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Why Exelixis Stock Broke Down in October

By George Budwell - Nov 11, 2019 at 10:39AM

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Investors were none too happy with the cancer specialist's Q3 results last month.

What happened

Shares of cancer specialist Exelixis ( EXEL -3.88% ) dropped by 12.6% in October, according to data from S&P Global Market Intelligence

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.   

A chalkboard chart illustrating a downward trend.

Image source: Getty Images.

So what

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.

Now what

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.  

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.

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