Why did investors hit the exits last month? Despite a strong month for biotech stocks in general, Exelixis' shares were essentially trading sideways over the course of October -- that is, up until the company reported its third-quarter earnings after the bell on Oct. 30. Shares promptly dropped by 10% during the next day's trading session.
What touchstone issue sparked this sell-off? Exelixis' shareholders apparently weren't pleased with the company's financial performance for the quarter. Although the biotech did top FactSet's revenue estimate for the three-month period, Exelixis' Q3 net product revenue of $191.8 million actually came in below the $193.7 million generated during the second quarter of 2019.
A quarter-over-quarter decline in net revenue certainly isn't the end of the world. But investors seemingly took this news as hard evidence that Exelixis' flagship cancer medication Cabometyx may have already hit a commercial plateau. It is, after all, facing stiff competition from rival treatments marketed by heavyweights Merck and Pfizer.
Should investors hit the panic button? Absolutely not. Exelixis is slated to roll out key clinical data in early 2020 that could significantly boost Cabometyx's sales in the years ahead. So while it's always disappointing whenever one of your stocks drops by 10% in a single day, there's good reason to stay the course with this promising cancer treatment stock.