As it expands its pipeline beyond the field of oncology, Exelixis Inc. entered a definitive agreement to acquire X-Ceptor Therapeutics Inc. and its small molecules for cardiovascular and metabolic disorders.
"As we've matured as a company, we've been thinking a lot of how to diversify our portfolio and bring different types of compounds forward," said George Scangos, Exelixis' president and CEO. "And metabolism was a very interesting area for us. We have a lot of assets there."
South San Francisco-based Exelixis plans to issue about 2.5 million shares of its common stock and pay about $2.9 million in cash in exchange for all of X-Ceptor's outstanding shares on a fully diluted basis. Based on Exelixis' closing stock price on Monday, the shares are worth about $19.4 million. Added to the cash payment, the acquisition is valued at $22.3 million.
Exelixis' stock (NASDAQ:EXEL) rose 35 cents on Tuesday, closing at $8.12.
X-Ceptor stockholders, who own about 87 percent of the outstanding shares, have approved the transaction with written consents. That includes Ligand Pharmaceuticals Inc., of San Diego, which owns 6 million preferred shares, or about 17 percent of X-Ceptor's outstanding capital stock.
Ligand said it expects to receive about 610,000 shares of Exelixis common stock upon closing. Those shares will be subject to trading restrictions for up to two years.
Founded in 1999 by Ligand and a group of private investors, X-Ceptor has taken identified orphan nuclear receptor targets without disease association and established disease proof of concept, generating preclinical drug candidates to treat cardiovascular and metabolic disorders.
"I think X-Ceptor really did represent the leading company in this area, and they've had a remarkably productive group, a great science, really interesting compounds," Scangos told BioWorld Today. "And put that with our own capabilities of moving compounds forward, it puts a program together that we're all really optimistic about."
With the acquisition, which is expected to close in the fourth quarter, Exelixis is able to expand its focus into the areas of metabolic syndrome, lipid disorders, hypertension and congestive heart failure. The company will combine its small-molecule discovery engine and oncology pipeline with X-Ceptor's reverse endocrinology platform and pipeline of nuclear hormone receptor (NHR)-targeted compounds.
While Exelixis wanted to expand its pipeline, X-Ceptor needed the acquisition to help exploit the potential of the NHR gene family.
"They're at the stage now where they needed to build downstream capabilities, preclinical and clinical development, cGMP manufacturing," Scangos said. "They were faced with the strategic decision of whether they wanted to do that themselves."
X-Ceptor established a partnership in 2001 with Sankyo Ltd., of Tokyo, for the discovery and development of small-molecule modulators of liver X receptor to treat the process of reverse cholesterol transport. Its internal programs include the development of farnesoid X receptor to treat hypertriglyceridemia observed in Type II diabetes, metabolic syndrome and related metabolic disorders; a mineralocortiocoid receptor to treat hypertension and other cardiovascular disorders; and other approaches to treat diabetes and obesity.
Exelixis expects to file investigational new drug applications for some of the X-Ceptor compounds in 2006.
"They have advanced lead compounds against three very interesting targets and a number of earlier assets and a very good IP position," Scangos said. The acquisition "probably moves forward by a year or two getting compounds into the clinic in this area."
In its own development pipeline, Exelixis is studying XL119 in Phase III for bile duct tumors, and XL784 and XL647 in Phase I trials for oncology indications. It also has several other cancer compounds preparing to enter the clinic.
Nuclear receptors are ligand-activated transcription factors that regulate gene expression and play a critical role in endocrine signaling. They interact with additional protein molecules that serve as co-activators or co-repressors, allowing each receptor to turn genes on or off.
The 48 members of the nuclear receptor gene family include validated nuclear receptors that serve as drug targets for human disease, as well as orphan nuclear receptors whose ligands, target genes and physiological function are not completely understood.
X-Ceptor's reverse endocrinology approach is used to validate targets, develop therapeutics and improve existing drugs. While traditional methods use a ligand to identify a receptor, which then is correlated to a disease, X-Ceptor begins with the molecular target that is used to screen for candidate ligands. The resulting small-molecule hits are optimized for their receptor activity and specificity with medicinal chemistry and rational drug design employing X-ray crystallography of the ligand receptor complex.
For the time being, X-Ceptor's offices will remain in San Diego and the company name will not change. Exelixis plans to lay off 17 employees and keep 39 at the site, Scangos said.