Cabosun study demonstrated, Cabometyx shouldn't have any issues on the basis of efficacy. However, Sutent is an established therapy in first-line RCC, and it can be tough to break into a new indication when you're facing a deep-pocketed goliath like Pfizer and an insurance industry that's become accustomed to Sutent as the go-to choice. Nonetheless, I am expecting Cabometyx to continually strip market share away from Sutent with each passing quarter in the intermediate term.

Prescription capsules lying atop a messy pile of hundred dollar bills.

Image source: Getty Images.

I'm expecting the FDA to approve a label expansion for advanced HCC as well. While nothing is a given with the FDA, the regulatory agency has a good bead on the safety profile of Cabometyx, and it easily met the mark of statistical significance in the Celestial study.

At this point, Exelixis has an opportunity to cross $1 billion in annual sales by perhaps as early as 2019. It'll depend on how quickly the drug pulls market share from Sutent, as well as how quickly it grows as a treatment for advanced HCC; but Exelixis has made a habit of trouncing Wall Street's projections in recent quarters.

As a longtime shareholder, I see no red flags, and would suggest that modest upside may still be had.

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.