Why Is Exelixis (EXEL) Down 15.6% Since Last Earnings Report?

It has been about a month since the last earnings report for Exelixis (EXEL). Shares have lost about 15.6% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important drivers.

Exelixis Beats on Earnings, Misses on Sales in Q4

Exelixis reported earnings of $0.22, handily beating the Zacks Consensus Estimate of $0.15. The bottom-line figure, however, declined from the year-ago quarter’s $1.15.

Net revenues came in at $240.3 million, increasing from the $228.6 million reported in the year-ago quarter. However, the revenue figure marginally missed the Zacks Consensus Estimate of $240.7 million.

Quarter in Detail

Net product revenues came in at $194.9 million, up 10.6% from the year-ago quarter, on continued growth of Cabometyx in the United States for the treatment of advanced renal cell carcinoma (RCC).

Cabometyx received another FDA approval for the treatment of patients with hepatocellular carcinoma, who have been previously treated with sorafenib, in January 2019. The label expansion of the drug for this indication in the United States also boosted sales.

Cabometyx generated $181.1 million of revenues. Patient demand grew 11% year over year and up 3% sequentially. Prescriber base grew 35% year over year and 6% sequentially.

Cometriq (cabozantinib capsules), for the treatment of medullary thyroid cancer, generated $13.8 million in net product revenues.

Exelixis also earned $17 million in royalty revenues based upon Ipsen’s cabozantinib-related revenues in the final quarter of 2019.

Total collaboration revenues were $45.4 million, down from the $52.4 million recorded in the year-ago quarter.

In the reported quarter, research and development expenses flared up significantly to $94.4 million from the $57.3 million due to rise in clinical trial costs, license and other collaboration costs, and personnel expenses. Selling, general and administrative (SG&A) expenses were $58 million, up 10.3% year over year, resulting from rise in personnel expenses and stock-based compensation.

Pipeline Update

In December 2019, Exelixis announced a collaboration agreement with Roche to evaluate cabozantinib in combination with Tecentriq, Roche’s PD-L1 immune checkpoint inhibitor, in patients with locally advanced or metastatic solid tumors. The clinical program, which will be co-funded by the companies, is expected to include three phase III pivotal trials in advanced non-small cell lung cancer, metastatic castration-resistant prostate cancer (mCRPC) and RCC.

Exelixis also announced positive results from IMspire150, the phase III study of Tecentriq, Cotellic and Zelboraf in patients with previously untreated BRAF V600 mutation-positive advanced melanoma. Genentech, a member of the Roche Group, Exelixis’ collaborator and the sponsor of the IMspire150 trial, informed Exelixis that the study met its primary endpoint of progression-free survival.

Based on continued encouraging efficacy and safety data, Exelixis plans to further expand the mCRPC cohort of COSMIC-021, the phase Ib trial of cabozantinib in combination with Tecentriq in patients with locally advanced or metastatic solid tumors. The cohort, which was previously expanded from 30 to 80 patients last July, will now include up to 130 patients.

2019 Results

Revenues for 2019 came in at $967.8 million, up from the prior year’s $853.8 million. Earnings per share came in at $1.16 compared with $1.55 per share reported in 2018.

2020 Guidance

Revenues are projected at $850-$900 million, while product revenues are estimated in the range of $725 million to $775 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Exelixis has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions indicates a downward shift. It comes with little surprise Exelixis has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.