Shares of

Matrix Pharmaceutical

(MATX) - Get Report

fell almost 17% Friday on Wall Street's rising fears that U.S. drug regulators may turn negative on the biotech firm's unique cancer treatment.

Friday's Matrix selloff came fast and furious. There was little activity in the stock until just before 2 p.m. EDT. But in the last two hours of trading, Matrix shares lost $1.56, or 16.9%, to close at $7.69 per share. Shares traded at almost 10 times the average volume.

Matrix goes in front of an advisory panel of the U.S. Food and Drug Administration on Sept. 10, seeking approval for

IntraDose, a novel treatment used to help patients dying from head and neck cancer.

Earlier this week, a hedge fund with a large long position in Matrix sold off its stake on the advice of a consultant who expressed doubt about IntraDose's chances at the advisory panel meeting, according to a source at the firm. The consultant based his opinion on his own interpretation of the company's previously released data, and not on any inside knowledge of the upcoming FDA meeting.

This hedge fund sold its position earlier this week, so it was not directly responsible for today's action. In fact, Matrix's price was fairly stable all week. But news like this gets around Wall Street pretty quickly, which could have led other institutional players to unload shares today.

Phone calls placed to other institutional investors in Matrix were not returned.

Today's Matrix selloff is a bit surprising in that the fears about the company's chances at the FDA advisory panel meeting are not new. The company designed a novel way of testing IntraDose, which is seeking approval as a palliative treatment for terminally ill patients and not as a cancer cure. Instead of analyzing data to measure the survival of patients, Matrix used a subjective measure of patient benefit, or improvement in their quality of life.

In its two late-stage tests, IntraDose failed to meet preset patient benefit goals, although the combined data from the test did pass. Matrix's challenge has always been to put a positive spin on these mixed results to the FDA panel members. But in today's risk-averse atmosphere on Wall Street, some institutional investors apparently lost their appetite for the risk.

Matrix does have some undeniably good news to deliver to the FDA, most notably additional test results that show IntraDose shrinks or eliminates head and neck tumors in 30% of patients -- a significant rate of success for cancer drugs.

And lest you think that Matrix has lost all of Wall Street's support, guess again. One hedge fund manager, who remains bullish on the company, scoffs at today's selloff and remains confident that IntraDose will get a positive nod at the FDA meeting.

Bill Martin, Matrix's spokesman, says he expects the FDA advisory panel members to take a critical look at IntraDose, just like any other drug they review, but the company is confident that it will present a strong overall case for approval.