What happened

Shares of Exelixis (NASDAQ:EXEL), an oncology-focused biotech, surged 46.4% higher in November, according to data from S&P Global Market Intelligence. Investors were pleasantly surprised by a third-quarter report that suggests competition for its lead drug, Cabometyx, might not be too fierce.

So what 

Ahead of Exelixis's third-quarter report in early November, investors were nervous about competition for newly diagnosed patients with renal cell carcinoma, the most common form of kidney cancer. Earlier this year, Opdivo plus Yervoy from Bristol-Myers Squibb (NYSE:BMY) earned approval to treat this group, and another combination on the way could be even tougher to beat.

A man in a suit touches an upward-sloping line.

Image source: Getty Images.

Exelixis soothed investor concerns last month with a third-quarter report that blew past expectations. Product sales rose 69% over the previous year and 12% over the previous quarter. On the bottom line, earnings soared 58% on year to $0.41 per share. 

Investors also cheered a European approval for Cabometyx as a treatment for liver cancer patients who relapse after standard chemotherapy, a group in need of new treatment options. The approval triggers a $40 million milestone payment from Exelixis' marketing partner, Ipsen.

Now what

In addition to milestone payments, Exelixis can also look forward to increased royalties from Ipsen in the years ahead. An application to treat liver cancer patients in the U.S. is currently under review, and the FDA is expected to issue its decision by Jan. 14.

Further ahead, a pivotal thyroid cancer study could produce top-line results that expand Cabmetyx's addressable population again. Net product revenue hit $443 million during the first nine months of the year, driven by kidney cancer sales that seem unaffected by Bristol's combination treatment. If Exelixis really can hang on to its share of the kidney cancer space, expansions to treat liver cancer could push Cabometyx sales well past the $1 billion mark in 2019.

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