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Exelixis Rising on Hope for Cancer Drug


The company's stock is coming back a bit after tanking last year on concern about a prostate cancer drug's potential approval. Some analysts are skeptical.

MINYANVILLE ORIGINAL After tanking late last year, Exelixis (EXEL) shares have had a (mostly) decent comeback as some investors grow confident that the company's prostate cancer drug eventually will win US approval. Now the company has a drug-approval decision date of November 29 but not for prostate cancer -- the drug will first be reviewed for a thyroid disease.

The Food and Drug Administration told the company that it will decide by that date whether cabozantinib will be cleared for sale in the US to treat medullary thyroid cancer, a hard-to-treat disease with a relatively small patient population. (No word on an FDA panel.) The indication would be the first for the drug. And investors hope cabozantinib will eventually be approved for other types of cancers, particularly prostate.

Advanced prostate cancer is the big opportunity for Exelixis and much of the company's focus is on that treatment area. That's why the stock took such a big hit last November when the FDA refused to approve a study design for a prostate cancer trial. (See Exelixis Plunges as FDA Refuses to Sign Off on Drug Study.)

At the time, CEO Michael Morrissey called the FDA's decision "surprising and unexpected."

Stifel Nicolaus analyst Joel Sendek estimates that if cabozantinib is approved late this year for thyroid cancer, the treatment will produce $168 million in annual sales by 2018.

On the other hand, if the drug is approved for castrate resistant prostate cancer and the treatment is launched in the US by 2015, cabozantinib may generate $325 million in sales from that use alone by 2018, Sendek estimates.

Sendek recommends buying the shares and set a 12-month price target of $8 for the stock. Longer term, he says the drug has the potential to win approvals for treating ovarian, liver, skin and lung cancers.

Exelixis shares rose 2% to $6.51 in midday trading Monday. The stock is up 38% this year but still down 15% over the past 12 months. This year's rally included dips below $5 a share in May and June. It takes a strong stomach to hold on to this stock.

The shares dipped in June as some investors and Wall Street analysts grew skeptical of Exelixis' chance of getting a prostate cancer approval, following presentations at a big cancer conference.

"We remain concerned about (the drug's) clinical, regulatory and commercial prospects in (prostate cancer) where investor and Exelixis' focus lies," Jefferies analyst Biren Amin says in a June note.

Amin has a hold rating on the stock. The analyst did say that early study data of the drug for treatment of kidney and liver cancers looked "intriguing." But prostate cancer continues to be the crucial focus for the stock.

Twitter: @brettchase

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