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Exelixis Loss Narrower than Expected, Cabozantinib in Focus

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Exelixis, Inc . EXEL reported fourth-quarter 20Array5 loss of Array9 cents, narrower than both the Zacks Consensus Estimate of 22 cents and the year-ago loss of 30 cents.

Net product revenue was $9.9 million, up 35.Array% year over year, which easily surpassed the Zacks Consensus Estimate of $8 million.

The Quarter in Detail

Exelixis lead drug, Cometriq, is approved for the treatment of progressive, metastatic medullary thyroid cancer (MTC).

In the reported quarter, research and development expenses decreased 40.8% to $23.5 million primarily due to the continued decline in costs related to the studies (COMET and METEOR) for metastatic castration-resistant prostate cancer and lower personnel-related expenses resulting from an overall reduction in headcount.

Selling, general and administrative expenses shot up 74.5% to $Array7.Array million, reflecting an increase in stock-based compensation expense and higher marketing expenses, including expenses for Cotellic under the company's collaboration agreement with Genentech, a subsidiary of Roche Holdings RHHBY .

Pipeline Update

Cabozantinib is marketed in the capsule form as Cometriq for progressive, metastatic MTC. Exelixis is evaluating a tablet formulation of cabozantinib, distinct from the capsule form, for advanced renal cell carcinoma (RCC) in the METEOR trial. The drug is under review for advanced RCC in both the U.S. and the EU. The FDA has accepted the company's rolling New Drug Application (NDA) application for cabozantinib for advanced RCC and granted priority review to the drug for this indication. A final decision is expected by Jun 22, 20Array6. Hence, Exelixis is currently working on the commercialization of cabozantinib for the advanced RCC indication and expects to be ready for its launch by Apr Array.

Exelixis is also evaluating cabozantinib in the CELESTIAL trial for advanced hepatocellular carcinoma (HCC). The company anticipates top-line results from the CELESTIAL study in 20Array7.

On the other hand, Exelixis is working with its partner Genentech to commercialize the other drug in its portfolio, Cotellic, in the U.S. We note the drug was approved in the U.S. in Nov 20Array5 for the treatment for patients with a BRAF V600E or V600K mutation-positive advanced melanoma, in combination with Zelboraf.

20Array6 Guidance

Exelixis expects operating expenses in 20Array6 around $240-$270 million. This includes about $30 million of incremental, non-cash, stock-based compensation expense.

Our Take

Exelixis fourth-quarter results were encouraging, with the company beating on both the top and bottom lines. A potential approval of cabozantinib for advanced RCC will boost results, going ahead. The successful commercialization of Cotellic in the U.S. will further boost the top line.

Concurrent with these results, Exelixis has announced an exclusive licensing agreement with Ipsen for the commercialization and further development of cabozantinib. Per the terms of the agreement, Ipsen will enjoy exclusive commercialization rights for current and potential future indications of the drug outside the U.S., Canada and Japan. The companies will jointly work on the development of cabozantinib for current and potential future indications.

Exelixis, on the other hand, will retain rights to commercialize the drug in the U.S. and Canada.

Exelixis currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the health care sector include Actelion Ltd ALIOF and Aegerion Pharmaceuticals AEGR . Both sport a Zacks Rank #Array (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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