What Should You Look For In Exelixis, Inc. (NASDAQ:EXEL)’s 4Q Earnings?

Exelixis, Inc. (NASDAQ:EXEL)

Exelixis, Inc. (NASDAQ:EXEL) is scheduled to release its Q4 2016 results on February 27 and Wall Street has already lined up its expectations for the quarter. The stakes seem to be high for the company given its mixed track record of earnings performance over the last several quarters.

Analysts on the average are expecting Exelixis to post EPS loss of $0.01 on revenue of $64.9 million in 4Q16. Exelixis reported EPS loss of $0.04 on revenue of $62.2 million in the last quarter, topping the consensus that called for EPS loss of $0.13 on revenue of $42.9 million. Exelixis’ earnings have topped expectations three times in the last four quarters.

While investors will be looking to see if Exelixis beats expectations in Q4 2016, significant attention will likely be on the company’s drug called Cabometyx (cabozantinib). The product has a potential to transform Exelixis’ financial performance.

Cabometyx is approved in the US and the EU as a treatment for a certain cancer indication in certain patient classes. Exelixis, Inc. (NASDAQ:EXEL) has also inked several strategic deals involving development and commercialization of Cabometyx. The company is working to extend the drug’s treatment label so that it can generate even more revenue from it.

Regulatory approvals

The FDA approved Cabometyx as a treatment for advanced RCC (renal cell carcinoma) for patients who have undergone prior treatment with different therapy. The drug is approved in the EU for a similar condition in the same class of patients.

Exelixis, Inc. (NASDAQ:EXEL) has been working to expand the drug’s treatment mandate, and it plans to submit supplemental applications for regulatory review that could end with Cabometyx being recommended for a first line treatment for advanced RCC patients.

Exelixis sees huge opportunity for its compound cabozantinib, which it believes could treat several other types of cancers beyond the ones it has been approved to tackle. As such, the company is collaborating with a number of leading pharmaceutical companies to develop and commercialize the compound.

Strategic partners

Exelixis’ partners in developing and commercializing cabozantinib include Merck & Co., Inc. (NYSE:MRK), Bristol-Myers Squibb Co (NYSE:BMY), Takeda Pharmaceutical Co Ltd (ADR) (OTCMKTS:TKPYY), DAIICHI SANKYO COM NPV (OTCMKTS:DSKYF) and Ipsen. If cabozantinib meets expectations as agreed by these partners, Exelixis would be in for milestone and royalty payments, giving a boost to its topline.

But for anything that goes through regulatory approval, nothing is guaranteed, which means that Exelixis could still miss the payments promised under the cabozantinib deals. In the case of Takeda, Exelixis gave the company exclusive rights to commercialize Cabometyx in Japan. In return, Exelixis is receiving $50 million in upfront payment and is also eligible to receive up to $95 million in milestone payments.

Stock movement

Shares of Exelixis, Inc. (NASDAQ:EXEL) retreated more than 3.9% to $21.73 in the last session. However, the stock is up more than 45% year-to-date and more than 430% over the last one year.

2/23/2017
Ticker Symbol EXEL
Last Price a/o, 4:02PM EST  $                       21.74
Average Volume (mlns) 5.42
Market Cap (blns)  $               6.10
Sales (mlns) $123.80
Shares Outstanding (mlns) 280.63
Share Float (mlns) 260.59
Shortable Yes
Optionable Yes
Inside Ownership 0.80%
Short Float 6.06%
Short Interest Ratio 2.91
Quarterly Return 26.62%
YTD Return 45.81%
Year Return 461.76%

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 96 hours. All information, or data, is provided with no guarantees of accuracy.

About the author: Monica Gray has an undergraduate degree in Accounting and an MBA – earned with Honors. She has six years of experience in the financial markets and has been a securities analyst for the past two years.

Author: Monica Gray

Monica has an undergraduate degree in Accounting and an MBA she earned - with Honors. She has six years of experience in the financial markets and has been an analyst for the past two years.

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