Please ensure Javascript is enabled for purposes of website accessibility

Why Exelixis, Inc. Rocketed Higher on Friday

By Brian Orelli, PhD - Jan 29, 2016 at 6:48PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

An upcoming catalyst gets amplified by the gyrating biotech sentiment.

What: Exelixis (EXEL -2.27%) ended Friday up 10.5% after the company announced Thursday after the closing bell that the European Medicines Agency (EMA) had accepted its application to market cabozantinib as a treatment for kidney cancer.

Eight hours earlier -- before the bell, so investors had time to digest the news during yesterday's trading, when Exelixis fell 2.8% -- the company announced that the FDA had accepted the equivalent marketing application to sell the drug in the U.S.

So what: Exelixis had already announced that the applications had been submitted to regulators, so their acceptance shouldn't have come as a surprise.

Both U.S. and EU regulators gave cabozantinib a shortened review period -- called a priority review in the U.S. and an accelerated assessment in the EU -- which adds value to Exelixis because an earlier approval means cabozantinib will generate revenue for the company, assuming it's approved, of course. And let's face it -- an approval seems like all but a sure thing. Cabozantinib beat Novartis' (NVS 1.41%) Afinitor in a head-to-head trial. Novartis' drug is currently the standard of care for the patients Exelixis is applying to treat.

But the accelerated assessment in the EU was already announced, and investors should have expected a priority review in the U.S. because the FDA had already granted Breakthrough Therapy designation for cabozantinib.

Now what: While it's hard to see how the news justifies a 10% increase in the stock, keep in mind that, even with the move, Exelixis is still down 18% for the year. It's hard to see how any company news justifies the decline, as well.

Exelixis is currently trading at the whim of investor sentiment about biotechs, which seem to be gyrating daily. Getting cabozantinib approved and on the market will give investors something fundamental to value the company on. Even the larger biotechs have seen wild swings based on sentiment, so the rocky road may never go away completely.

Brian Orelli has no position in any stocks mentioned. The Motley Fool recommends Exelixis. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Exelixis, Inc. Stock Quote
Exelixis, Inc.
EXEL
$21.06 (-2.27%) $0.49
Novartis AG Stock Quote
Novartis AG
NVS
$87.15 (1.41%) $1.21

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
379%
 
S&P 500 Returns
123%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/10/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.