By Mary Welch

Exelixis Pharmaceuticals Inc., in its first pharmaceutical genomics deal, signed a ¿substantial¿ five-year pact with Pharmacia & Upjohn Inc. to identify targets for small-molecule therapeutics in the areas of Alzheimer¿s disease and Metabolic Syndrome, including diabetes and obesity.

¿We cannot give out any financial information, but it is a substantial relationship in two disease areas,¿ said George Scangos, president and CEO of South San Francisco-based Exelixis. ¿As part of the arrangement, they will make an equity payment, which will make them one of our largest stockholders. So that [equity], too, is substantial.¿

In addition to the equity and up-front investment, Pharmacia & Upjohn, of Bridgewater, N.J., will fund research as well as pay milestones and royalties based on future sales of products. Exelixis will use its PathFinder technology coupled with genomic and computational biology technologies to identify and validate novel targets.

The PathFinder technology works out the biochemical networks involved in disease processes and identifies key points of intervention. Researchers can identify optimal screening targets based on systematic functional genetic assays in whole organisms. Using human disease-associated genes as starting points, PathFinder disrupts the normal functions of the homologous genes in model organisms, then uses systematic mutagenesis to identify other genes that function in the same pathways.

Exelixis¿ primary model genetic systems are the fruit fly and the nematode worm.

¿Insulin resistance is important in diabetes,¿ Scangos said. ¿So we study the insulin signaling techniques used by the genes. Then we identify all those genes that, when we antagonize them, result in increasing the insulin signaling.¿

What is special about PathFinder, he continued, is that ¿we don¿t come up with 500 genes. Instead we get small numbers of genes to select. And then you can run them through other tests using different criteria and further eliminate some. It¿s a quick and efficient way to find qualified targets. We will identify targets and Pharmacia & Upjohn will take it from there.¿

The company, which has 107 employees, will not have to staff up significantly to service the collaboration.

To Exelixis, this association signals bigger and better things.

¿It¿s a big milestone for us,¿ Scangos said. ¿We believe it will help us secure other high-profile collaborations as well as help get us to the next stage, where we can develop our own compounds.¿

Founded in 1995, Exelixis benefited a year later from a $12.3 million round of private financing led by Atlas Venture, of Boston; Oxford Bioscience Partners, of Los Angeles; and PaineWebber, of New York. Two years later, it raised $15.8 million through another private placement.

¿Obviously, we are a genomics company that would like to get closer to the market and develop our own compounds,¿ Scangos said. ¿There are a lot of ways to do that, and we want to do it in an intelligent way and with high-quality partnerships, such as this one and with Bayer. It¿s a calculated risk. We want to maximize our chances for success.¿

Last year, Bayer AG, of Leverkusen, Germany, signed a $30 million deal for Exelixis to identify screening targets for new crop protection agents. (See BioWorld Today, May 22, 1998, p. 1.)

While the company is pursuing development deals, it also is keeping an eye on the stock market.

¿An IPO [initial public offering] requires you to demonstrate the ability to make additional relationships and to take the business and move forward,¿ Scangos said. ¿The barriers to a good IPO have been raised, but that is our direction.¿ n