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Glaxo, Exelixis in $135-Million Deal

The alliance involves an unspecified number of drugs in the areas of cancer, inflammatory disease, vascular biology.

October 29, 2002|Denise Gellene | Times Staff Writer

Exelixis Inc., a small Bay Area biotechnology company, said Monday that it would receive at least $135 million from British drug maker GlaxoSmithKline as part of a broad collaboration.

The agreement, one of the largest early-stage deals ever, is the latest example of how the industry's giants are teaming with California biotechs to replenish their product pipelines. Last month, Eli Lilly & Co. agreed to invest as much as $325 million in San Diego-based Amylin Pharmaceuticals Inc. for rights to an experimental diabetes drug that is in late-stage development.

The size of Monday's deal is significant, given that Exelixis has a market value of $200 million, said S.G. Cowan analyst Eric Schmidt. "The fact that GSK is willing to commit that much shows that Exelixis is on to something ... and its stock is undervalued," Schmidt said.

Exelixis shares closed at $3.58, up 18 cents, on Nasdaq. They soared as high as $6.69 in early after-hours trading Monday. The deal was announced at the market close. Glaxo closed at $38.50, down 27 cents, on the New York Stock Exchange.

The long-term collaboration involves an undetermined number of drugs in the areas of vascular biology, inflammatory disease and cancer. The agreement calls for Exelixis to conduct animal and early-stage human studies on the drug candidates before turning them over to Glaxo for late-stage testing and commercialization.

The companies said Glaxo would pay Exelixis $30 million upfront and buy 2 million Exelixis shares at $7 each, almost a 100% premium from their closing price Monday. Glaxo agreed to pay Exelixis at least $90 million in development funding over six years.

Exelixis could receive milestone payments that range from $220 million to $350 million and a loan from Glaxo for as much as $85 million. In addition, Exelixis stands to receive royalties on sales of products that result from the collaboration, and possible co-promotion rights.

Based in South San Francisco, Exelixis used genomics tools to discover new drugs. For the six months ended in June, Exelixis had a loss of $42.3 million on revenue of $21.4 million. It has $170 million in cash.

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