West Coast Editor

Exelixis Inc.'s potential $120 million deal for cancer drugs with Bristol-Myers Squibb Co. broadens the two firms' longstanding relationship in oncology, providing $60 million up front while letting Exelixis keep sole ownership of a substantial pipeline.

"One of our challenges has been how to partner to bring in near-term revenue and how to bring some of our own things into the clinic," George Scangos, president and CEO of Exelixis, told investors during a conference call. "The structure of this collaboration is perfect for that."

New York-based BMS is paying $20 million each for up to three drug candidates to be chosen when they are ready for investigational new drug application filings, splitting with Exelixis development costs, promotion expenses, and profits.

Under the terms, Exelixis can opt out of any program chosen by BMS, and still get milestone payments, as well as royalties. "That's certainly not the preferred scenario, and I think it's highly unlikely," Scangos said. "There's a range, depending on a number of factors, but the low end of the [royalty] range is in the double digits."

BMS and Exelixis, of South San Francisco, have been working together in cancer since 2000, and their partnership includes a $200 million collaboration focused on tumor suppression pathways. (See BioWorld Today, Oct. 30, 2002.)

Along with four BMS alliances, Exelixis has a deal that includes oncology with London-based GlaxoSmithKline plc, which agreed to provide funding of $134 million, and a loan facility of $85 million, plus milestone payments and royalties. The deal covers vascular biology and inflammatory disease, too. (See BioWorld Today, July 19, 2001.)

Scangos would not disclose targets in the latest BMS agreement, but said some have been decided upon and noted that Exelixis' early stage oncology candidates XL518, XL147, XL765, and XL019 are excluded from the deal, which also carries an undisclosed funding mechanism that allows Exelixis to pay its half of development costs if they go above a certain amount.

"We, of course, will then take the clinical risk [on the independently held candidates], but actually we like those compounds a lot, so we think this is a very good thing for us," Scangos said.

He brushed aside the idea - for now, at least - that partnering could broaden the opportunity with those compounds. "That may be true, but it's probably not true at Phase I," Scangos said. "It doesn't necessarily mean we're going to take them all the way to market on our own, but for now we're going to keep them and generate more value."

Exelixis faces what Scangos called the "high-class problem" of having too much in the pipeline to pursue on its own. The company lists eight compounds in the clinic, with plenty behind those.

"We're rapidly expanding our clinical development capability, but we don't want potentially promising therapies to languish in the clinic due to a lack of bandwidth if there's an opportunity to keep them moving forward through a co-development agreement," he said.

The firm most recently made news with a setback involving the Phase II trial testing the multi-kinase inhibitor XL999. Enrollment in the program was suspended in early November because of cardiovascular adverse events, and the company is analyzing the data. Six trials are evaluating XL999 as a single agent in the treatment of colon cancer, ovarian cancer, non-small-cell lung cancer, renal-cell carcinoma, acute myelogenous leukemia and multiple myeloma. Later the same month, Exelixis reported updated data from a Phase I study with the compound that showed preliminary evidence of antitumor activity. (See BioWorld Today, Nov. 3, 2006.)

Exelixis' stock (NASDAQ:EXEL) closed Monday at $9.17, up 16 cents.