Shares of Exelixis (EXEL) and partner Roche (RHHBY) are under pressure this morning after the companies announced that the Phase 3 IMblaze370 trial did not achieve statistical-significance on the primary efficacy endpoint evaluating the ability of a combination of a MEK inhibitor and anti-PD-L1 to improve overall survival in patients with microsatellite stable metastatic colorectal cancer.

FAILED TO MEET PRIMARY ENDPOINT: Exelixis announced that IMblaze370, the phase 3 pivotal trial of atezolizumab, an anti-PDL1 antibody discovered and developed by Genentech, a member of the Roche Group, and cobimetinib, an Exelixis-discovered MEK inhibitor, did not meet its primary endpoint. Genentech, Exelixis' collaborator and sponsor of the IMblaze370 trial, informed the company that the combination of atezolizumab and cobimetinib did not deliver an improvement in overall survival, or OS, versus regorafenib. The IMblaze370 trial evaluated the combination in patients with difficult-to-treat, locally advanced or metastatic colorectal cancer whose disease had progressed or who were intolerant to at least two systemic chemotherapy regimens. The safety profile for the combination appeared consistent with the known safety profile of each individual medicine, and no new safety signals were identified with the combination. Genentech will further examine results from IMblaze370 and plans to present the data at an upcoming medical meeting.

PULLBACK CREATES 'INTERESTING' ENTRY POINT: Commenting on the announcement, Stifel analyst Stephen Willey told investors that the absence of any granular statistical information from Roche is unsurprising but now establishes a scenario whereby OS data from this "very underpowered" trial fails to achieve statistical significance but still could be viewed as clinically meaningful. As a result, improved powering and perhaps an improved combination of drugs might be able push the MEK/PD-1 hypothesis across the threshold of statistical significance in both MSS mCRC and other tumor types, he contended. The analyst noted that Exelixis management indicated additional trials evaluating the combination of cobimetinib/atezolizumab in other tumor types remain ongoing and unchanged, and argued that attrition in the shares may create an "interesting entry point." Additionally, Willey told investors that he anticipates to see weakness materialize in Array BioPharma (ARRY), as it also has Phase 1/2 development collaborations in place with both Bristol-Myers (BMY) and Merck (MRK) evaluating the MEK/PD-1 hypothesis in earlier-lines of MSS mCRC. Meanwhile, his peer at Piper Jaffray lowered his price target for Exelixis to $29 from $33 after IMblaze370 missed the primary endpoint of OS. However, analyst Edward Tenthoff pointed out that the data does not impact two ongoing Phase 3 trials of cobimetinib and Tecentriq in BRAF-mutant melanoma. Tenthoff reiterated an Overweight rating on Exelixis shares.

PRICE ACTION: In late morning trading, shares of Exelixis have dropped 11% to $19.31, while Roche's stock trading in New York has slipped 2% to $27.52. Meanwhile, shares of Array have gained about 3% to $14.08.