A Commercial-Stage Biotech at Last

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It's been a long road for Exelixis (Nasdaq: EXEL  ) to get a drug through the marathon of drug development. On Thursday, the Food and Drug Administration approved Exelixis' cancer treatment cabozantinib, which will go by the brand name Cometriq. After being in existence for 18 years, the biotech can finally label itself as a commercial-stage biotech.

Technically speaking, of course.

Cometriq is approved to treat medullary thyroid cancer that has spread to other parts of the body. The indication is so small -- each year, just 500 to 700 patients in the U.S. reach the stage when they'd use the drug -- that Exelixis is only using five sales reps to promote the drug to patients. And it's not even hiring the sales reps directly; they'll be employees of inVentiv Health, a sales force outsourcing firm, although they'll be a dedicated sales force that only sells Cometriq.

At $9,900 per month and figuring that patients stay on the drug for 10 months, the maximum market is about $70 million. And that assumes it takes all the market from AstraZeneca's (NYSE: AZN  ) Caprelsa, which is also approved to treat the rare indication.

Clearly, Exelixis needs to expand into other tumor types to make it to profitability. The next major test will come in late-stage prostate cancer where Cometriq is in phase 3 trials. It'll have more competition -- Dendreon (Nasdaq: DNDN  ) , Johnson & Johnson (NYSE: JNJ  ) , and Medivation (Nasdaq: MDVN  ) all have drugs for metastatic prostate cancer -- but there are substantially more than 700 patients with the disease.

The current label comes with a boxed warning about potential for issues with bleeding. In theory, the side effects could pose a problem as Exelixis moves onto other types of tumors where doctors have multiple treatment options with fairly tolerable drugs. But the biotech is testing Cometriq at a lower dose -- 60 mg in prostate cancer compared to 140 mg, which was used as the staring dose in the thyroid cancer trial. So far, the side effects haven't been an issue at the lower dose.

Exelixis is on the road to profitability, but it will have to compete with Dendreon as it expands into treating prostate cancer. Dendreon's run over the past four years witnessed sub-$5 share prices skyrocket to 10-bagger status before tumbling all the way back down below $5. But where does that leave investors? Our own David Williamson answers this question, and many more, inside our brand new premium research report on Dendreon. He details every key issue facing the company and outlines how Dendreon intends to regain its former glory. The report comes with a full year of analyst updates, so claim your copy of this exclusive report today by clicking here now.

Read/Post Comments (5) | Recommend This Article (5)

Comments from our Foolish Readers

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  • Report this Comment On November 30, 2012, at 10:54 AM, teamfaulkner wrote:

    Why is Exel down 8% today on this positive news?

  • Report this Comment On November 30, 2012, at 12:15 PM, dailyrx wrote:

    Cometriq has a very specific usage. To learn more about it:

  • Report this Comment On November 30, 2012, at 12:51 PM, ministitcher wrote:

    We already knew it had a very specific use and limited market. So why is the stock down on the positive news?

  • Report this Comment On November 30, 2012, at 1:14 PM, hiddenflem wrote:

    I agree, the spin on the falling share price is ridiculous.

  • Report this Comment On November 30, 2012, at 2:38 PM, pavlos1971 wrote:

    In addition to the approval itself, the news are: 1) cabo has a price tag (9900/month) at the particular 140mg/day formulation used for MTC; and 2) Exelixis's current sales strategy is sane and inexpensive as the management views this approval only as transitional and not transformational (i.e. the company is not going to become a commercial-stage company in the next couple of years). Most other bits of info were known or expected upon approval: side effects at this dose level, black labels, etc. The huge dilutive financing from this summer can have strange effects on the pricing of the stock for a while longer, but the only real danger is the difficulty in getting the lower-dose formulations of cabo approved for other cancer indications in the future (2015 and beyond). I like the science and trial data thus far, and wish EXEL all the best!

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