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Exelixis (EXEL) to Report Q4 Earnings: What's in Store?

Zacks Equity Research

Exelixis, Inc. EXEL is scheduled to report fourth-quarter 2018 results on Feb 12, after the market closes.

Exelixis’ shares have gained 7.6% in the past six months compared with the industry’s decline of 13.5%.

 

The company has an excellent earnings surprise history, surpassing expectations in all of the trailing four quarters with average beat of 83.43%.  In the last reported quarter, the company beat expectations by 115.79%.

Let’s see what is in store for this quarter.

Factors Likely to Impact Results

Strong Cabometyx sales boosted the company’s third-quarter results and we expect the momentum to continue in the fourth quarter. The company experienced 11% increase in Cabometyx’s prescriber base in the third quarter as compared to that in the second quarter.

While the FDA approved Cabometyx tablets in April 2016 for the treatment of advanced renal cell carcinoma (“RCC”), the drug’s label was also expanded in December 2017 for the treatment of previously untreated advanced RCC. Since the drug is now approved for first-line RCC as well, the company can now cater to the entire patient population suffering from the disease.

In May 2018, Exelixis and partner Ipsen Biopharmaceuticals also obtained the European Commission (EC) approval for Cabometyx (20 mg, 40 mg and 60 mg) in the first-line treatment of adults with intermediate- or poor-risk advanced RCC. The approval will broaden the geographic reach of the drug as the market potential is significant for the first-line treatment of kidney cancer.

Moreover, Exelixis and partner Ipsen obtained EC approval for Cabometyx as a monotherapy for hepatocellular carcinoma (HCC) in adults who have previously been treated with Bayer’s Nexavar. In January 2019, the FDA also approved Cabometyx for HCC.

In September 2018, Exelixis announced that the National Comprehensive Cancer Network (NCCN) has updated its Clinical Practice Guidelines to include new recommendations for lead drug Cabometyx. As a result of the update, Cabometyx is now recommended by the NCCN for the treatment of advanced RCC, regardless of patient risk status (favorable-, intermediate- and poor-risk).

We expect sales to get a further boost, with an increase in the eligible patient population for Cabometyx in the United States. However, competition has increased in the RCC market, with the approval of Opdivo combined with Yervoy for the treatment of poor and intermediate risk first-line RCC.

Meanwhile, investors are expected to focus on pipeline development. In December 2018, Exelixis and Ipsen announced the initiation of a pivotal phase III study — COSMIC-312 — to evaluate a Cabometyx combination therapy in treatment-naïve advanced HCC. Moreover, an exploratory arm will also evaluate Cabometyx monotherapy in the first-line setting for similar patients.

Exelixis is developing cabozantinib in a broad development program, comprising more than 45 clinical studies across multiple indications. Exelixis inked agreements with Bristol-Myers BMY and Roche to develop cabozantinib in combination with immunotherapy agents.

Earlier, Exelixis announced encouraging results from the dose-escalation stage of the phase Ib COSMIC-021 study of Cabometyx in combination with Tecentriq in previously untreated advanced RCC. The combination was well tolerated and showed promising anti-tumor activity.

Exelixis expects total costs and operating expenses for 2018 to be $410-$420 million.

Earnings Whispers

Our proven model does not conclusively show that Exelixis will beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates. Unfortunately, that is not the case here, as you will see below.

Earnings ESP: Earnings ESP for Exelixis is -3.45%. The Zacks Consensus Estimate is pegged at 25 cents, while the Most Accurate Estimate is pegged at 24 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Exelixis carries a Zacks Rank #2, which is favorable. However, the negative ESP makes surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Exelixis, Inc. Price, Consensus and EPS Surprise

 

Exelixis, Inc. Price, Consensus and EPS Surprise | Exelixis, Inc. Quote

Stocks to Consider

Here are some companies you may consider, as our model shows that these have the right combination of elements to deliver a beat this quarter.

Mallinckrodt MNK has an Earnings ESP of +2.25% and a Zacks Rank #2. The company is scheduled to report results on Feb 26. You can see the complete list of today’s Zacks #1 Rank stocks here.

ACADIA Pharmaceuticals Inc. ACAD has an Earnings ESP of +3.89% and a Zacks Rank #3.

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