The benchmark S&P 500 may have crossed the psychological 2,000 point mark, and the Dow Jones Industrial Average have crested 17,000, but it's been an abysmal year if you're a shareholder in Exelixis (NASDAQ:EXEL), like I am.

EXEL Chart

EXEL data by YCharts

For the year, shareholders have witnessed their shares tumble in value by 70%. If you retrace back to the company's year-to-date closing high in January shares are down almost 80%.

What's caused this vicious tumble in Exelixis' stock? We'll take a closer look at the reasons for that today, as well as examine whether there's any hope that Exelixis shares can rebound from their current level.

Why Exelixis was mauled in 2014
Without question, the big reason Exelixis shares have been hammered in 2014 is the failure of cabozantinib (known commercially as Cometriq), in the COMET-1 trial.

Roche Employee
Source: Roche

COMET-1 was a late-stage study that was testing Cometriq as a treatment for metastatic castration-resistant prostate cancer, or mCRPC. The primary endpoint of the study was a statistically significant improvement in median overall survival with a secondary endpoint of a statistically significant improvement in progression-free survival. For Exelixis it was a critical study because prostate cancer is the most commonly diagnosed cancer in the U.S., thus a large potential patient pool.

According to the results of the study, which were released a little over a week ago, Cometriq hit its secondary endpoint of improving progression-free survival over the control arm of prednisone (5.5 months versus 2.8 months), but failed to significantly improve overall patient survival (11.0 months versus 9.8 months) relative to the prednisone-treated group. A high p-value of 0.212, implying that chance rather than actual pharmacologic effect played a role in widening overall survival by 1.2 months, also doomed its results.

This wasn't the first hint that Cometriq might not succeed in the COMET-1 study, either. In late March Exelixis' stock was hammered after announcing that the independent data monitoring committee had suggested the trial be run to completion during a planned interim analysis. Exelixis shares took it on the chin then because investors had been hopeful for an early trial stoppage, which would have signaled superior survival efficacy. Because the trial continued it already drew into question Cometriq's potential survival benefit.

Images

Source: Images Money via Flickr

In addition to the COMET-1 study, Exelixis has been hit hard by concerns of its cash burn rate. With the mCRPC indication now off the table, investors have to turn their attention toward whether or not Exelixis has enough cash to survive until it reports its two other important late-stage results in its METEOR and CELESTIAL trials for renal cell carcinoma and hepatocellular carcinoma. Data from these studies isn't expected until 2015 and 2017, and the company likely only has enough in cash to sustain it through sometime in the second half of 2015.

In response to this coming cash crunch Exelixis also announced last week that it was laying off around 70% of its workforce. Following the carnage there will be approximately 70 employees left, but the company will be running much leaner on an expense basis.

Is there any hope left for Exelixis?
As I examined recently, I do believe that Exelixis shareholders can hold out some bit of hope, as long as they keep in the back of their mind that cash burn remains a very viable concern.

For example, although Cometriq failed to improve survival in the COMET-1 study, there's still plenty of promise that it'll be successful in the METEOR and/or CELESTIAL study. Though the CELESTIAL liver cancer study also has a primary endpoint of overall survival, the METEOR kidney cancer study, projected to yield data by 2015, has a primary endpoint geared at progression-free survival and a secondary endpoint of overall survival. Through Cometriq's two clinical studies -- metastatic medullary thyroid cancer for which it was approved by the Food and Drug Administration, and mCRPC -- we've seen notable improvements in progression-free survival, which lends hope that its METEOR study will be a success.

Roche Biomarker

Source: Roche

Another point to keep in mind is that Exelixis is more than just Cometriq. In mid-July it and collaborative licensing partner Roche (NASDAQOTH:RHHBY) announced positive late-stage results for the combination of cobimetinib (developed by Exelixis) and Zelboraf as a treatment for BRAF V600 mutation-positive advanced melanoma. Though the duo didn't release specific data, it did note a significant improvement in progression-free survival, which could lead to an FDA approval in 2015. Even with the melanoma market getting a bit crowded, royalties from sales of this combination, coupled with existing and growing revenue from its metastatic medullary thyroid indication for Cometriq, could help lessen the pain of its cash burn rate. 

And, of course, there's always the outside chance of a Roche takeover if everything pans out OK with its melanoma combo drug. Exelixis has fallen well off its highs, and additional labels for Cometriq along with an approval for cobimetinib could still yield more than $500 million in annual revenue. Not to mention, with the exception of its licensing agreement for cobimetinib, Roche wouldn't have to worry about any other major collaborative pacts. In other words, it'd be able to add Exelixis to its already impressive cancer portfolio without having to share revenue with anyone else.

Roche Production

Source: Roche

Cautious optimism
As a shareholder I hold cautious optimism for Exelixis' future. Next year we should have an answer on the success or failure of Cometriq in the METEOR study and we'll likely know if the FDA is going to approve the cobimetinib-Zelboraf combo as a treatment for BRAF V600 mutation-positive advanced melanoma.

In the meantime, however, there aren't many catalysts to guide Exelixis' shares. Its ability to conserve cash will remain a priority, and it's quite possible that the company could turn toward a secondary share offering to raise money in order to boost its cash on hand at some point in the future. If this were to happen it's a good possibility that stakeholders like myself could see their shares fall as they're diluted.

It's certainly going to be a long road back for Exelixis to get back to its high of $8.24 this year, but I wouldn't rule it out just yet.

Sean Williams owns shares of Exelixis, but has no material interest in any other companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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