Source: Exelixis.

Exelixis (NASDAQ:EXEL) has filed for FDA approval of Cobimetinib, a treatment for skin cancer that investors hope will offer new hope for patients with a particularly tough to treat form of melanoma. Investors also hope the process will resurrect shares in the struggling company.

Turning the page
As recently as 2011, investors were paying more than $12 to own shares in Exelixis. However, a big-time failure of a promising drug for prostate cancer rocked shares in 2014, sending them down to all-time lows, and prompting long-term investors to wonder what may be in store for the company in the future.

If Exelixis can convince regulators to approve cobimetinib, 2015 could prove to be a much better year than 2014. That's because an approval would give Exelixis its first commercial drug, and a valuable revenue stream that can be used to slow the company's cash burn and pay down some debt.

But before we get too excited about the opportunity that cobimetinib may offer to Exelixis investors, we need to remember that Exelixis will be sharing profit from cobimetinib with Roche, its partner on the drug since 2006. At first, the two companies will split profits on sales of the drug in the U.S., but once U.S. sales eclipse $200 million, Exelixis' share of the profit will decline to 30% on U.S. sales of more than $400 million a year. On sales outside the U.S., Exelixis will receive low double-digit-percentage royalty.

An important market
If approved, cobimetinib will be used alongside Roche's Zelboraf, another cancer drug, to treat melanoma patients with a BRAF V600 gene mutation. During phase 3 clinical trials, combining those two drugs helped those patients avoid disease progression for longer than using Zelboraf alone. For patients taking the two-drug therapy, progression-free survival was 9.9 months versus just 6.2 months for Zelboraf monotherapy.

Because Exelixis is filing for approval of the two-drug approach as a treatment in previously untreated patients with the BRAF V600 mutation, cobimetinib could become a widely used treatment for melanoma. According to Exelixis, roughly 50% of all melanomas contain a mutation of the BRAF protein.

This suggests that cobimetinib could help treat tens of thousands of patients every year. According to the American Cancer Society, more than 76,100 people will be diagnosed with melanoma, and more than 9,700 people will die from the disease this year.

Ongoing risk
Despite cobimetinib's potential to help thousands of melanoma patients, investors are right to remain cautious on Exelixis. After all, the drug has yet to receive the regulatory green light. Even if the drug is approved, analysts think that sales may only total $200 million, or less.

That would certainly help Exelixis' balance sheet, but it's unlikely to cure all its ills. The company owes lenders $355 million, and its ongoing trials continue to eat away at cash, which stood at $192 million exiting the third quarter.

Additionally, as per the licensing deal with Roche, Exelixis will need to pay for 25% of the sales and marketing associated with cobimetinib. This suggests that Exelixis remains a speculative biotech stock with arguably more than its fair share of risk. For investors who are comfortable with such risk, cobimetinib could provide an important catalyst for shares in 2015.