Biotech Values

[DewDiligence]

MAXY Offloads Essentially All Operations to JV With Astellas

[This is a highly unorthodox deal. First of all, MAXY’s management team is resigning effective immediately. Astellas is getting an option to acquire MAXY’s share of the new JV during the next three years at prices ranging from $53M to $123M. MAXY’s residual stake in the previously licensed MAXY-G34 (a Neulasta knockoff) and MAXY-Seven (a Novo-Seven knockoff) programs are excluded from the JV, as is $200M of cash on hand. CC today (Wednesday) at 4:30 pm ET.]

http://finance.yahoo.com/news/Maxygen-Announces-Joint-bw-3346218354.html

›Maxygen Announces Joint Venture with Astellas to Develop Protein Pharmaceuticals

-Maxygen to Contribute R&D Operations and Assets to Newly-Formed Joint Venture-

-Astellas to be Granted 3-Year Option to Acquire Joint Venture-

-Maxygen Plans Strategic Restructuring of Remaining Operations-

-Maxygen to Host Conference Call on July 1, 2009 at 4:30 p.m. ET (1:30 p.m. PT)-

Tuesday June 30, 2009, 7:00 pm EDT

REDWOOD CITY, Calif.--(BUSINESS WIRE)--Maxygen, Inc. (Nasdaq:MAXY) today announced that Astellas Pharma Inc. and Maxygen have executed an agreement to establish a joint venture focused on the discovery, research and development of multiple protein pharmaceutical programs, including Maxygen’s MAXY-4 program and other early stage programs. As part of the arrangement, Maxygen will provide Astellas with an option to acquire all of Maxygen’s ownership interest in the joint venture within three years after establishment of the joint venture. The joint venture arrangement represents a significant expansion of the existing collaboration agreement between the parties for the development and commercialization of MAXY-4 program candidates for autoimmune diseases and transplant rejection.

The Joint Venture

Pursuant to the joint venture agreement, Maxygen will contribute substantially all of its programs and technology assets in protein pharmaceuticals, including its existing MAXY-4 collaboration agreement with Astellas, together with $10 million in cash, to a newly-formed joint venture in which Maxygen will have an ownership interest of approximately 83%. Astellas also will invest $10 million in the joint venture in exchange for the remaining ownership interest in the joint venture of approximately 17%. Astellas will be granted an option to acquire all of Maxygen’s ownership interest in the joint venture at specified exercise prices that will increase each quarter from $53 million to $123 million over the three-year term of the option. Grant Yonehiro, Maxygen’s Chief Business Officer, is expected to serve as chief executive officer of the joint venture.

As part of the joint venture arrangement, the joint venture and Astellas will also enter into a collaboration agreement under which Astellas will fund substantially all of the costs, estimated at up to $30 million over the three-year option term and subject to certain limitations, related to the discovery, research and development by the joint venture of multiple protein therapeutics (other than MAXY-4). Astellas will be granted an option to obtain a license to one product developed by the joint venture under this collaboration arrangement, subject to certain conditions and exercisable only if Astellas does not exercise its buy-out option during the option term. Development costs for the MAXY-4 program will be shared by Astellas and the joint venture in accordance with the existing terms of the MAXY-4 collaboration agreement.

The transactions will also include a grant by Maxygen to the joint venture of certain licenses to use its MolecularBreeding™ technology platform and ancillary protein expression technologies, subject to certain existing licenses and other limitations.

In the event Astellas does not exercise its buy-out option prior to expiration of the three-year option term, all rights to the protein therapeutics developed through the joint venture (with the exception of any product for which Astellas has exercised its license option) will be retained by the joint venture, and Astellas will be required to provide up to 18 months of transition funding to the joint venture in the form of revolving loans of up to $20 million on pre-agreed terms if the MAXY-4 collaboration agreement between the joint venture and Astellas remains in force.

The boards of directors of Astellas and Maxygen, respectively, have approved the terms of the joint venture arrangement. The consummation of this transaction is subject to customary closing conditions, including approval by Maxygen’s stockholders. The parties expect the transaction to close late in the third quarter or early in the fourth quarter of 2009.

Maxygen Strategic Reorganization

“Today’s announcement largely completes a multi-year strategic process to position Maxygen’s programs and assets in collaborations and other arrangements that are primarily supported by external parties,” said Isaac Stein, the Executive Chairman of the Board of Directors of Maxygen. “Going forward, Maxygen’s focus will be to manage these arrangements to maximize the return to our stockholders over the next few years.”

In addition to its majority ownership of the joint venture, Maxygen will continue to retain a number of significant assets, including:

• approximately $200 million in cash;

• its MAXY-G34 program (including the previously announced licensing arrangement with Cangene Corporation for Acute Radiation Syndrome);

• a 22% ownership interest in Codexis, Inc. and a revenue stream from Maxygen’s biofuels license to Codexis;

• a potential $30 million milestone payment from Bayer HealthCare LLC [this relates to MAXY-Seven];

• its MolecularBreeding™ platform [is this worth anything?] and intellectual property portfolio (including certain additional fields of application of the technology platform not yet licensed); and

• a fully funded vaccine discovery program.

As a result of this transaction, substantially all of Maxygen’s research and development operations and personnel will be transferred to the new joint venture. “We intend to restructure and downsize Maxygen’s corporate and administrative staff and expenses to best align the company’s operations with its future business needs,” said Mr. Stein. “As a part of this process and following an appropriate transition period after the closing of the joint venture transaction, we also expect Maxygen’s current senior management team – Russell Howard, Larry Briscoe and Elliot Goldstein – will be leaving the company. On behalf of the company, I would like to thank each of them for their extraordinary efforts in the development of Maxygen’s programs and to wish them the best of success in their future endeavors.”

Conference Call

We will host a conference call tomorrow, July 1, 2009, at 4:30 p.m. ET (1:30 p.m. PT) to discuss this transaction. Participants in the U.S. can access the call by dialing 800.901.5217 and using the passcode 53785247. International participants can dial 617.786.2964 and use the same passcode. A live webcast of the conference call will be available on the Maxygen web site at www.maxygen.com/webcasts.

Telephone and webcast replays of the conference call will be available until July 30, 2009. To access the telephone replay, dial 888.286.8010 (U.S.) or 617.801.6888 (international) and use the passcode 43903995. To access the webcast archive, go to www.maxygen.com/webcasts.‹