Biotech Values

[DonShimoda]

XOMA - Servier Partnership Terms

Xoma, a US-based developer of therapeutic antibodies, has
signed a regional licensing pact with Les Laboratoires
Servier, France’s largest privately held pharmaceutical
company, which is potentially worth US$835 M (Deal no.
38740). Servier and Xoma will co-develop XOMA 052,
Xoma’s leading anti-inflammatory drug candidate, in multiple
indications. XOMA 052 is a human engineered antibody that
is designed to inhibit the pro-inflammatory cytokine
interleukin-1 beta, which is believed to activate pathologic
inflammation in multiple diseases, including rheumatoid
arthritis and diabetes.

The companies will first develop XOMA 052 for Behcet’s
uveitis, a chronic and debilitating ophthalmic inflammatory
condition for which the drug has received Orphan Drug
Designation in both the US and Europe. Behcet’s uveitis is
one of the most severe forms of uveitis, a vasculitis of the
blood vessels in the eye, and can lead to blindness. It affects
approximately 50% of Behcet’s disease patients and around
250,000 patients have been diagnosed with Behcet’s
disease worldwide. At present there are no approved
treatments for the disease in the US. Xoma reported positive
data from a Phase II pilot study for XOMA 052 in Behcet’s
uveitis in June 2010 and is expected to advance the drug
into Phase III for this indication in 2011.

Under the terms of the agreement, Xoma will receive
approximately US$35 M upfront, consisting of US$15 M and
a €15 M (US$20 M) loan that Xoma need not repay until
2016. Servier will fund the initial US$50 M of development
expenses for XOMA 052 and 50% of the additional
expenses for Behcet’s uveitis. Xoma will retain the
development and commercialisation rights for Behcet’s
uveitis and other inflammatory and oncology indications in
the US and Japan, while Servier has similar rights in the rest
of the world. Servier will also continue parallel Phase II
programmes for XOMA 052 in diabetes and cardiovascular
disease in exchange for global rights, although Xoma has
the option to regain these rights in the US and Japan if its
pays an option fee and partially reimburses Servier’s
incurred development expenses. It is believed that Xoma is
able to exercise its option at quite a late stage of
development, possibly after Phase III data have become
available. If Xoma reacquires these rights, then it will still be
eligible to receive milestone payments of up to US$470 M
and it would also be able to license the product to one or
more third parties in the future. If it chooses not to exercise
its option, then the milestone payments could reach US$800
M. Xoma is eligible to receive tiered royalties up to a midteens
percentage rate and will be responsible for manufacturing
XOMA 052 throughout clinical development and launch.
The company also anticipates being a long-term
manufacturer of the drug.

Xoma will benefit from Servier’s development and
commercialisation expertise, particularly in the
cardiovascular and diabetes therapy areas, which it has
gained thanks to products such as Diamicron® MR
(gliclazide) for type 2 diabetes and Procoralan® (ivabradine)
for congestive heart failure. It is worthy of note that Servier’s
licensing deals typically allow the licensor to retain US rights.
For example, in 2010 it signed an ex-US licensing
agreement with Osteologix for a Phase II drug candidate for
post-menopausal osteoporosis (Deal no. 36941) and formed
a strategic alliance with Galapagos to develop new therapies
in osteoarthritis under which Galapagos retained US
commercialisation rights (Deal no. 36574).
This regional deal is attractive for both parties. It provides a
large cash injection for Xoma, which was forced to reduce its
workforce by almost half in 2009 owing to diminishing royalty
revenue and escalating debt, thus delaying development of
XOMA 052. The agreement will also reduce the company’s
rate of cash burn and allow it to retain potential future
upside. For Servier, the deal provides the company with a
drug candidate that has demonstrated proof-of-concept in
one indication and which has potential in the treatment of a
number of inflammatory diseases. As an orphan disease,
Behcet’s uveitis offers a relatively quick and inexpensive
route to market for XOMA 052, allowing the companies to
then target larger markets such as rheumatoid arthritis

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