Exelixis' shares flogged after lead drug disappoints at interim PhIII point

Hell hath no fury like a disappointed investor who bet wrong on a biotech catalyst.

The execs at Exelixis ($EXEL) got a three-course serving of that anger this morning as its stock went into a 35% nose dive--after the biotech announced that its interim analysis was complete and the Phase III prostate cancer study for cabozantinib would go to its conclusion. Translation: Investigators couldn't call the study a success at the interim point, which is what some of the true believers were betting on.

The beating of Exelixis' shares began early today as a result.

"Although many considered this interim analysis to be a moonshot, there were clearly plenty of investors willing to take the chance," noted an analyst at EP Vantage. "Shares in the company climbed in anticipation of the readout--the stock touched a two-and-a-half year high of $8.24 in January--and today's plunge to $4.18 reflects the collapse of the bull case."

The interim analysis for the COMET-1 study was conducted after 387 deaths while the final analysis will occur after 578 such events.

Over at TheStreet, Adam Feuerstein points to some considerable unease over the missed catalyst. J.P. Morgan's Cory Asimov noted that three new market entries for castration-resistant prostate cancer--Johnson & Johnson's ($JNJ) Zytiga, Medivation's ($MDVN) Xtandi and Bayer's Xofigo, which have transformed treatment for the disease--were all called on interim data. Exelixis's miss is feeding the bear camp's argument that the biotech's drug can't win out in the end.

COMET-1 could still work, Asimov noted. "However questions around dosing, contamination from additional treatments post progression, and lack of details on the trial progress relative to expectations muddy the waters, in our view."

Cabozantinib is a tyrosine kinase inhibitor which has been followed closely as it winds its way through the clinic. The biotech has circled its wagons around this program, betting that it can break into the big CRPC market after scoring an approval for the small metastatic medullary thyroid cancer field. In its release today the biotech noted that the final results will be available later this year.

- here's the release from Exelixis
- here's the report from EP Vantage
- here's the story from TheStreet