Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Exelixis Plunges as FDA Refuses to Sign Off on Drug Study


The company is going forward with a human trial for cabozantinib that measures pain reduction in men with advanced prostate cancer, but possible approval of the drug may be pushed out until 2016.

In one week, cancer drug developer Exelixis (EXEL) went from riding high on expectations for its experimental treatment to losing more than a third of its market value as the company can't come to terms with government folks on how to test its product.

Exelixis says that it's going forward with a final stage of testing its drug cabozantinib for bone pain in prostate cancer patients. The company was counting on the US Food and Drug Administration signing off on the design of a clinical trial of the drug using pain reduction as an endpoint.

Specifically, the company was seeking a written agreement with the FDA that the design of its study and, most importantly, the goal of reducing pain was acceptable for possible US approval of the drug. No dice. The FDA has questions about gauging pain and it appears the agency may be more concerned about overall survival of patients taking the drug. Exelixis plans to study survival in another study next year but completing that trial in addition to its study on pain reduction before winning approval will cost a lot of money and delays the process.

"Given the previous feedback we had received, this outcome is both surprising and unexpected," Exelixis CEO Michael Morrissey told investors and analysts on a call Monday night.

Indeed, last Thursday, Morrissey told investors on another call that "we remain confident that we will secure" an agreement from the FDA. Now investors are losing confidence in Exelixis.

Shares of the company dropped more than 36% to $4.83 Tuesday morning. The stock traded above $12 a share in February.

"Demonstrating both a pain and overall survival benefit in two separate studies could be the best strategy for (cabozantinib) positioning in a market of rapidly accumulating competing drugs," Canaccord Genuity analyst George Farmer says in a note this morning.

Farmer, who rates the stock a hold, says the time it will take to complete the studies and move the drug toward a possible approval will take longer than some investors have been hoping. He predicts a possible approval date of 2016 and a 40% chance of the drug being cleared for sale.

The problem, Farmer says, is that the company may need to raise more money. He predicts Exelixis will have $277 million in cash by the end of the year.

Just last week, Exelixis' stock was rising on very encouraging news for cabozantinib for another form of cancer -- thyroid. While prostate cancer is a much bigger market, the study showed the potential of the Exelixis drug, which is being tested for multiple types of cancer. (See Exelixis Rises on Cancer Drug Study.) If eventually approved for multiple uses, cabozantinib potentially can be a blockbuster some day.

Some analysts, including Farmer, felt the stock had gotten ahead of itself. The company's market cap surged to almost $1 billion. And while cabozantinib still has its fans, it appears investors are going to have to wait longer and shoulder more risk of the drug being approved for prostate cancer.

The agreement Exelixis was seeking with the FDA is known as a special protocol assessment. While it's not a binding contract, it basically says the agency is going along with the frame of a drug study, and it's assumed there's a good chance of the drug being approved in a relatively timely period (a late-stage study usually takes at least three years to complete).

"While we were surprised and disappointed by this news, we do not believe that the strategic value of cabozantinib has been diminished," William Blair analyst John Sonnier says in a note Tuesday morning.

Twitter: @brettchase

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.

No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Featured Videos