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Why Is Exelixis (EXEL) Down 0.6% Since Last Earnings Report?

It has been about a month since the last earnings report for Exelixis (EXEL). Shares have lost about 0.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Exelixis due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Exelixis Q1 Earnings Miss, Revenues Increase Y/Y

Exelixis reported earnings of 16 cents per share in the first quarter of 2023, which missed the Zacks Consensus Estimate of 23 cents and our estimate of 20 cents and declined from 26 cents in the year-ago quarter.

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Including stock-based compensation expense, earnings per share came in at 12 cents compared with earnings of 21 cents per share in the year-ago quarter due to an increase in operating expenses.

Net revenues came in at $408.8 million, which missed the Zacks Consensus Estimate of $427 million and our model estimate of $428 million. Revenues were up 14.8% year over year.  

Quarter in Detail

Net product revenues came in at $363.4 million, up 17.1% year over year. The increases in net product revenues were primarily due to a rise in sales volume and the average net selling price.

Cabometyx (cabozantinib) generated revenues of $361.8 million. It is approved for advanced renal cell carcinoma (RCC) and previously treated hepatocellular carcinoma (HCC). Cometriq (cabozantinib capsules) for treating medullary thyroid cancer generated $1.6 million in net product revenues.

Collaboration revenues, comprising license revenues and collaboration services revenues, were $45.4 million in the quarter compared with $45.7 million in the year-ago quarter. 

In the reported quarter, research and development expenses were $234.2 million, up 49.5% year over year due to increases in license and other collaboration costs, personnel expenses and manufacturing costs. Selling, general and administrative expenses were $131.4 million, up 27.7% on increased personnel expenses.

In March, Exelixis announced that the board authorized the repurchase of up to $550 million of the company’s common stock before the end of 2023.

Pipeline Update

In February, Exelixis and partner Sairopa announced FDA clearance of Sairopa’s IND to evaluate the safety and pharmacokinetics in a phase I study of ADU-1805 in adults with advanced solid tumors. The study has been initiated. Per the terms of the clinical development and option agreement, Exelixis has the option to obtain an exclusive, worldwide license to develop and commercialize ADU-1805 and other anti-SIRPα antibodies upon review of data from prespecified phase I studies to be completed by Sairopa during the option period. This IND clearance triggered a $35.0 million milestone payment to Sairopa, which was paid in the first quarter of 2023.

2023 Guidance Reiterated

Revenues are projected between $1.775 billion and $1.875 billion, while product revenues are estimated in the range of $1.575-1.675 billion.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

VGM Scores

At this time, Exelixis has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Exelixis has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Exelixis belongs to the Zacks Medical - Biomedical and Genetics industry. Another stock from the same industry, Denali Therapeutics Inc. (DNLI), has gained 8.5% over the past month. More than a month has passed since the company reported results for the quarter ended March 2023.

Denali Therapeutics Inc. reported revenues of $35.14 million in the last reported quarter, representing a year-over-year change of -16.6%. EPS of -$0.80 for the same period compares with -$0.53 a year ago.

For the current quarter, Denali Therapeutics Inc. is expected to post a loss of $0.68 per share, indicating a change of -41.7% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.8% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Denali Therapeutics Inc. Also, the stock has a VGM Score of F.

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