Exelixis, Inc. EXEL is scheduled to report second-quarter 2018 results on Aug 1, after the market closes.
Exelixis’ shares have lost 31.9% in the last six months as against the industry’s fall of 9.0%.
The company has a pretty good earnings surprise history, having surpassed expectations in the three of the trailing four quarters, with an average beat of 130.7%. In the last quarter, the company beat expectations by 131.2%. Let’s see what is in store for this quarter.
Why a Likely Positive Surprise?
Our proven model shows that Exelixis is likely to beat estimates this quarter as it has the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +1.13%. 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 #3, which when combined with a positive Earnings ESP increases the chances of an earnings beat.
Conversely, 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.
Factors Likely to Impact Results
Exelixis delivered a stellar first-quarter 2018 on strong performance of Cabometyx and we expect the momentum to continue in the second quarter also. Increases in market share, refills for patients already on therapy and continued expansion of the prescriber base should boost the drug’s demand.
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 target the entire patient population suffering from the disease.
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.
In May 2018, Exelixis and partner Ipsen also obtained the European Commission (EC) approval for Cabometyx (20 mg, 40 mg and 60 mg) for 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. The approval also triggered a milestone payment of $50 million to Exelixis from Ipsen, of which approximately $46 million was recognized as collaboration revenues in the first quarter of 2018.
Meanwhile, investors will also focus on pipeline development. 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 RHHBY to develop cabozantinib in combination with immunotherapy agents with various ongoing studies.
These collaborations entitle Exelixis to earn milestone payments and royalties that will boost its top line.
We remind investors that Exelixis has submitted an sNDA to the FDA for advanced hepatocellular carcinoma (HCC). The EMA also accepted the company's application for the addition of HCC indication.
Exelixis expects total costs and operating expenses for 2018 in the range of $430-$460 million.
Another Stock to Consider
Here is another company that you may consider, as our model shows that it also has the right combination of elements to deliver a beat this quarter.
ArQule, Inc. ARQL is scheduled to report second-quarter results on Aug 1. The company has an Earnings ESP of +80.0% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
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