OT- Bristol-Myers joins Exelixis for cancer drugs
Bernadette Tansey, Chronicle Staff Writer
Saturday, December 13, 2008
(12-12) 18:20 PST -- Shares in biotechnology company Exelixis Inc. rose nearly 33 percent Friday on news that major pharmaceutical firm Bristol-Myers Squibb will collaborate on the development of two experimental cancer drugs discovered through Exelixis' automated screening process.
The South San Francisco biotech company will receive an initial payment of $195 million from Bristol-Myers under the partnership terms, followed by $45 million in 2009.
The deal is one of the bright spots in a gloomy picture for small and midsize biotechnology companies in the current economic downturn, which has made investors wary of risk and capital hard to raise. Exelixis laid off 78 employees in November to conserve its dwindling cash reserves after its former partner on the two cancer drugs, GlaxoSmithKline, decided to bow out of the collaboration.
The setback was short lived, Exelixis chief executive George Scangos said. Bristol-Myers and other companies quickly expressed interest in the two compounds, he said. "There were multiple bidders," Scangos said.
The salvation of many struggling biotech outfits during the recession will come from big pharmaceutical companies on the hunt for innovative medicines to replace their best-selling drugs, many of which are soon to lose patent protection.
Bristol-Myers has had earlier partnerships with Exelixis dating to 1999. The New Jersey pharmaceutical firm's other recent Bay Area deals are part of a plan to transform itself into a biopharma' company through alliances with smaller cutting-edge companies, said Dr. Jeremy Levin, an external licensing executive. For example, in May Bristol-Myers said it would purchase Kosan Biosciences of Hayward and acquire Kosan's stable of experimental cancer drugs.
Scangos said Bristol-Myers will now pick up 65 percent of the cost of a late-stage clinical trial of Exelixis' most advanced product, XL 184, which is being tested in a form of thyroid cancer. If the drug is approved, Exelixis would share in the profit from U.S. sales and receive double-digit royalties on foreign sales.
Bristol-Myers will also fund future development of the second compound, XL 281, in a variety of solid tumors. Exelixis would receive milestone payments of up to $315 million and double-digit royalties on worldwide sales.
In spite of the cash infusion from the Bristol-Myers deal, Scangos said Exelixis might further reduce its staff of 680 employees. The company spends about $80 million a year on a drug discovery unit that uses automated screening techniques to identify compounds that might help treat disease. Its partners in the development of those compounds include Genentech Inc. and Wyeth.
Exelixis will end the year with $280 million in cash, Scangos said. The company's shares rose $1.22 to close at $4.95 Friday.
E-mail Bernadette Tansey at btansey@sfchronicle.com.
This article appeared on page C - 1 of the San Francisco Chronicle
