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What: Shares of Exelixis (NASDAQ:EXEL), a biopharmaceutical company focused on developing therapies targeted at cancer, rallied 11% in October, based on data from S&P Capital IQ, as investors' nerves calmed down from the month prior and rumors of a possible Roche (NASDAQOTH:RHHBY) tie-up continue to swirl.

So what: The first factor helping Exelixis' shares in October was the mere fact that no additional bad news surfaced. If you recall, Exelixis shares lost more than half of their value at the beginning of September after announcing that Cometriq (scientific name cabozantinib) failed to meet its primary endpoint of a statistically significant improvement in overall survival for metastatic castration-resistant prostate cancer patients in the COMET-1 study. Exelixis' press release generated a lot of emotions from investors that took a while to die down. October allowed calmer heads to prevail and for the stock to see a little bit of a rebound as a result of that.  

Roche Biomarker
Source: Roche.

The other factor at work here was a late September release that announced positive phase 3 results for the combination of cobimetinib (discovered by Exelixis) and Roche's Zelboraf as a treatment for BRAF V600 mutation-positive advanced melanoma. The combination produced a median progression-free survival of 9.9 months compared to 6.2 months for Zelboraf alone, while an independent review committee determined the PFS to be an even more impressive 11.3 months. The objective response rate was also notably better at 68% for the combo compared to 45% for the Zelboraf monotherapy arm.

Following this data, and Exelixis' recent swoon, rumors have surfaced that Roche may have interest in buying Exelixis, though as of now these are nothing more than unsubstantiated rumors.

Now what: As a shareholder of Exelixis myself, I clearly expect a rebound at some point down the road, but also believe that there will be other bumps in the road along the way.

Exelixis is likely going to need to raise cash at some point to cover its ongoing clinical and research and development costs, which may ultimately hurt shareholder value through a secondary offering. In addition, the advanced melanoma space is getting more crowded every year, meaning even with Roche on its side and the CoBRIM study delivering excellent results the combination of cobimetinib and Zelboraf may have limited upside.

On the other hand, Cometriq has worked phenomenally in metastatic medullary thyroid cancer and has two additional studies it's being tested in – METEOR for renal cell carcinoma due in 2015, and CELESTIAL for hepatocellular carcinoma due in 2017. What's unique about the METEOR trial is that progression-free survival, not overall survival, is the primary endpoint. Cometriq has hit the mark on PFS in a number of studies thus far, so I feel good about a positive late-stage outcome in this particular study.

As I said, Exelixis isn't without its risks, but I do continue to see value in these shares over the long term.

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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