Exelixis (EXEL -2.05%) recently reported bad news from a late-stage study evaluating a combination of Cabometyx with Tecentriq in treating liver cancer. The biotech stock immediately sank close to 20%. In this Motley Fool Live video recorded on June 30, 2021, Motley Fool contributors Keith Speights and Brian Orelli discuss whether or not Exelixis stock could be a buy after this clinical setback.

Keith Speights: At the end of our Monday program, we had a question from a viewer about Exelixis' big stock decline. The stock plunged on Monday after the company announced disappointing results from a combination of Cabometyx with Tecentriq in treating liver cancer.

First of all, how bad were those results and do you think Exelixis' stock might be a buy after these disappointing results, or are investors better off looking elsewhere right now?

Brian Orelli: In my quick scan on Monday, I didn't see anything too bad. But as often is the case with the clinical trial results, the devil's often in the details.

This was an interim look at the data from a phase 3 clinical trial in patients with liver cancer. Exelixis is testing its drug Cabometyx combined with Roche's Tecentriq which reduced the risk of progression or death by 37 percent compared to Bayer's Nexavar.

That's definitely good news. But three-quarters of the way through the first paragraph it says, and I'm quoting here, "Based on the preliminary overall survival data, Exelixis anticipates that there's the low probability of reaching statistical significance at the time of final analysis is low."

Like I say, I added a low somewhere in there. So that's definitely bad news. Delaying progression is good, but patients and the doctors ultimately care about living longer, and so being able to prove that it provides a benefit in overall survival is what doctors and their patients would really like to see.

Exelixis based on the initial data doesn't think that that's going to be the case there. There seems to be a trend favoring Cabometyx and Tecentriq, but it doesn't look like it's going to be statistically significant. That isn't necessarily to say that Cabometyx plus Tecentriq doesn't work better than Nexavar.

I suspect what happened is that the patients who progressed on Nexavar then went on to take another approved combination, possibly Tecentriq with Avastin, which Roche also sells, and that was approved last year.

I think what's probably happening is those patients are living longer than they would if had just taken Nexavar and then the next best drug. But Tecentriq plus Avastin actually beat Nexavar, so I think that's probably what's happening as patients went from Nexavar to a better drug, and so then that even though staying on Cabometyx until you progressed provided a definite survival benefit over Nexavar, by taking the other drug, it boosted that a little bit, and so now it's not statistically significant.

Speights: I'm sorry, go ahead.

Orelli: Yeah. I think just the issue here is probably just convincing doctors to use it as a first-line treatment because I did some hand-waving and that's probably what Exelixis is going have to do. Whether doctors buy it or not is going to be a problem, especially since there's this other combination of drugs that has proven that it provided a survival advantage over Nexavar.

Growth into the early lines of cancer has been really important for Exelixis. It's done it in kidney cancer, and then investors are really expecting it to be able to do it in liver cancer, and that's more of a gray area at this point.

Speights: Now, the stock fell around 20 percent earlier this week, it's down around 30 percent from its highs front just a couple of months ago. I know, Brian, you really look for value. Is Exelixis a stock that might be on your radar now because of the sell-off?

Orelli: I think I'd have to probably look at it a little bit closer than I have. My biggest issue, the reason why I haven't really been into Exelixis is right now -- I was really bullish on it before it started getting approvals for Cabometyx -- was that there's a big gap between Cabometyx and its next pipeline drug.

I'm worried about that gap in there and how the company's going to perform over that timeframe, which is probably coming up pretty soon. I think Cabometyx is going to be so slowing growth, and then what is the next growth driver is still, I don't know, on phase 1 or 2.

It's going to be years before they have another drug on the market. That's been my biggest concern with Exelixis going forward over the medium term. Over the long term, they've started to build a pipeline, and so they definitely have potential, but I tend to discount those early stage drugs until you get some decent data on them.