Reading Between the FDA Lines

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The Food and Drug Administration canceled the advisory committee meeting for Exelixis' (Nasdaq: EXEL  ) cancer treatment cabozantinib this week, which is either a really good sign or a really bad one.

The FDA holds advisory committee meetings to get feedback from outside experts about whether they think a drug should be approved. The agency must have canceled the meeting for cabozantinib because it doesn't see a need to get outside input. Or, put another way: The reviewers have basically already made up their minds.

It's impossible to know for certain which way the FDA is strongly leaning, but when it cancels an advisory committee meeting, I take it as a sign that the majority hypothesis is probably right. If it seems like the drug is going to get approved, it probably will. Alternatively, if the data was questionable to begin with, it's probably a sign that the FDA doesn't need an advisory committee to confirm that the drug isn't worth approving.

For example, Bristol-Myers Squibb's (NYSE: BMY  ) Yervoy had pretty strong efficacy data, the FDA canceled the advisory committee meeting, and the agency subsequently approved the drug. On the flip side, the FDA canceled the advisory committee meeting for Repligen's pancreatic imaging diagnostic, RG1068, and at the same time, the company said it expected to receive a rejection letter from the agency. A few months later, the FDA did just that.

The data for cabozantinib looked pretty good -- and Exelixis certainly didn't say that it expected to receive a rejection -- so my guess is that an approval is fairly likely at this point. Obviously, that guess makes some assumptions about a relatively opaque FDA that can be hard to read sometimes. Clues are usually all you get, and you just have to take your best guess.

In the big scheme of things, though, it doesn't matter that much whether cabozantinib is approved for use in medullary thyroid cancer. The indication is fairly small, and cabozantinib will likely be used after AstraZeneca's (NYSE: AZN  ) Caprelsa or, at the very least, have to compete with it.

If cabozantinib works in prostate cancer, it'll have more competition -- Johnson & Johnson's (NYSE: JNJ  ) Zytiga, Dendreon's (Nasdaq: DNDN  ) Provenge, and likely Medivation's MDV3100 -- but the market is also substantially larger. A positive clinical trial in prostate cancer patients is likely to have a bigger effect on the stock price than an approval in thyroid cancer.

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Fool contributor Brian Orelli holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Johnson & Johnson and Dendreon. Motley Fool newsletter services have recommended buying shares of Exelixis and Johnson & Johnson, as well as creating a diagonal call position in Johnson & Johnson. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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  • Report this Comment On August 31, 2012, at 9:58 PM, lika1234 wrote:

    To address the paragraph " cabozantinib works in prostate cancer, it'll have more competition -- Johnson & Johnson's (NYSE: JNJ ) Zytiga, Dendreon's (Nasdaq: DNDN ) Provenge, and likely Medivation's MDV3100 "

    My comment :

    The good thing about prostate cancer is that it is a slow growing disease, going on many, many years (vs glioblastomas, lung cancers, melanomas and medullary carcinomas), hence requiring multiple treatment options when patient progresses on his current treatment. Cabo does not compete with Zytiga or MDV 3100 drugs, or available chemo regiments, they all have their own place in the course of prostate cancer treatment.

    Out of all of them, Cabo shows the most promise in treating patients with bone mets, that are the most common distant metastases for prostate cancer. Cabo doesn't need Prednisone as Zytiga does, and it it a bonus. Chemotherapy is reserved for the very late stage of the disease in the metastatic prostate cancer, and after a patient had Taxotere and Cabozitaxel chemo regiments and progressed, he would be offered Zytiga, MDV and Cabo in sequence since each of them will be able to "buy" more time before progressing and requiring a new drug to contain that progression of his disease.

    The advantage of Cabo is that on top of prostate treatment it offers treatment option for other cancers, while Zytiga doesn't and MDV 3100 may be will show some promise in breast cancer

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