Exelixis (EXEL) to Report Q4 Earnings: What's in the Cards?

Exelixis, Inc. EXEL is scheduled to report fourth-quarter 2019 results on Feb 25, after market close.

The company’s shares have gained 1.2% in the year so far as against the industry’s decline of 0.3%.

Exelixis has an impressive earnings surprise history, surpassing expectations in the trailing four quarters, the average beat being 31.05%. In the last reported quarter, the company beat expectations by 55%.

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

Factors at Play

Solid sales of Exelixis’ lead drug — Cabometyx — boosted the company’s third-quarter 2019 results despite stiff competition. This upside was driven by continued growth in demand in the United States, for the treatment of advanced renal cell carcinoma (RCC), a trend that most likely continued in the fourth quarter as well. Moreover, the label expansion of the drug for the treatment of patients with hepatocellular carcinoma (HCC) in January 2019 resulted in incremental sales in the third quarter, with the demand likely to have picked up well for the same in the to-be-reported quarter.

In January 2020, Exelixis announced preliminary results for the fourth quarter of 2019. Revenues for the quarter came in at $245 million.

In October, Ipsen announced Health Canada’s approval of Cabometyx for the first-line treatment of adults with advanced RCC. Hence, Exelixis has recorded a milestone payment of $3 million, resulting in incremental revenues in the fourth quarter. Moreover, in November, Health Canada approved Cabometyx tablets for the treatment of HCC patients, who have been previously treated with sorafenib. Per the terms, Exelixis has most likely received a milestone payment of $2 million for the same.

Per the preliminary results provided by the company, Research and development expenses came in at around $98 million in the December-end quarter, while Selling, general and administrative (SG&A) expenses are projected at $60 million.

Meanwhile, investors are expected to focus on pipeline development. In December, the company announced a collaboration agreement with Roche RHHBY to evaluate Cabometyx in combination with the latter’s PD-L1 immune checkpoint inhibitor, Tecentriq, in patients with locally-advanced or metastatic solid tumors. The clinical program, which will be co-funded by the companies, is expected to include three phase III pivotal trials in advanced non-small cell lung cancer (NSCLC), castration-resistant prostate cancer (CRPC) and RCC.

The company has multiple studies underway evaluating Cabometyx with other approved therapies for various indications and an update on the same is expected from the call. Apart from Cabometyx, Exelixis has other sources of revenues. Exelixis earns royalties on sales of Minnebro tablets in Japan from Daiichi Sankyo.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Exelixis this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. Unfortunately, that is not the case here, as you will see below. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Exelixis is 0.00%, as both the Zacks Consensus Estimate and the Most Accurate Estimate stand at $0.15.

Zacks Rank: The company currently carries a Zacks Rank #3.

Stocks to Consider

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

Clovis Oncology, Inc. CLVS has an Earnings ESP of +0.81% and carries a Zacks Rank #2. It is scheduled to release earnings on Feb 24. You can see the complete list of today’s Zacks #1 Rank stocks here.

Immunomedics, Inc. IMMU has an Earnings ESP of +3.37% and holds a Zacks Rank of 2.

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