What happened

Shares of Exelixis (NASDAQ:EXEL) have jumped 9.8% as of 11:47 a.m. EDT Thursday, having been up as much as 13% earlier, after the biotech released solid second-quarter earnings after the bell yesterday. The company continues to expand sales of its lead drug, Cabometyx, assuaging investors' fears that competition might cut into the drug's growth.

So what

Sales of Cabometyx and Cometriq, which is the same active drug sold for thyroid cancer, jumped 66% year over year, mostly because Cabometyx is getting used more for renal cell carcinoma (RCC), the most common form of kidney cancer.

The rest of the revenue line looked pretty good, too. There was a $25 million milestone payment from Exelixis' ex-U.S. partner Ipsen Pharma for sales reaching a specific threshold. Royalties from Ipsen and Roche's Genentech unit, which sells Exelixis' other approved drug, Cotellic, also helped boost revenue.

Doctor talking to patient around a table

Image source: Getty Images.

While this was certainly a solid second quarter, the double-digit jump today was likely due to investors' worry about competition from Bristol-Myers Squibb's (NYSE:BMY) immuno-oncology combination Opdivo plus Yervoy. Shares have been off their all-time high as investors pondered how Bristol-Myers Squibb's FDA approval for first-line RCC would affect sales of Cabometyx.

It appears the answer is not much, as even if patients are getting Bristol-Myers Squibb's cocktail first, many are receiving Cabometyx second, helping the drug take market share from Pfizer's Sutent -- the previous first-line standard of care -- and other older medications used for RCC.

Now what

The ironic thing about this competition between Exelixis and Bristol-Myers Squibb is that they have a partnership testing Cabometyx plus Opdivo in a phase 3 trial called CheckMate 9ER, so any worry of competition may be short-lived if the combination proves better than either of the drugs individually.

Exelixis also has the potential to expand Cabometyx into hepatocellular carcinoma (HCC), a form of liver cancer, with a decision from the FDA expected on or before Jan. 14, 2019. Cabometyx will be used as a late-stage option for HCC, so the opportunity is likely to be smaller than for RCC, but should still provide some additional revenue growth in 2019 and beyond.

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.