Exelixis Inc. (NASDAQ: EXEL) is seeing an outright implosion in its stock after news of its Phase 3 metastatic prostate cancer not meeting its primary endpoint. The disappointing news, the charges announced and the coming layoffs sound dire. While most news outlets are focused on the negative news of the day and the 50% haircut in the stock price, 24/7 Wall St. has a much more important question for investors to consider: Is there anything left for Exelixis investors ahead?

For starters, Exelixis shares fell by more than half on the news. After 15 minutes of trading, more than 10 million shares had already traded, and that was over 15 million shares in less than the first half-hour. Also, the new $370 million market cap was closer to $800 million before the bad news broke. A drop of more than 50% in any biotech is generally considered an outright implosion. So again, what is left here at Exelixis?

The company does have its Cometriq, indicated for the treatment of patients with progressive, metastatic medullary thyroid cancer. Unfortunately, the company’s annual revenues have slid massively, and a failed Phase 3 trial puts the company into a perceived jeopardy by investors. That is why it is important to see what is left under the hood.

Cobimetinib (formerly GDC-0973/XL518) is listed in the company’s pipeline. Cobimetinib is classified as an inhibitor of the MEK pathway. It is also listed as being developed by Roche (and Genentech) under a collaboration agreement with Exelixis.

READ ALSO: Top-Yielding Stocks Dominate UBS Equity Focus List for September

While the balance sheet appears to have massive liquidity in cash and investments, there are some serious considerations that investors need to keep in mind. Class action lawsuits likely will be coming very soon. Those suits, and the company’s charges announced in the news, likely will eat into the balance sheet — listed as follows (as of June 30, 2014): Cash, cash equivalents, short-term investments and long-term investments came to a combined $341.2 million. Unfortunately, the short-term (current) liabilities were $171.857 million and the company had $253.69 million in long-term debt.

If you add up the “other” liabilities, the total liabilities were $437.392 million as of June 30. If you back out the goodwill and intangibles, the net tangible assets came was negative: -$60.441 million. The company’s annual revenues were as follows:

• $31.338 million in 2013
• $47.45 million in 2012
• $289.636 million in 2011
• $185.04 million in 2010

The news summary is very unfortunate.

Exelixis announced the results from the final analysis of COMET-1 Monday and the response was not favorable. This was the Phase 3 trial for cabozantinib, which was a treatment for prostate cancer. Ultimately the study did not yield the results and the primary endpoint of a significant increase in overall survival was not seen. The company will continue to pursue the COMET-1 project for secondary and exploratory endpoints. However, more bad news came from COMET-1 when Exelixis announced that it will significantly reduce its workforce so that the financial resources can be focused on the late-stage clinical trials of cabozantinib. The number of layoffs that the company indicated was 70%, resulting in approximately 70 employees remaining.

READ ALSO: Merrill Lynch Says Tech Hardware Still the Stocks to Own in 2014

Exelixis expects a one-time restructuring charge to come from its workforce reduction in the range of $6 million to $8 million. Exelixis said that it has enacted this among other cost-saving measures to financially sustain its operations through the release of the results from the METEOR trial next year. The company deprioritized cabozantinib in light of the results from COMET-1. The enrollment for COMET-2 has been halted but results are expected before the end of the year. Other studies in metastatic prostate cancer by Exelixis will be halted as well.

The company’s combined quotes said:

We are very disappointed that COMET-1 did not meet its primary endpoint of extending overall survival in men with mCRPC. We are grateful to the patients, physicians, nurses, caregivers, and other study team members who participated in the trial. We remain focused on the development program for cabozantinib beyond mCRPC, including the ongoing METEOR and CELESTIAL phase 3 pivotal trials, from which we expect top-line data in 2015 and 2017, respectively. We have thoughtfully prepared for this scenario and the resulting very difficult decisions. The workforce reduction we have announced today is necessary to significantly reduce our corporate operating expenses. I would like to personally express my deep appreciation to the talented and dedicated Exelixis employees who will be impacted by these actions, both for their commitment to Exelixis and for their tremendous contributions to patients with cancer.

After 25 minutes of trading, the stock had traded more than 15 million shares and the price was down 52% at $1.99. Exelixis has had a 52-week range of $1.85 (the low Tuesday morning) to $8.41.

While other analysts may chime in, so far we have seen two downgrades in the opening hour of trading on Tuesday. There was a downgrade to Market Perform from Outperform at Cowen and a downgrade to Hold from Buy at Stifel.

On the surface it seems as though there is more than just the bad news to look at. Unfortunately, the balance sheet inversion is likely to be a serious issue. This company had previously been considered potential merger bait, but that was when the news flow was looking more positive. Exelixis has more than a simple conundrum on its hands, and ditto for its investors.

READ ALSO: 10 Brands That Will Disappear in 2015

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.