Washington Editor

If all goes according to plan, Exelixis Inc. could bank more than $1 billion under a new licensing and discovery deal with Sanofi-Aventis Group for phosphoinositide-3 kinase (PI3K) inhibitors targeting cancer.

Investors jumped on the deal, pushing shares of South San Francisco-based Exelixis (NASDAQ:EXEL) up 18.8 percent Thursday, or 85 cents, to close at $5.36.

Exelixis is set to receive $140 million up front from Paris-based Sanofi and $21 million in R&D funding over three years, in addition to development, regulatory and commercial milestones, which could exceed $1 billion, said Exelixis CEO George Scangos.

"The financial structure of this partnership gives us significant funding with which to advance our PI3K programs while also providing substantial additional funding that we can deploy to other company efforts," he told investors and analysts Thursday during a conference call.

Scangos noted that in the last six months, the firm's business development efforts have generated more than $400 million in guaranteed cash revenues, which he insisted was "by any metric" a "substantial" achievement.

Under the license agreement, Sanofi gains worldwide exclusive rights to Exelixis' PI3K inhibitors XL147 and XL765, currently in Phase I and Ib/II trials.

Data on XL147 and XL765 suggest that the compounds may have use in treating several types of cancers, Scangos said. XL765 also inhibits the mammalian target of rapamycin, which can be activated via upregulation of PI3K, or via PI3K-independent mechanisms.

Both compounds are being investigated as monotherapies for solid tumors and in combination with Genentech Inc.'s Tarceva (erlotinib) for non-small-cell lung cancer. XL765 also is being studied in combination with Schering-Plough Corp.'s Temodar (temozolomide) for glioblastoma.

Scangos noted that the company plans to present updated data on XL147 and XL765 Monday in Orlando at the annual meeting of the American Society of Clinical Oncology.

Under the partnership, Sanofi will be responsibility for all clinical, regulatory, commercial and manufacturing activities for XL147 and XL765, while Exelixis will continue to work on ongoing and potential future trials, although Sanofi will assume all expenses going forward, Scangos said.

Under the discovery collaboration, the firms will work collaboratively to create several preclinical PI3K programs and will jointly share responsibility for research and preclinical activities related to isoform-selective inhibitors of PI3K, which plays an important role in cell proliferation and survival.

Scangos noted that each company currently has preclinical assets in the PI3K area.

"By pooling and jointly developing our respective preclinical PI3K assets as potential follow-on compounds to 147 and 765, we believe that this partnership will have the most robust PI3K portfolio in the biotech and pharma industries," he said. "The combination of 147 and 765 and its diverse pool of additional preclinical PI3K assets positions us for first- and best-in-class status in this exciting and important area," Scangos added.

Analyst Joe Pantginis, of Merriman Curhan Ford, said the terms of the deal were "very impressive" and highlight the "general excitement" in the development space for the PI3K target for oncology.

After evaluating multiple potential partnership opportunities around the PI3K programs, Exelisis chose to collaborate with Sanofi because the Paris firm "shared our desire to establish a truly joint effort to aggressively pursue oncology compounds that inhibit the PI3K pathway," Scangos said.

"Sanofi-Aventis was prepared to make a significant commitment to the PI3K pathway so that we can jointly mount an industry-leading effort against this key pathway in oncology," he added. "The collaboration will leverage strengths and expertise of both organizations from preclinical to development and commercialization."

The Sanofi deal not only validates Exelixis' PI3K programs, Scangos said, it also "validates and highlights the value of our strategy of building and advancing a robust pipeline that we can use to generate near-term cash by selectively partnering and build value to strategically advancing compounds with good chances of success."

The Sanofi collaboration comes on the heels of Exelixis' $345 million deal signed earlier this month with German drugmaker Boehringer Ingelheim GmbH to discover, develop and commercialize autoimmune disease therapies. (See BioWorld Today, May 11, 2009.) The biotech also sealed a major deal last December with Bristol-Myers Squibb Co., which paid Exelixis $195 million for co-development and co-promotional rights to XL184, a small molecule inhibitor of MET, VEGFR2 and RET, which is currently in Phase III development for medullary thyroid cancer. (See BioWorld Today, Dec. 15, 2008.)

The BMS agreement also called for the pharma to pay additional license payments to Exelixis of $45 million in 2009, with Exelixis eligible to receive sales performance milestones of up to $150 million and double-digit royalties on sales outside the U.S., or an opt-out option of the co-development of XL184, in which case Exelixis would instead be eligible to receive development and regulatory milestones of up to $295 million, double-digit royalties on XL184 product sales worldwide and sales performance milestones.

JP Morgan analyst Cory Kasimov noted that Exelixis also is presenting Phase II data at ASCO on XL184 in brain cancer, which he expects to draw much interest from investors.

BMS also gained exclusive worldwide rights under its December 2008 partnership with Exelixis to develop and commercialize XL281, a small molecule inhibitor of RAF kinase, which is in Phase I development for the treatment of patients with advanced solid tumor malignancies.

Exelixis could bank development and regulatory milestones of up to $315 million, sales performance milestones of up to $150 million and double-digit royalties on worldwide sales of XL281.

The "transformative" BMS deal, and now the Sanofi collaboration, is evidence that Exelixis' management is "effectively executing a smart and necessary strategy of partnering their highest profile assets that are likely to require greater resources and which have an ill-defined path to market," Kasimov said.

However, he said he expected Exelixis to ultimately retain greater economics in candidates focused on niche opportunities with a clear path to market.

Published  May 29, 2009