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A month has gone by since the last earnings report for Exelixis (EXEL). Shares have lost about 9.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Exelixis due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Exelixis’ Q2 Earnings and Revenues Surpass Estimates
The company reported earnings of 21 cents per share, beating the Zacks Consensus Estimate of 12 cents. The bottom-line figure, however, declined from the year-ago quarter’s 25 cents per share due to higher R&D expenses.
Net revenues came in at $259.5 million, increasing from the $240.3 million reported in the year-ago quarter. Revenues also beat the Zacks Consensus Estimate of $233 million.
Quarter in Detail
Net product revenues came in at $178.7 million, down from $193.7 reported in the year-ago quarter due to a decrease in sales volume. Net product revenues in the second quarter of 2020 were negatively impacted by the COVID-19 pandemic and an inventory built by wholesalers and end customers in the first quarter of 2020, which generally reversed in the second quarter.
Lead drug, Cabometyx, is approved in the United States for the treatment of advanced renal cell carcinoma (RCC). The drug was also approved for the treatment of patients with hepatocellular carcinoma, who have been previously treated with sorafenib, in January 2019.
Cabometyx generated $173.6 million of revenues. Cometriq (cabozantinib capsules) for the treatment of medullary thyroid cancer generated $5.1 million in net product revenues. Exelixis earned $16.3 million in royalty revenues on the basis of cabozantinib-related revenues generated by its partner, Ipsen.
In the reported quarter, research and development expenses increased to $114.9 million from the year-ago figure of $81.9 million due to a rise in clinical trial costs (COSMIC-312, COSMIC-313, CONTACT-02 and COSMIC-021). and personnel expenses. Selling, general and administrative (SG&A) expenses were $59.8 million, up from $58.8 million in the year-ago quarter.
In April 2020, Exelixis and Bristol-Myers announced that CheckMate -9ER, the phase III study evaluating Opdivo in combination with Cabometyx compared to Sutent in previously untreated advanced or metastatic RCC, met its primary endpoint of progression-free survival at the final analysis as well as the secondary endpoints of overall survival at a pre-specified interim analysis and objective response rate. This preliminary analysis of data showed a favorable safety profile for the combination of a 40 mg dose of cabozantinib with Opdivo.
In June and July, Exelixis announced the initiation of CONTACT-01, CONTACT-02 and CONTACT-03, three global phase III studies of cabozantinib in combination with Roche’s (RHHBY) Tecentriq in patients with previously treated metastatic non-small cell lung cancer (NSCLC), castration-resistant prostate cancer (CRPC) and RCC, respectively.
2020 Guidance Updated
Revenues are now projected at $900-$950 million (previous guidance: $850-$900 million) while product revenues are estimated in the range of $725-$775 million for 2020.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -52.63% due to these changes.
Currently, Exelixis has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Exelixis has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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