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Biotech Stock Mailbag: Exelixis, Protalix, Arena

BOSTON (TheStreet) -- David Sobek, political scientist, amateur biotech investor and widely followed Twitter commentator (@dsobek) writes that Exelixis (EXEL) is an under-appreciated and under-valued biotech stock, particularly given some updates on the prostate cancer drug cabozantinib expected at the American Society of Clinical Oncology (ASCO) annual meeting in June.

"[Exelixis] represents both a long-term value play and has a good chance to surprise investors with their data presentations at ASCO," writes Sobek at Seeking Alpha.

I appreciate Sobek's perspective on Exelixis but told him (via Twitter) that he's fighting against Wall Street biotech investors and their generally dim view of cabozantinib's potential. That makes it tough for Exelixis bulls like Sobek to win.

Exelixis shares were trading around $12 in the run up to last year's ASCO meeting but have since slumped to less than $5. To help explain why Exelixis has fallen and isn't getting up anytime soon (say the bears), I've asked a veteran Wall Street biotech investor -- and a longtime source -- to lay out his negative thesis for cabozantinib in this week's Biotech Stock Mailbag. His job prevents him from going on the record, so let's just call him Bio-investor X. And while he's not short Exelixis, you can assume that he's in the short-selling camp on this stock.

Remember, every stock -- biotechs included -- has a bull and bear thesis. You can't make an informed investing decision without knowing what the other side thinks.

As background, Exelixis is conducting two phase III studies of cabozantinib ("cabo" for short) in advanced prostate cancer. The company's plan is to use data from both studies to seek regulatory approval.

Study 306 is designed to assess durable pain reduction, currently enrolling prostate cancer patients with progressive disease (bone pain) after treatment with Taxotere and either Johnson & Johnson's (JNJ) Zytiga or Medivation's (MDVN) MDV3100 . The study's targeted enrollment is 236 patients who are randomized 1:1 to receive either cabo or mitoxantrone/prednisone.

Study 307 is the survival trial and will enroll the same type of prostate cancer patient (post Taxotere and either Zytiga or MDV3100), randomized 2:1 to receive either cabo or prednisone. Target enrollment is 960 patients. An interim analysis of survival will be conducted after 387 deaths, a final analysis at 578 deaths.

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