Bristol-Myers Squibb's (NYSE: BMY) loss is Exelixis' (Nasdaq: EXEL) gain. As in a 32% gain, the amount the shares went up yesterday.

Earlier this year, Bristol-Myers handed rights to cancer drug XL184 back to Exelixis. It's not entirely clear whether Bristol-Myers didn't like the prospects or if it just thought the wholly owned drugs in its pipeline looked better. Whatever the case, the prospects for XL184 look pretty dang good.

Data released yesterday from a phase 2 clinical trial testing XL184 in ovarian and prostate cancer -- two fairly large markets -- showed the drug appears to be a help in both tumor types. In late-stage ovarian cancer, XL184 shrunk metastatic tumors in 81% of the patients, and 32% had a partial response at their primary tumor site. These are fairly sick patients, at least half of whom had already received two or more prior treatments, so those numbers are fairly impressive.

The prostate cancer data looked just as good, with XL184 shrinking metastatic bone tumors in 95% of the patients and 69% of patients with soft-tissue metastatic lesions. The trial enrolled patients who had and hadn't been treated with sanofi-aventis' (NYSE: SNY) Taxotere. For the phase 3 trial, Exelixis likely will have to pick one or the other. Either it can go after the patients earlier in their diagnosis and compete directly with Taxotere and Dendreon's (Nasdaq: DNDN) Provenge, or it'll have to be content with trying to help patients after they have failed a prior treatment.

Exelixis likely will need to find another partner to run a large number of phase 3 trials; the data certainly warrant it. We're years away from seeing XL184 approved for ovarian or prostate cancer, and that'll only happen if the phase 3 trials turn out positive.

XL184 could be on the market before that, though. Data from a phase 3 trial testing XL184 in a type of thyroid cancer will be available early next year, with approval from the Food and Drug Administration possible within a year if results are positive. The market isn't large enough to launch XL184 into blockbuster status, but it would provide Exelixis some revenue while it waits.

Even after the 32% increase yesterday and a slight pullback today, Exelixis' shares don't look horribly expensive. Exelixis is still only a $650 million company, so it's not like investors have gone crazy adding billions of dollars to its market cap because of a positive phase 2 trial result. If it can bring just one drug onto the market, the 32% increase would pale in comparison.