Trying to understand the acronym soup that is the U.S. Food and Drug Administration can be confusing. On Monday, Rule Breakers pick Exelixis (NASDAQ:EXEL) received news that the agency had granted one of its lead drugs, XL184, a special protocol assessment for its phase 3 clinical trials.

An SPA agreement with the FDA is made out to be much more than it is. Essentially, an SPA means that the FDA and Exelixis have a written and explicit set of rules for what sort of benefits and hurdles XL184 will need to meet and overcome for its phase 3 testing to be considered a success and the company to move toward marketing approval.

The benefits to signing an SPA deal is that Exelixis will have pinned the agency down on what sort of data XL184 needs to produce in its phase 3 thyroid cancer program. That way, the agency can't backtrack and say that it was expecting some other sort of data for the drug's approval. An SPA agreement thus provides a little extra bit of understanding between the FDA and a drugmaker about what is expected of a compound.

Getting an SPA is relatively common and shouldn't be construed as some game-changing event for Exelixis. In fact, for cancer drugs such as XL184, the FDA has been fairly consistent and explicit about the sort of data that is required for a drug to get approved. Therefore, an SPA agreement doesn't mean a whole lot more than just a little extra affirmation that Exelixis is heading in the right direction with its phase 3 program for XL184.

An SPA doesn't guarantee approval: Drugmakers like Encysive Pharmaceuticals and GPCBiotech (NASDAQ:GPCB) have signed SPA agreements, but those drugs were not approved for one reason or another.

Exelixis expects that phase 3 testing for XL184 will start in the summer. The company has designed the phase 3 program with the expectations that the drug will have a 90% chance of producing a 75% increase in one measure of survival if it truly does work as Exelixis expects it to and if the study is properly run.

Other multi-targeted therapies like Pfizer's (NYSE:PFE) Sutent are also in testing as potential treatments for thyroid cancer. Exelixis may have its own big pharma help on the way, though, as GlaxoSmithKline (NYSE:GSK) might take over development of the drug during the fall.

Need some help with biotech terms? Check out our three-part series on the subject: