Exelixis, Inc. EXEL is scheduled to report first-quarter 2018 results on May 2, after the market closes.

Exelixis, Inc. Price, Consensus and EPS Surprise


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

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 247.9%. However, investors weren’t much impressed when the company came up with in-line earnings numbers in the last reported quarter. Let’s see what is in store for this quarter.

Exelixis’ shares have lost 18.2% in the last six months as against the industry’s fall of 9.4%.


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 — positive Earnings ESP  and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +26.7% since the Most Accurate estimate is 19 cents while the Zacks Consensus Estimate is pegged at 15 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 #3, which when combined with positive 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’ stock received a major boost when the FDA approved Cabometyx tablets in April 2016 for the treatment of advanced renal cell carcinoma (“RCC”).

The drug’s uptake was encouraging and is expected to propel the top line in the forthcoming quarters. New patient market share in the second-line plus setting increased to 42% at the end of 2017. The recent FDA approval of Cabometyx for the treatment of previously untreated advanced RCC should further boost demand. The approval comes two months ahead of schedule.

RCC is the most common form of kidney cancer in adults. Per statistics, approximately 30,000 patients in the United States and 68,000 around the world need a first-line treatment for advanced kidney cancer. As many as 14,000 patients need the same annually in the United States.

Since the drug is now approved for first-line RCC as well, the company can now target the entire patient population with the disease. We expect sales to get a further boost as the company will launch the drug for first-line RCC which will increase the eligible patient population for Caobometyx in the United States by approximately 14,000 patients and grab market share from two key drugs — Sutent and Votrient in the first-line RCC market.

Exelixis is developing cabozantinib in a broad development program comprising more than 45 clinical studies across multiple indications. The CELESTIAL study for advanced hepatocellular carcinoma is also ongoing.  Exelixis has submited an sNDA to the FDA for HCC. The EMA accepted the company’s application for the addition of HCC indication.

Exelixis inked agreements with Bristol-Myers BMY and Roche Holding RHHBY to develop cabozantinib in combination with immunotherapy agents in 2017.

These collaborations entitle Exelixis to earn milestone payments and royalties that will boost its top line. Exelixis and Bristol-Myers initiated a phase III trial, CheckMate 9ER, in July 2017 which is evaluating the combination of checkpoint inhibition therapy, combined with a cabozantinib, compared to Sutent.

Exelixis has also initiated a phase Ib study (investigator-sponsored) on cabozantinib (in combination with Opdivo (nivolumab) or Opdivo plus Yervoy) in patients suffering from genitourinary tumors, including bladder cancer and RCC.

However, expenses continue to increase and raise concerns. 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.

Emergent Biosolutions Inc. EBS has an Earnings ESP of +61.8% and a Zacks Rank #2.  The company is scheduled to release Q1 results on May 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

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