Exelixis (EXEL) to Report Q2 Earnings: What's in the Cards?

Exelixis, Inc. EXEL is scheduled to report second-quarter 2019 results on Jul 31, after market close.

The company’s shares have increased 4.6% in the year so far, against the industry’s decline of 0.5%.

 

Exelixis has an excellent earnings surprise history, surpassing expectations in the trailing four quarters, with average positive surprise of 65.74%. In the last reported quarter, the company beat expectations by 12.50%.

Let’s see what is in store for this quarter.

Why a Likely Positive Surprise?

Our proven model indicates that Exelixis is likely to beat on earnings 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) — to be able to beat estimates.

Earnings ESP: Earnings ESP for Exelixis is +8.00%. The Zacks Consensus Estimate is pegged at 25 cents, while the Most Accurate Estimate is pegged at 27 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Exelixis currently carries a Zacks Rank #2, which when combined with a positive ESP makes us confident of an earnings beat.

Note, 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.

 

Exelixis, Inc. Price, Consensus and EPS Surprise

Exelixis, Inc. Price, Consensus and EPS Surprise

Exelixis, Inc. price-consensus-eps-surprise-chart | Exelixis, Inc. Quote

 

Factors Likely to Impact Q2 Results

Strong Cabometyx sales boosted the company’s first-quarter 2019 results despite headwinds like an inventory draw down and higher gross-to-net fees. The FDA approved Cabometyx tablets in April 2016 for the treatment of advanced renal cell carcinoma (“RCC”).

The drug’s label was 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 cater to the entire patient population suffering from the disease. In addition, the approval will broaden the geographic reach of the drug, as the market potential is significantly high for the first-line treatment of kidney cancer.

The drug gained market share throughout the first quarter for the RCC indication. The initial traction for the HCC indication in the second and third-line setting was encouraging as well. We expect the momentum to continue in the second quarter as well. Exelixis experienced a 10% increase in Cabometyx’s prescriber base in the first quarter and a similar trend is expected in the quarter to be reported.

Meanwhile, investors are expected to focus on pipeline development. In April, CheckMate 9ER, the phase III trial evaluating the combination of cabozantinib and Opdivo versus Sutent in patients with previously-untreated advanced or metastatic RCC, completed enrollment. The study was sponsored by Bristol-Myers Squibb Company BMY and co-funded by Exelixis, and partners Ipsen and Takeda.

In May 2019, the company initiated a multicenter, randomized, double-blinded, controlled phase III study, COSMIC-313. The study is evaluating Cabometyx in combination with Opdivo and Yervoy versus Opdivo and Yervoyin in patients with previously-untreated advanced RCC. The primary endpoint of the trial is progression-free survival, and the secondary endpoints are overall survival and objective response rate.

Apart from Cabometyx, Exelixis has other sources of revenues. In January 2019, partner Daiichi Sankyo announced that Minnebro (esaxerenone) tablets were approved by the Japanese Ministry of Health, Labour and Welfare as a treatment for patients with hypertension. The compound was identified during the prior research collaboration between Exelixis and Daiichi Sankyo, and has been subsequently developed by the latter. In May 2019, Daiichi Sankyo launched Minnebro tablets in Japan.

With Daiichi Sankyo’s first commercial sale of Minnebro, Exelixis will receive an associated $20-million milestone payment from the former under the terms of the collaboration agreement. Exelixis anticipates receiving the payment during the second quarter of 2019. The company is also eligible to receive additional commercialization milestone payments and low-double-digit royalties on sales of the compound.

Other Stocks to Consider

Here are some companies you may consider, as our model shows that these too have the right combination of elements to deliver a beat this quarter.

Incyte Corp. INCY has an Earnings ESP of +3.73% and a Zacks Rank of 2. The company is scheduled to release second-quarter results on Jul 30, before market open. You can see the complete list of today’s Zacks #1 Rank stocks here.

Regeneron Pharmaceuticals, Inc. REGN has a Zacks Rank #3 and an Earnings ESP of +6.25%. The company is scheduled to release second-quarter results on Aug 6, before market open.

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