Exelixis (EXEL) Up 10.8% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Exelixis (EXEL). Shares have added about 10.8% in that time frame, outperforming the S&P 500.Will the recent positive trend continue leading up to its next earnings release, or is Exelixis due for a pullback? 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 catalysts. Exelixis Beats on Q3 Earnings and Sales, Raises Annual OutlookExelixis reported better-than-expected third-quarter results. The company recorded earnings of 47 cents per share, which beat the Zacks Consensus Estimate of 42 cents. The company registered adjusted earnings of 10 cents per share in the third quarter of 2023. The upside was mainly driven by higher revenues and lower operating expenses.Including stock-based compensation expense, earnings were 40 cents per share in the reported quarter.Net revenues were $539.5 million, which easily beat the Zacks Consensus Estimate of $491 million. The top line surged 14.3% year over year.Third Quarter HighlightsNet product revenues were $478 million, up 12.1% year over year. The increase in net product revenues was primarily driven by a rise in sales volume and average net selling price.Cabometyx (cabozantinib) generated revenues of $475.7 million, which beat both the Zacks Consensus Estimate of $439 million and our model estimate of $434.6 million. The drug is approved for advanced renal cell carcinoma (RCC) and previously treated hepatocellular carcinoma. Cometriq (cabozantinib capsules) generated $2.4 million in net product revenues for treating medullary thyroid cancer.Prescription volume grew 9% year over year.Collaboration revenues, comprising license revenues and collaboration services revenues, totaled $61.5 million, up from $45.4 million in the year-ago quarter.  The increase was primarily driven by an increase in milestone-related revenues recognized in the quarter and higher royalty revenues from the sale of cabozantinib outside the country (generated by collaboration partners Ipsen Pharma and Takeda).Research and development expenses amounted to $222.6 million, down 33.1% year over year. This decrease was primarily related to a drop in license and other collaboration costs.Selling, general and administrative expenses totaled $111.8 million, down 19% year over year. This was due to a decline related to decreases in corporate giving, stock-based compensation expenses and legal and advisory fees.In August, Exelixis announced that the board of directors authorized the repurchase of up to $500 million of the company’s common stock. As of Sept. 30, 2024, Exelixis had repurchased $12.4 million of the company’s common stock at an average price of $25.61 per share.Regulatory UpdatesExelixis announced that the District Court of Delaware has ruled in its favor in the second patent litigation against MSN Laboratories. MSN is seeking approval for its generic product of Exelixis’ cabozantinib. The Delaware District Court ruled in Exelixis’ favor, rejecting MSN’s challenge to three Orange Book-listed patents related to cabozantinib, including U.S. Patents No. 11,091,439 (crystalline salt), 11,091,440 (pharmaceutical compositions) and 11,098,015 (methods of treatment).If the FDA approves MSN’s abbreviated new drug application, the earliest it may be permitted to commercially launch its proposed generic product in the United States is January 2030, subject to any appeal or additional regulatory exclusivity.Pipeline UpdatesManagement is focused on the label expansion of its lead drug, Cabometyx, in 2024.  The FDA accepted EXEL’s supplemental new drug application (sNDA) for cabozantinib for patients with previously treated advanced pancreatic NET (pNET) and those with previously treated advanced extra-pancreatic NET (epNET). The regulatory body assigned a standard review with a target action date of April 3, 2025. It also granted the orphan drug designation to cabozantinib for the treatment of pNET.Exelixis intends to submit an sNDA with the FDA later this year for cabozantinib, in combination with Tecentriq (atezolizumab), for metastatic castration-resistant prostate cancer.Enrollment has been completed in the late-stage STELLAR-303 study evaluating zanzalintinib, in combination with Tecentriq, compared with regorafenib in patients with metastatic refractory colorectal cancer that is not microsatellite instability-high or mismatch repair-deficient. Preliminary results from the study are expected in 2025.Exelixis recently collaborated with pharma giant Merck to evaluate zanzalintinib in combination with Merck’s blockbuster anti-PD-1 therapy Keytruda (pembrolizumab) in a late-stage study for treating patients with head and neck squamous cell carcinoma (HNSCC).Both the companies will also evaluate zanzalintinib with Merck’s oral hypoxia-inducible factor-2 alpha (HIF-2α) inhibitor Welireg (belzutifan) in a phase I/II study and two phase III studies for the treatment of patients with RCC.Per the terms of the agreement, Merck will supply Keytruda for the ongoing, Exelixis-sponsored phase III STELLAR-305 study in previously untreated PD-L1 positive recurrent or metastatic HNSCC.Additionally, Merck will sponsor a phase I/II trial and two phase III studies in RCC. While Merck will fund one of these phase III studies, Exelixis will co-fund the phase I/II study and the other phase III study, as well as supply zanzalintinib and cabozantinib.Raises 2024 Revenue GuidanceTotal revenues are projected to be between $2.150 billion and $2.2 billion (previous guidance: $1.975-$2.075 billion). Product revenues are estimated to be in the band of $1.775-$1.825 billion (previous guidance: $1.65-$1.75 billion).Research and development expenses are now estimated to be in the band of $925-$950 million (previous guidance: $925-$975 million). Selling, general and administrative expenses are projected to be in the range of $475-$500 million (previous guidance: $450-$500 million). How Have Estimates Been Moving Since Then?In the past month, investors have witnessed an upward trend in estimates revision.The consensus estimate has shifted 16.21% due to these changes.VGM ScoresCurrently, Exelixis has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Exelixis has a Zacks Rank #2 (Buy). 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