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Exelixis Inc's Comet Fails To Dazzle

Astronomers have grown very cautious over the years about predicting which comets will brighten the night skies, as all too many have failed to live up to expectation. Small biotech Exelixis'  (NASDAQ: EXEL  ) own comet, the COMET-1 study of cabozantinib in metastatic castration-resistant prostate cancer, likewise has failed to live up to the most optimistic hopes. Although the stock's 25% drop on Wednesday may seem like an overreaction, the reality is that the company badly needed a winner and the absence of an early halt due to efficacy suggests that the company could face a tough battle in getting market share in the prostate cancer space.

No early halt
Exelixis designed the Phase III COMET-1 study to include an interim analysis that would assess the drug's efficacy and progress toward achieving its primary endpoint, overall survival. Importantly, the trial design did not include a futility analysis that would stop the study if the results were clearly not going to achieve statistical significance.

Exelixis announced Tuesday night that the independent data monitoring committee recommended that the study continue through to its scheduled end. That decision does not prove that the drug failed, but it does prove that the data were not overwhelmingly positive.

Why does this matter?
Studies are designed to be completed, so why is it such a big deal that the COMET-1 study won't end early? The problem is competition. Johnson & Johnson's (NYSE: JNJ  ) Zytiga and Medivation's (NASDAQ: MDVN  ) Xtandi have established themselves as very strong treatment options for metastatic prostate cancer, so much so that both are well on their way to blockbuster status. Likewise, Bayer's Xofigo has shown to be highly efficacious in patients with bone metastases, with better toxicity and efficacy in patients otherwise ineligible for chemotherapy.

All of these drugs – Zytiga, Xtandi, and Xofigo – had their pivotal studies stopped early for positive efficacy. With survival benefits in the range of 3.5 to 5 months, that would seem to be the relative bar that cabozantinib has to hit, but now that is in question.

Comps are challenging
Comparing across clinical studies is tricky, as the enrollment and trial design criteria vary from study to study and those variations can have a meaningful impact on comparability. In the case of COMET-1, for instance, patients enrolled were already nonresponsive to docetaxel, Zytiga, and/or Xtandi. Obviously that is a different enrollment standard than for those prior Zytiga and Xtandi studies that were stopped earlier. It is possible, then, that this drug is still effective, but not as dramatically so due to a sicker patient pool. Likewise, there could be issues like a higher-than-expected response rate in the control (prednisone) arm that is skewing the result.

Exelixis needs this one
Exelixis does have other clinical compounds, but management has put a very large percentage of the company's eggs in the cabozantinib basket. The drug is already approved for medullary thyroid cancer (as Cometriq), but the addressable market is small and Exelixis would likely be fortunate to see $250 million in peak revenue from that indication.

Success in prostate cancer could be worth over $1 billion in sales, but it is not going to be easy. Oncology drugs are not as difficult or expensive to sell as drugs targeted for a primary care setting (like depression or cholesterol), but Johnson & Johnson, Medivaion, and Bayer have meaningful head starts and strong clinical data packages. Prior Phase II studies of cabozantinib have supported the notion of a four-month survival advantage for the drug (putting it close to par with these other three), but "good enough" for FDA approval may not be good enough for market acceptance unless the company is willing to be aggressive on pricing.

The bottom line
The market's reaction to the continuation of the COMET-1 study is not so unreasonable if you believe that the implied absence of superior efficacy reduces the peak sales potential from $1 billion to $500 million. Exelixis is definitely a high-risk proposition now, particularly when considering the prospect that the company will have a harder time distinguishing its drug in the market, assuming it even gets there in the first place.

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Read/Post Comments (3) | Recommend This Article (9)

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  • Report this Comment On March 28, 2014, at 12:19 PM, oneil wrote:

    The patients who enrolled in Cometriq study had already failed Zytiga, Xtandi and Xofigo treatment. Cometrig is not competing with these drugs, but only offer patients with more choice. If you consider these three drugs as first line treatment, Cometrig can be considered as second line treatment. The study design for second line treatment is different with first line where you need more data to prove. I don't think any of these street writers knew oncology treatment, but only make background noise to confuse the investors.

  • Report this Comment On March 28, 2014, at 12:56 PM, duckduffer wrote:

    Well said Oneil. In this line of treatment, later stage, the bar is lower. Everything else has stopped working. Even moderate OS benefit would likely be approved if with the other benefits of Cabo (pain palliation and bone healing). In addition to your point, there is the trial data itself. The interim for Comet was 387 patients. All the other trials mentioned the interims were in the 500+ events range. That is hugely important. A great example is Jevtana, which also was recommended to go to trial end. That drugs interim analysis was in the same range as Cabo, fewer patient events required for the interim. With these types of trials, late stage cancer, that is clearly very important. A shame the author doesn't explain that with more detail.

  • Report this Comment On March 29, 2014, at 9:28 AM, hiddenflem wrote:

    Comparisons of the trials are apples and oranges as duck duffer noted. Why are CFA's writing about clinical trials anyway?

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Stephen D.

I'm an ex-Wall Street sell-side and buy-side analyst who has spent most of the last 10 years writing on a wide range of industries and investment ideas.

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