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Exelixis in Transition

By Brian Orelli, PhD - Feb 27, 2018 at 4:09PM

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The biotech posted a disappointing quarter, but there's more growth ahead.

The sequential growth in sales of Exelixis' (EXEL 0.14%) Cabometyx came to a screeching halt in Q4, but fortunately a late-quarter FDA approval allowing the drug to be used earlier in the treatment regimen of kidney cancer patients, plus a potential approval for liver cancer patients, should help reaccelerate growth.

Exelixis results: The raw numbers

Metric

Q4 2017

Q4 2016

Year-Over-Year Change

Revenue

$120.1 million

$77.6 million

55%

Income from operations

$37.4 million

$38.9 million

(3.7%)

Earnings per share

$0.12

$0.12

0%

Data source: Exelixis.

What happened with Exelixis this quarter?

  • Cabometyx sales totaled $90.4 million while Cometriq added an additional $5.3 million. Combined sales were up 84% year over year, but down 1% quarter over quarter, which the company blamed on increased inventory in the third quarter that was used up in the fourth quarter; overall demand was up 5% sequentially, which is OK, but certainly not what we've seen earlier in the launch.
  • The rest of the revenue, $24.4 million, came from collaborations, which was fairly similar to the $25.7 million in the year-ago quarter.
  • The year-over-year income and earnings comparison makes it look like higher expenses ate up all the additional revenue generated, but it's an artifact of the year-ago quarter when Exelixis received a one-time rebate for disputed costs from Roche's Genentech unit over the expenses to sell Cotellic, inflating the profits in the prior-year period.
  • In October, Exelixis said the Celestial trial met its primary endpoint, with Cabometyx improving overall survival in patients with hepatocellular carcinoma (HCC), the most common form of liver cancer.
  • In December, the FDA approved Cabometyx for previously untreated advanced renal cell carcinoma (RCC), also known as kidney cancer, almost two months ahead of the FDA's goal date.
  • In January, Exelixis announced a deal with StemSynergy to license its cancer drugs targeting casein kinase 1 alpha. It's a preclinical deal, which is only costing the company $3 million up front and up to $3.5 million in research and development funding.
  • Updated data testing Cabometyx with Bristol-Myers Squibb's (BMY -0.95%) Opdivo plus Yervoy in patients with urothelial carcinoma and RCC was presented at the ASCO-GU meeting earlier this month, creating confidence of a positive readout for the phase 3 CheckMate 9ER trial that Bristol-Myers is running in patients with RCC.
  • At a different conference this month, doctors presented data showing that Cabometyx helps patients with differentiated thyroid carcinoma, leading Exelixis to decide to start a phase 3 trial testing the drug in those patients later this year.
Woman doctor talking to older male patient

Image source: Getty Images.

What management had to say

Following the aforementioned approval in previously untreated RCC, P.J. Haley, Exelixis' senior vice president of commercial, said the company is tracking the highest prescribers of Sutent and Votrient, which have 75% of the market, noting that "the number of Cabometyx prescriptions written by these top writers has approximately doubled in the first six weeks of Q1 relative to the first six weeks of Q4."

President and CEO Michael Morrissey told investors to look for more licensing deals like the one with StemSynergy as the company rebuilds its pipeline: "We expect to complete additional transactions in 2018, and we will provide more details as we announced those deals."

Looking forward

Management didn't give revenue guidance for 2018, which seems reasonable given the newly approved indication. In addition to an unknown ramp-up as Cabometyx takes market share from Sutent and Votrient, Exelixis will likely see new competition from Bristol-Myers and Roche, which are likely to get their combinations of Opdivo plus Yervoy and Tecentriq plus Avastin, respectively, approved to treat the same previously untreated RCC patients later this year. Exelixis' head start will help, but only a little.

Exelixis plans to submit the data from Celestial to the FDA in the first quarter, setting up a potential approval for Cabometyx in HCC patients by the end of the year.

Genentech expects data from the phase 3 IMblaze370 trial testing Cotellic plus Tecentriq in advanced colorectal cancer in the first half of this year, potentially increasing sales of Cotellic in 2019 and beyond. That combination is also being tested in IMspire170, a phase 3 trial in previously untreated patients with BRAF wild-type melanoma. Genentech is also running a trial testing Cotellic and Tecentriq plus Zelboraf in other melanoma patients, although both those trials are further behind the IMblaze370 trial.

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Stocks Mentioned

Exelixis, Inc. Stock Quote
Exelixis, Inc.
EXEL
$20.82 (0.14%) $0.03
Bristol Myers Squibb Company Stock Quote
Bristol Myers Squibb Company
BMY
$77.00 (-0.95%) $0.74

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