Updated with new information, stock price. SOUTH SAN FRANCISCO, Calif. ( TheStreet) -- Exelixis ( EXEL) faces the possibility of a lengthy delay in the approval process for its experimental prostate cancer drug cabozantinib because U.S. regulators are refusing to sign off on the design of a pivotal clinical trial. The setback introduces new risk into the development of the promising prostate cancer drug, which caused investors to flee Exelixis. Shares are down $2.97, or 38%, to $4.75 in Tuesday trading following Monday night's announcement. Exelixis had been hoping to reach agreement with the U.S. Food and Drug Administration that a relatively small and quick phase III study of cabozantinib demonstrating pain reduction in very late-stage prostate cancer patients would be sufficient to get the drug approved. But FDA balked at endorsing this strategy and refused to grant Exelixis a so-called Special Protocol Assessment for the cabozantinib pain study, Exelixis disclosed Monday night. "This was surprising and unexpected," said Exelixis CEO Michael Morrissey, referring to the FDA's decision, on a conference call. Exelixis has decided to push ahead and conduct the cabozantinib study with a pain reduction endpoint without an FDA endorsement. The company will hope that overwhelmingly positive data will convince FDA to approve cabozantinib early. If FDA balks at this "go fast" approach to cabozantinib approval -- and Monday's announcement certainly suggests FDA opposition to this plan -- Exelixis will have to wait for results from a larger, follow-on phase III study in prostate cancer that will seek to prove cabozantinib can prolong survival. Exelixis suggested Monday night that cabozantinib could still be approved in 2014 even if two studies are required. Analysts like Canaccord Genuity's George Farmer are skeptical about that timeline, predicting cabozantinib's approval could be pushed back to 2015 or 2016. Exelixis decision to rely on pain relief as a primary endpoint for a pivotal study of cabozantinib has been controversial. All recently approved prostate cancer drugs -- Johnson & Johnson's ( JNJ) Zytiga, Sanofi's ( SNY) Jevtana and Dendreon's ( DNDN) Provenge -- used a survival benefit as the basis for approval. Still experimental prostate cancer drugs from Medivation ( MDVN) and Algeta both employed overall survival in their respective phase III studies. Exelixis believes demonstrating cabozantinib's ability to shrink or eliminate the spread of prostate cancer to bone, which causes patients a lot of pain, is a clinically significant benefit and enough to convince FDA to approve the drug. To support their position, Exelixis points to the FDA's own guidance stating prostate cancer drugs can be approved on the basis of pain resolution. Mitoxantrone was approved for prostate cancer using a pain reduction endpoint in 1996.