Business context and reporting period
Exelixis is an oncology-focused biotechnology company whose business is led by cabozantinib products, particularly CABOMETYX, alongside collaboration revenue and an expanding drug pipeline. The supplied filing is a Form 10-Q for the quarter ended October 1, 2021 (financial statements presented through September 30, 2021). This conflicts with the request metadata identifying 2020 Q3; the filing content is for 2021 Q3.
Financial performance and liquidity
Amounts below are in millions of dollars except per-share data. Comparisons are with the corresponding 2020 period.
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Total revenue | $328.4 | $231.1 | $983.8 | $717.5 |
| Net product revenue | $263.1 | $168.6 | $774.6 | $541.2 |
| Operating income (loss) | $51.6 | $(42.6) | $170.0 | $85.8 |
| Net income (loss) | $38.2 | $(32.0) | $135.9 | $83.4 |
| Diluted EPS | $0.12 | $(0.10) | $0.42 | $0.26 |
| Operating cash flow | Not provided quarterly | Not provided quarterly | $304.4 | $175.7 |
Q3 2021 operating margin was approximately 15.7%, compared with an operating loss in Q3 2020; net margin was approximately 11.6%. Gross margin was 95% in both Q3 and nine-month periods. For the nine months, operating margin was approximately 17.3% and net margin approximately 13.8%.
At September 30, 2021, cash and cash equivalents were $567.3 million, short-term investments $835.4 million, and long-term investments $362.2 million. Total cash, cash equivalents, restricted cash equivalents and investments were $1.8 billion, versus $1.5 billion at December 31, 2020. Current assets were $1.662 billion and current liabilities $269.5 million. Total liabilities were $335.3 million; the balance sheet reports no borrowings or other debt balance. Management said available resources and anticipated revenues should fund operations for at least 12 months from the filing date.
Nine-month investing cash outflow was $29.8 million, including $48.3 million in property, equipment and other purchases, partly offset by net investment maturities and sales. Financing cash flow was positive $3.2 million. Cash, cash equivalents and restricted cash increased by $277.7 million during the period.
Material changes versus prior comparable periods
- Q3 revenue increased 42%; net product revenue rose 56%, led by CABOMETYX, whose Q3 sales increased 63% to $259.8 million. The company attributed growth mainly to uptake of CABOMETYX plus OPDIVO following its January 2021 U.S. approval as first-line treatment for advanced RCC.
- Nine-month revenue increased 37%, with net product revenue up 43%. COMETRIQ revenue declined 63% in Q3 and 17% for the nine-month period.
- Q3 R&D expense declined 8% to $163.4 million, while nine-month R&D expense increased 20% to $471.4 million. Q3 SG&A rose 15% to $101.6 million; nine-month SG&A rose 43% to $302.4 million.
- Q3 results shifted from a $32.0 million net loss to $38.2 million net income. Nine-month net income rose 63%. Lower interest income partly offset operating improvement.
- Nine-month operating cash flow increased to $304.4 million from $175.7 million, principally reflecting greater cash receipts from product sales and collaborations, with favorable working-capital changes also contributing.
Outlook, management commentary, risks and contingencies
- Management expected CABOMETYX product revenue to increase in the remainder of 2021 versus the prior-year period, primarily due to demand following the first-line RCC combination approval; discounts and allowances as a share of gross revenue could also increase as government-program utilization rises.
- Management anticipated higher collaboration services revenue from Ipsen’s COSMIC-311 co-funding and projected R&D and SG&A expenses could increase during the remainder of 2021. No numerical earnings or revenue guidance was provided.
- The FDA approved CABOMETYX for certain advanced or metastatic differentiated thyroid cancer patients in September 2021. COSMIC-312 met its PFS endpoint in HCC, but its interim overall-survival analysis was not statistically significant; management expected final OS results in early 2022 and intended to submit an sNDA then, subject to the final data.
- COVID-19 had a modest reported impact at the time of filing, with no significant supply-chain impairment reported. The company cautioned that renewed outbreaks or restrictions could delay trials, discovery, commercial activity or supply.
- Generic-entry litigation presents a material commercial risk. MSN and Teva filed ANDAs seeking approval for generic CABOMETYX tablets. MSN litigation had a bench trial scheduled for May 2022 and Teva litigation for June 2023. The company said an unfavorable outcome or early generic entry could materially reduce U.S. CABOMETYX revenue; potential loss could not be estimated.
- Other key risks include competition, clinical and regulatory uncertainty, payer coverage and reimbursement, drug-pricing measures, reliance on collaboration partners, intellectual-property challenges, and the ability to expand the pipeline while controlling spending. Management disclosed the September 2021 deaths of its President of Product Development and Medical Affairs/Chief Medical Officer and Senior Vice President of Sales; the sales leadership role had been filled and a search for a Chief Medical Officer was underway.
- The company reported no material off-balance-sheet arrangements, no material changes in contractual obligations outside the ordinary course, and effective disclosure controls.
Important facts for investors to verify
- Confirm the intended reporting period: the request says 2020 Q3, but this filing reports 2021 Q3.
- Track CABOMETYX sales growth, net pricing, gross-to-net discounts, and uptake of the RCC combination and newly approved thyroid cancer indication.
- Monitor generic CABOMETYX litigation, trial dates, patent outcomes and the potential timing of generic competition.
- Review COSMIC-312 final overall-survival results and the expected HCC regulatory submission, as well as other pivotal trial readouts.
- Assess whether projected pipeline investment and commercial spending remain supported by operating cash flow and the company’s substantial liquid investment balance.