When Exelixis' (Nasdaq: EXEL) press release arrived in my inbox yesterday afternoon, I knew investors weren't going to like this news.

But a 40% drop today? That seems a bit excessive. You'd think its lead drug failed a clinical trial or the Food and Drug Administration turned down the drug. Neither is the case.

Instead, the FDA simply didn't agree with Exelixis in how to take a shortcut to approval.

The agency has a process called a Special Protocol Assessment, or SPA, where companies can get the FDA to sign off on their clinical trial protocols. The agency is essentially saying, "Assuming no unforeseen issues, we'll approve the drug if it matches or exceeds this level of activity." Since this all happens before the data is generated, you can imagine that the agency tends to be a little conservative when handing out SPAs.

Exelixis and the FDA couldn't reach an agreement on what constitutes a positive trial for testing its cancer drug, cabozantinib, in prostate cancer patients with pain that can't be controlled. That doesn't preclude the company from going ahead anyway, hoping that the data will be robust enough to convince the FDA that it should approve the drug to treat pain.

And that's exactly what Exelixis is doing. It'll test cabozantinib in late-stage prostate cancer patients who have failed Sanofi's (NYSE: SNY) Taxotere and Johnson & Johnson's (NYSE: JNJ) Zytiga. There isn't much left for these patients except some older drugs, mitoxantrone and prednisone, which control pain in only about 8% of patients. If cabozantinib can triple that, which it'll have to do to have a successful trial, will the FDA really say the drug isn't doing anything useful for patients?

And keep in mind, a pain indication was just a shortcut to try to get cabozantinib to prostate cancer patients quicker. The company is running a second trial, hoping to prove that the drug improves overall survival, which J&J's Zytiga, Dendreon's (Nasdaq: DNDN) Provenge, and others have done. There's no need for an SPA there, as it's the gold standard for efficacy.

Not getting an SPA for the pain indication is certainly a negative, as it introduces uncertainty, but I have a hard time seeing it as bad as investors are making it out to be. If you're willing to wait for data, the knocked-down price is a buying opportunity.

Fool contributor Brian Orelli holds no position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Johnson & Johnson, Dendreon, and Exelixis. Motley Fool newsletter services have recommended buying shares of Johnson & Johnson and Exelixis and creating a diagonal call position in Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.