What happened

Shares of Exelixis (NASDAQ:EXEL), a biotech company focused on the development of therapies to treat cancer, exploded higher by 104% in 2017, according to data from S&P Global Market Intelligence. The catalysts behind this move all tie in, some way or another, with the company's lead drug, Cabometyx.

So what

If we were to single out perhaps the biggest market-moving event of the year for Exelixis, it probably was the mid-June announcement that an independent radiology committee review confirmed the results from the company's phase 2 Cabosun study involving Cabometyx in first-line advanced renal cell carcinoma (RCC).

A businessman holding up a card that says FDA approved.

Image source: Getty Images.

In May 2016, Exelixis had announced that Cabosun met its primary endpoint of a statistically significant and clinically meaningful improvement in progression-free survival in a head-to-head against current standard-of-care in first-line advanced RCC, Pfizer's (NYSE:PFE) Sutent. Having already been approved to treat second-line advanced RCC, the strong results from the phase 2 Cabosun study allowed for an expedited supplemental new drug application to expand the drug's label. 

Second, just last month, the Food and Drug Administration announced that it had approved Cabometyx in first-line advanced RCC, based on the results of the Cabosun study. Unlike second-line RCC, where Cabometyx hit pharmacy shelves after cancer immunotherapy Opdivo from Bristol-Myers Squibb (NYSE:BMY), the Cabosun results and FDA approval gave Cabometyx a foot in the door ahead of Bristol-Myers on this occasion. Not to mention, first-line advanced RCC is an even larger patient pool than second-line RCC. 

Third, we can't overlook the other important study on the docket last year: the phase 3 Celestial trial. Cabometyx met its primary endpoint of a statistically significant and clinically meaningful improvement in median overall survival compared to placebo in patients with advanced hepatocellular carcinoma (HCC). It looks to have a very good chance of yet another label expansion in 2018. 

And finally, Exelixis had a tendency to trounce Wall Street's sales and profit expectations in all four quarters last year. Exelixis topped Wall Street's earnings-per-share expectations by $0.13, $0.06, $0.02, and $0.18, in Q4 2016, and then Q1, Q2, and Q3 of 2017, respectively. This is a result of Cabometyx launching far better than expected out of the gate. Moving into the black on a recurring basis so quickly certainly helped Exelixis' stock.

Three institutional investors cheering in front of their computers.

Image source: Getty Images.

Now what

Of course, the big question now is whether Exelixis has more room to run higher. While I would certainly suggest tempering your expectations after its doubling in 2017, I do believe there could be modest upside from here. And I promise that's not just the shareholder in me talking.

Beating Bristol-Myers to the punch in first-line advanced RCC, and running circles around Pfizer's Sutent in Cabosun, should allow for a very quick uptick in sales of the drug over the next two to three years as it gains market share. Though Exelixis doesn't have its foot in the door in advanced HCC yet, it should within the next couple of months. By 2019 or 2020, we should be talking about a blockbuster drug with $1 billion or more in annual sales.

Despite the run-up in Exelixis' share price, the company is only valued at roughly 18 times its 2020 EPS. Though that's looking pretty far down the road, the new indications Cabometyx has and should tack on, along with ongoing partnered studies with Bristol-Myers' Opdivo that could translate into additional label expansion opportunities, leave plenty of room for margin and EPS expansion. It may also attract Big Pharma buyers that are interested in adding a fast-growing biotech like Exelixis to their pipeline.

Long story short, this shareholder still sees blue skies and modest upside for Exelixis in 2018.

Sean Williams owns shares of Exelixis. The Motley Fool owns shares of and recommends Exelixis. The Motley Fool has a disclosure policy.