Exelixis (EXEL 2.00%) continues to grow sales of its cancer drug Cabometyx, thanks in large part to data showing the drug works well in combination with Bristol Myers Squibb's (BMY -2.21%) Opdivo. In this video from Motley Fool Live, recorded on May 10, Fool.com contributors Brian Orelli and Keith Speights discuss the biotech's first-quarter results and why the increased revenue failed to translate into an as impressive increase in earnings.

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Brian Orelli: Cancer drug company Exelixis reported revenue growth in the first quarter, but it's ramping up R&D, which hurt the bottom line.

Keith Speights: This biotech announced mixed results. Revenue narrowly beat Wall Street expectations; its bottom line missed the analyst estimates. But as you mentioned, R&D spending was up quite a bit. There was a year-over-year increase of $57 million. But Exelixis also spent a little over $39 million more on selling general and administrative expenses. Between those two increases, $34.6 million of it was due to higher stock-based compensation. That was a big driver for the company's increased spending.

But on Friday, the stock rose over 8%. This was the day after Exelixis reported its Q1 results. I think investors, more than anything, just like the direction and the trajectory for this biotech. The company has solid growth prospects with Cabometyx in combination with other drugs, particularly with Opdivo, which is a cancer immunotherapy, as well as another cancer drug, Tecentriq. Exelixis is making progress with advancing programs into clinical testing. It has a good hefty cash stockpile of $1.6 billion. I suspect that the company will use at least some of that to beef up its pipeline, probably through some licensing deals. I think the future still looks pretty good for Exelixis.

Orelli: Yeah, it's done quite a few early-stage licensing deals, and then it's also ramping up its internal discovery programs after shutting that down for quite a while while it was waiting for Exelixis to get through phase 3 clinical trials. It got some failures in prostate cancer, I think, and then it finally had success in kidney and liver cancer.

The weird thing about Exelixis is that it was very profitable when it launched in kidney and liver because it didn't have any research -- the research [expense] was very minimal, and now it's going back to being an unprofitable company because it's ramping up in research. But it has to do that because otherwise, eventually, Cabometyx will give off patent, and then it won't have anything. It's a necessary evil, but it's resulting in the weird thing where the company wasn't profitable, and then it was profitable and now it's back to not profitable again.

Speights: I don't think any shareholders of this biotech are concerned that R&D spending is going up.

Orelli: No. As I said, it's a necessary evil.

Speights: Yeah.