Why Shares of Exelixis, Inc. Briefly Spiked Higher

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of small-cap biopharma Exelixis spiked upwards by 9.5% in early trading Thursday, following a regulatory update for the company's experimental skin cancer drug,cobimetinib, that's being co-developed with Roche's subsidiary Genentech.

Cobimetinib is currently under review with the Food and Drug Administration, or FDA, as a potential combo treatment with skin cancer drug vemurafenib in patients with unresectable or metastatic melanoma harboring a BRAF V600 mutation.

On Thursday, the company announced that the FDA granted the drug's regulatory application Priority Review and assigned a Prescription Drug User Fee Act target action date of Aug. 11, 2015.

What this means is that cobimetinib will be reviewed faster than normal, given that it has the potential to provide a significant improvement in the treatment of this devastating form of advanced skin cancer.

So what: Exelixis shares were crushed last year due to the late-stage clinical failure of its flagship drug,Cometriq, as a treatment for metastatic castration-resistant prostate cancer. However, the stock has been rebounding nicely so far this year, fueled by cobimetinib's pending regulatory review and the looming top-line data readout for Cometriq as a treatment formetastatic renal cell carcinoma due out in the second-quarter of 2015.

So this positive regulatory news should help to keep the momentum going, even if it was somewhat expected by the Street.

Now what: Roche and Exelixis recently rolled out plans to explore cobimetinib's activity in solid tumors, when used in conjunction with immuno-therapies such as anti-PD-L1s. If the drug can show anti-tumor activity in these early stage trials, its value proposition to Exelixis shareholders would undoubtedly be greatly enhanced. So investors will probably want to keep close tabs on this drug's clinical progress in other indications moving forward, as well as its current regulatory review for advanced skin cancer.

The article Why Shares of Exelixis, Inc. Briefly Spiked Higher originally appeared on Fool.com.

George Budwell has no position in any stocks mentioned. The Motley Fool recommends Exelixis. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.