Exelixis's Cabozantinib Should Receive FDA Approval, But Faces Long-Term Challenges

| About: Exelixis, Inc. (EXEL)

By November 29, the FDA will determine whether to approve Exelixis's (NASDAQ:EXEL) drug cabozantinib for the treatment of medullary thyroid cancer (MTC). Cabozantinib would be Exelixis's first FDA-approved drug. In this article, we discuss medical and scientific aspects of cabozantinib and MTC. Furthermore, we discuss the reasoning behind our belief that cabozantinib will receive a positive response from the FDA. Given that Exelixis is seeking approval of cabozantinib for many indications beyond MTC, the FDA's upcoming decision will likely have a pronounced impact on the company's prospects and stock price.


MTC arises from parafollicular cells of the thyroid gland and accounts for three percent of thyroid cancers. In the United States, 2,000 cases of MTC are diagnosed each year. MTC is surgically curable if detected at an early stage. However, once a patient develops metastatic or locally recurrent disease, MTC is much less treatable. For late-stage MTC, chemotherapy can be nearly ineffective and is often foregone to maximize patients' quality of life.

Approximately 25% of MTC cases are hereditary in nature. The remaining so-called "sporadic" cases begin spontaneously. Patients with sporadic cases tend to present with later-stage disease and, consequently, have a less benign prognosis. Both hereditary and non-hereditary MTC result from mutations in a gene named RET. The RET gene encodes a cell surface receptor that is important for intercellular communication. In MTC, the RET gene and its encoded receptor are overactive, resulting directly in the incidence and progression of MTC. Exelixis's drug cabozantinib inhibits the activity of RET. Additionally, cabozantinib inhibits the activity of MET and VEGFR-2, two other receptors that are overactive in cancerous cells.

Currently, no drug has a clear and positive influence on MTC patient survival. Some proponents have lauded cabozantinib as a breakthrough drug because it strongly reduces the progression of late-stage MTC. In other words, cabozantinib stops late-stage MTC from getting worse. Another way of wording this is that cabozantinib increases progression-free survival. Nevertheless, in its phase III trial, cabozantinib may have failed to achieve a critical secondary endpoint. Namely, Exelixis could not show that patients receiving cabozantinib lived longer than those receiving the placebo. Stated formally, cabozantinib did not impact "overall survival."

Cabozantinib should receive FDA approval for MTC

The phase III trial for cabozantinib was conducted under a Special Protocol Assessment, which allows for post-trial FDA approval according to a study design and evaluation method previously endorsed by the FDA. For this particular trial, the FDA determined that progression-free survival was an acceptable metric for gauging the trial's success. Therefore, regardless of whether cabozantinib improves overall survival, cabozantinib should receive approval provided Exelixis effectively shows that the drug increases progression-free survival and has an acceptable safety profile. Publicly available information suggests cabozantinib met its mark in this area. During its phase III trial, cabozantinib increased median progression-free survival from 4.0 months in the placebo group to 11.2 months. The estimated progression-free survival at one year was 47.3% for cabozantinib, contrasted to 7.2% for the placebo. Concurrent with treatment, patients experienced many adverse events, including severe hypertension and diarrhea, palmar-plantar erythrodysesthesia, and weight loss. However, these types of adverse events are expected given cabozantinib's mode of action and purpose. Notably, cabozantinib's safety profile is not fundamentally different from that of AstraZeneca's (NYSE:AZN) Caprelsa, the only other drug indicated specifically for MTC.

Approval for MTC may not fully support approval for other indications

The appropriate use of any medication requires a fair assessment of associated benefits and risks. Most cancer drugs damage both healthy and diseased cells, so this assessment can be relatively difficult for cabozantinib and other cancer drugs. When making its approval decision for cancer drugs, the FDA evaluates whether the drug makes patient outcomes discernibly better. These outcomes include factors such as quality of life, disease progression, and overall survival. Furthermore, the FDA's tolerance for risk is proportional to how severely the target patient population lacks an effective treatment and inversely proportional to the size of that patient population.

For MTC, the risk is relatively low. The MTC population is small and has few treatment options. However, many of the additional indications Exelixis seeks for cabozantinib do not share these characteristics. For example, Exelixis is currently enrolling patients in a phase III trial for late-stage prostate cancer, an indication involving numerous effective treatments and more than ten times the number of patients as for MTC. Through discussion with the FDA, Exelixis determined that for cabozantinib to receive FDA approval for late-stage prostate cancer, Exelixis must show that cabozantinib positively influences overall survival. This is a much more stringent test than progression-free survival and, at this point, no public information suggests cabozantinib has such an effect. A reasonable fear is that cabozantinib reduces the physical progression of disease but actually increases the treated cancer's aggressiveness. This would explain why cabozantinib improved progression-free survival but not overall survival for MTC patients. There is precendence for such a possibility. If this were the case, cabozantinib would likely carry too much risk for a large patient population like that of late-stage prostate cancer. Thus, cabozantinib faces a serious challenge for its additional indications. A positive response from the FDA for MTC may not indicate meaningful support for future approvals.


Many unsettled questions remain for cabozantinib. The drug met the primary endpoint outlined in its Special Protocol Assessment, so it should receive FDA approval for MTC. However, cabozantinib will face sizeable challenges before it can become a more general cancer drug. Consequently, we anticipate Exelixis's stock price will see positive movement ahead of the upcoming FDA decision, but will remain volatile in the long term as investors await results from ongoing clinical studies.

Disclosure: I am long EXEL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Beacon VP Investments is a team of analysts. This article was written by Abhinav Bhushan, one of our team members.