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Reading the Expectations for Exelixis’s Net Profit Margin in 2017

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Cabometyx prescriber base

In 3Q17, Exelixis (EXEL) witnessed the rapid adoption of Cabometyx, mainly driven by the company’s promotional efforts focused on community oncologists. Approximately 95% of the growth in Cabometyx revenues in 3Q17 came from prescriptions written by community oncologists.

Exelixis expects Cabometyx revenues to rise further after the drug secures FDA (US Food and Drug Administration) approval for first-line advanced RCC (renal cell carcinoma) and second-line hepatocellular carcinoma indications.

These approvals would represent the third and fourth indications for the company’s Cabozantinib franchise. Cabomety’s approval for a first-line RCC indication will be based on positive data from the phase-2 Cabosun trial, while the approval of the drug for the HCC indication will be based on clinical data from the phase-3 celestial trial. Prior to Cabometyx, the capsule formulation of cabozantinib, Cometriq, had been approved by the FDA for metastatic medullary thyroid cancer.

Exelixis is already involved in launch preparations for Cabometyx for the first-line RCC indication and is ahead of its PDUFA (prescription drug user fee act) date of February 15, 2018. The company expects to benefit from its market expertise and its established position in the second-line RCC market to accelerate the launch in the new setting.

Exelixis also expects to benefit from synergies in a similar prescriber base for first-line and second-line RCC indications in the US as well as from previously established relationships between its sales team and physicians.

Notably, Exelixis accounts for 2.0% of the PowerShares DWA Momentum Portfolio’s (PDP) total portfolio holdings.

Strong growth in net profit margins

Wall Street analysts have projected that Exelixis’s 2017 net profit margin will be ~34.0%, which would mean a YoY (year-over-year) rise of close to 7,070 basis points. Peers Pfizer (PFE), Bristol-Myers Squibb (BMY), and Amgen (AMGN) are expected to report net profit margins of ~20.9%, ~21.1%, and ~36.4%, respectively.

In the next part, we’ll take a closer look at label expansion plans for Cabometyx for first-line RCC.

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