Will Cabometyx Fuel Exelixis' (EXEL) Earnings In Q4 Again?

Exelixis, Inc. (NASDAQ:EXEL) , is scheduled to report fourth-quarter 2017 results on Feb 26, after market closes.

The company has an outstanding earnings surprise history, having surpassed expectations in the trailing four quarters, with an average of 572.9%.

Exelixis, Inc. Price and Consensus

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

Exelixis’ shares have rallied 6.8% in the last six months as against the industry’s fall of 2.3%.

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 +8.94% since the Most Accurate estimate is 13 cents while the Zacks Consensus Estimate is pegged at 12 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 #2, 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 starts, refills for patients already on therapy and continued expansion of the prescriber base for Cabometyx are driving the drug’s sales. Cabometyx delivered strong sales in the first nine months of 2017, underlying the increasing demand for the drug. New patient market share in the second-line plus setting increased to 38%. The FDA’s approval of Cabometyx for untreated advanced RCC is likely to boost demand further. The drug demonstrated statistically significant and clinically meaningful improvement in PFS versus the current standard of care, Sutent.

Meanwhile, 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 also announced collaboration agreements with Bristol-Myers Squibb (NYSE:BMY) and Roche (OTC:RHHBY) for the development of cabozantinib in combination with immunotherapy agents in early 2017. These collaborations entitle Exelixis to earn milestone payments and royalties that boost its top line. In June 2017, Exelixis initiated the dose-escalation stage of a phase Ib trial of cabozantinib in combination with Tecentriq. The drug will be evaluated in patients suffering from locally advanced or metastatic urothelial carcinoma or RCC.

However, expenses continue to increase and raise concerns. Exelixis expects total costs and operating expenses for 2017 in the range of $285-$295 million.

Stock to Consider

Here is one company that you may consider, as our model shows that it also has the right combination of elements to deliver a beat this quarter.

Gemphire Therapeutics (NASDAQ:GEMP) is expected to release fourth-quarter 2017 results on Mar 21. The company has an Earnings ESP of +6.62% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

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