MINYANVILLE ORIGINAL Exelixis
(NASDAQ:EXEL) got its first approval
for the company’s lead drug, Cometriq, getting the green light from US officials to sell a treatment for a rare form of thyroid cancer.
The market for the first indication sought, medullary thyroid cancer, is very small and hardly justifies the many years of work and hundreds of millions of dollars spent to develop the drug, also known as cabozantinib. Yet the first approval is important as Exelixis hopes to ultimately get government clearance to sell its drug for multiple cancers. The company is in the late stages of testing Cometriq for advanced prostate cancer patients. Some analysts see the drug as a potentially promising treatment for liver and kidney cancers.
“We view the approval of Cometriq in (thyroid cancer) as the first of many critical milestones along the path to building a robust oncology franchise around this drug,” Exelixis CEO Michael Morrissey told analysts and investors on a conference call Thursday night.
Morrissey says Exelixis is making only a modest investment to launch the drug for its newly approved use. He referred to the approval as a “transitional” rather than transformative event for the company. The drug will be priced at just under $10,000 per month.
Exelixis’ stock was halted Thursday just before the Food and Drug Administration released news of the approval. The shares fell prior to the announcement and dropped 3% to $5.09 in pre-market trading Friday. Selling on a new drug approval is common, especially if the shares had a decent run-up prior to the news. The stock was up by a third in the 12 months prior to Thursday.
Cometriq will go up against AstraZeneca’s
(NYSE:AZN) Caprelsa, which is not a big selling product. Caprelsa sales for the first nine months of 2012 were only $19 million, according to Stifel Nicolaus analyst Joel Sendek.
However, Sendek blames those low sales on side effects related to the drug. (Cometriq also has serious side effects. See label information here
.) He predicts Exelixis’ drug will have $42 million in yearly sales by 2014 from treating the thyroid cancer. The entire market for treating the condition is less than $100 million, he says. A much bigger sales opportunity is possible with approval of the drug as a prostate cancer treatment, he notes.
Prostate cancer is a far bigger market opportunity, and progress in this area will be the near-term catalyst for the stock going forward. If approved for prostate cancer in 2015, annual sales of Exelixis’ drug for that use alone may be $325 million by 2018, according to Sendek’s previous projections.
Sendek set a $9 price target for Exelixis’ stock, based on his assumption that the company will win additional uses for its cancer drug.
The first indication provides some evidence of the drug’s worth and of CEO Morrissey’s strategy. A little more than a year ago, Morrissey said he was surprised that FDA folks didn’t go along with his plan for a faster approval process for the prostate cancer indication. The company and the agency couldn’t agree on study design.
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