Sitting at half the price it was when the year started, 2011 hasn't been kind to Exelixis (Nasdaq: EXEL).

The year started out well enough, with investors waiting for highly anticipated phase 3 data testing its cancer compound cabozantinib in medullary thyroid cancer. As so often happens, investors piled on, looking for a piece of the binary action, causing shares to rise.

As it turned out, they had to wait a bit longer. Despite the company's best efforts to determine when patients would progress, Exelixis' estimate was off by about three months. That's really not surprising considering the phase 3 trial enrolled only a subset of the patients that were enrolled in the phase 2 trial.

And the delay turned out not to matter that much. Cabozantinib was a huge success. The median progression-free survival, a measurement of how long it takes for the tumor to start growing again, was 11.2 months for patients taking cabozantinib, compared to just 4.0 months for patients taking placebo. Shares deservedly jumped on the news. Without any drugs approved to treat medullary thyroid cancer patients this late in progression -- AstraZeneca's (NYSE: AZN) vandetanib is approved for earlier use -- an approval seems likely.

Unfortunately, the euphoria was short-lived. About a week later, Exelixis announced that it wasn't able to reach an agreement with the Food and Drug Administration on a Special Protocol Assessment (SPA) to test cabozantinib in prostate cancer.

The company wants to take a shortcut, gaining approval based on the ability to decrease pain in patients rather than the more-obvious-but-slower measurement of overall survival. For patients that have already failed Sanofi's (NYSE: SNY) Taxotere, Johnson & Johnson's (NYSE: JNJ) Zytiga, and potentially even Dendreon's (Nasdaq: DNDN) Provenge, there aren't many options left, so relieving pain is certainly a worthy goal.

And the FDA never really said it was a bad idea, the agency just wasn't willing to give Exelixis an SPA, which would give it a free ride if it met certain criteria. The sticking point was pre-specifying that criteria. Exelixis is more risky without the SPA, but not overly so. It's still planning on running a trial to measure overall survival, so even if the FDA establishes a high bar for the pain indication after the data are available, cabozantinib could still eventually get approved as a treatment for prostate cancer.

With an approval on the horizon, next year looks like it'll be a better year for Exelixis. But it's still not our top pick for 2012. Check out the Fool's new free report where Fool analysts report their top pick for 2012. Just click here to grab your free copy.

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