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Exelixis (EXEL) Earnings & Revenues Beat Estimates in Q1

Zacks Equity Research

Exelixis, Inc. EXEL delivered better-than-expected results for first-quarter 2019, wherein both earnings and revenues beat estimates on strong performance by Cabometyx.

The company’s shares have lost 0.6% in the year so far against the industry’s growth of 2.8%.

Exelixis reported earnings of 27 cents, easily beating the Zacks Consensus Estimate of 24 cents. However, the bottom line declined from 40 cents in the year-ago quarter.

Net revenues came in at $215.5 million, up from $213.7 million in the year-ago quarter. The top line also surpassed the Zacks Consensus Estimate of $203.6 million.

Quarter in Detail

Net product revenues came in at $179.6 million, up 33.7% from the year-ago quarter, driven by continued growth of Cabometyx in the United States for the treatment of advanced renal cell carcinoma (RCC).

In April 2016, the FDA approved a tablet formulation of cabozantinib (distinct from the capsule form), under the brand name Cabometyx, for the treatment of advanced RCC in patients, who have received prior anti-angiogenic therapy. The company also expanded the drug’s label for the treatment of previously-untreated advanced RCC in December 2017.

Cabometyx generated $175.9 million of net product revenues, up from $171.6 million in the prior quarter. Patient demand grew 33% year over year and 3% sequentially, driven by both RCC and HCC. New Prescriptions were up by 17% sequentially.

Cometriq (cabozantinib capsules), for the treatment of medullary thyroid cancer, generated $3.7 million in net product revenues.

Total collaboration revenues were $35.9 million compared with $79.5 million in the year-ago quarter.

In the reported quarter, research and development expenses increased 67.4% to $63.3 million, stemming from personnel expenses and clinical trial costs. Selling, general and administrative (SG&A) expenses were $60.1 million, up 11.3% year over year, driven by increases in personnel expenses and stock-based compensation.

Pipeline Update

The pipeline progress in the year so far has been encouraging. Cabometyx received another FDA approval for the treatment of patients with hepatocellular carcinoma (HCC) in January 2019.

In April, CheckMate 9ER, the phase III trial evaluating the combination of cabozantinib and Opdivoversus Pfizer’s PFE Sutent in patients with previously-untreated advanced or metastatic RCC, completed enrollment. The study was sponsored by Bristol-Myers Squibb Company BMY and co-funded by Exelixis, and partners Ipsen and Takeda.

Exelixis initiated a multicenter, randomized, double-blinded, controlled phase III study, COSMIC-313. The study is evaluating Cabometyx in combination with Opdivo and Yervoy versus Opdivo and Yervoyin in patients with previously-untreated advanced RCC. The primary endpoint of the trial is progression-free survival, and the secondary endpoints are overall survival and objective response rate.

In January 2019, partner Daiichi Sankyo announced that Minnebro (esaxerenone) tablets were approved by the Japanese Ministry of Health, Labour and Welfare as a treatment for patients with hypertension. The compound was identified during the prior research collaboration between Exelixis and Daiichi Sankyo, which the companies entered in March 2006, and has been subsequently developed by the latter.

Exelixis submitted an investigational new drug (IND) application in February 2019 to the FDA for XL092, a next-generation small molecule tyrosine kinase inhibitor targeting VEGF receptors, MET and other kinases implicated in cancer’s growth and spread. Following the FDA’s acceptance of the IND filing, the company initiated a phase I dose escalation trial evaluating the pharmacokinetics, safety and tolerability of XL092 in patients with advanced solid tumors, with the primary objective of determining a dose for daily oral administration of XL092 suitable for further evaluation.

2019 Guidance

R&D expenses are expected to be between $285 million and $315 million. SG&A expenses are expected to be between $220 million and $240 million.

Our Take

Exelixis’ first-quarter results were impressive despite headwinds from both an inventory draw down and higher gross-to-net fees. The drug gained market share throughout the first quarter for the RCC indication. The initial traction for the HCC indication in the second and third-line setting was encouraging as well.

The company ended the quarter with 34% market share, backed by its broad label for advanced RCC. The company experienced a 10% increase in Cabometyx’s prescriber base from the fourth quarter.

We expect investors to focus on further label expansion of cabozantinib. The drug is also being evaluated in various studies with Roche’s RHHBY Tecentriq.

Zacks Rank

Exelixis currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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