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Exelixis Rises on Cancer Drug Study


Investors are looking ahead to the drug cabozantinib's next catalyst, start of late-stage trial for prostate cancer patients.

Cancer drug developer Exelixis' (EXEL) stock is jumping this morning on positive study results for a thyroid cancer treatment.

In a key, late-stage clinical trial of more than 300 people, Exelixis found that its drug substantially extended the period of time before tumors progressed -- more than 11 months on average for patients on the treatment cabozantinib vs. four months for those on a placebo.

It's good news in the short term but possibly even better long term. Cabozantinib is being tested for medullary thyroid cancer but it's also being tested for multiple other conditions, including late-stage prostate, lung, and ovarian cancers. Later this year, the company hopes to start the last stage of human trials for prostate cancer, which is going to be another key catalyst for the stock. Prostate cancer is a large market. Specifically, Exelixis is focused on treating men whose prostate cancer jumped to their bones. The drug is being tested to clear up lesions and reduce bone pain.

Indeed, in the company's own press release Monday, it noted the importance of the thyroid cancer study, which highlighted "cabozantinib's profound anti-tumor activity in an indication that has seen little clinical progress over the past few decades."

The results "also highlight Exelixis' late-stage clinical development capabilities that will continue to be of critical importance as cabozantinib advances through late-stage development in other indications," CEO Michael Morrissey says in a statement. Approval for thyroid cancer "would be a first step to achieve our goal of improving the lives of cancer patients and would set a solid foundation on which to build a cabozantinib franchise that includes large indications such as prostate cancer."

Shares of Exelixis jumped 21% to $7.22 in late-morning trading Monday. The shares jumped above $12 each in February. Exelixis is among a group of clinical-stage companies who saw their stocks run up prior to a major cancer conference in June. Like some of its rivals, the company's shares dropped after reporting good news at the cancer event. (See Exelixis, YM Biosciences Lead Losers at Cancer Meeting.) In the case of Exelixis, investors were keying in on positive cabozantinib data for prostate cancer.

Investors should expect more volatility for this stock. The company plans to apply for US approval in the first half of next year. But, if approved for thyroid cancer, the event is no more than a milestone to the next stage for Exelixis' potential blockbuster product.

Cabozantinib for thyroid cancer represents no more than a $22 million sales opportunity by 2018, Stifel Nicolaus analyst Maged Shenouda estimates. He has a hold rating on the stock.

Drug approvals for other indications, starting with prostate cancer, will represent a far better sales potential.

A green light for the next stage of the prostate cancer study is the next big test for the company. An important thing to watch is whether the Food and Drug Administration will go along with the prostate cancer study goals Exelixis is proposing: reduction of lesions and pain as trial endpoints. A broader study, such as proving survival rates, would be more expensive and lengthy.

Twitter: @brettchase

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No positions in stocks mentioned.
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