Exelixis disclosed June 27 that its six-year collaboration with GlaxoSmithKline will end this fall, leaving GSK with one compound in hand and the choice of another from five that came out of Exelixis' work.

The deal is "coming to a natural, positive end," said Exelixis CEO George Scangos, calling the outcome good for both sides. "Any biotech company would say that, but in this case, it's actually true," he said.

Near the end of last year, GSK chose the small molecule cancer compound XL880, as part of the alliance signed in October 2002 (¹ Also see "GSK Selects Exelixis’ Phase II MET Inhibitor XL880" - Pink Sheet, 14 December, 2007.).

GSK now can choose another from among XL184, XL281, XL228, XL820, and XL844. That selection likely will be made around the time of the collaboration's formal finish, Oct. 27.

"They got what they wanted to get when they signed up," Scangos told "The Pink Sheet" DAILY. Although GSK had an option to extend the deal for another two years and get another opt-in, he said, not doing so is "really good news" for Exelixis.

"One of the issues we've had is a lack of clarity around our pipeline," Scangos said. "We knew GSK would end up with some [compounds], but we didn't know which ones."

XL880, also known as GSK089, has reached Phase II for papillary renal cell carcinoma. The drug inhibits MET and vascular endothelial growth factor receptor 2.

Next in line for GSK to decide upon is XL184, for which Exelixis will submit a data package in the summer.

XL184 inhibits VEGFR2, MET, and RET, so it might be too similar to XL880 for GSK to take the option.

Also, XL184's lead indication is medullary thyroid cancer, likely not to hold commercial appeal for GSK, J.P. Morgan analyst Cory Kasimov wrote in a July 27 research note - though Phase II trials in larger tumor types, such as NSCLC, are ongoing, and could draw the opt-in.

GSK-eligible compounds behind XL184 have not reached proof of concept, though the available data are enough to provide understanding of the drugs' likely use.

Exelixis has gained about $235 million from GSK in the deal, including $150 million in upfront, milestone, and research and development support payments, and $85 million through a loan facility.

If GSK picks a second compound, and that compound has achieved proof-of-concept at the time of selection, the milestone payment is $55 million. If not, it's $27.5 million. Either payment is creditable by GSK against the loan facility.

Exelixis could also get development milestones and royalties on compounds chosen by GSK and will pay GSK a low, single-digit royalty on certain candidates GSK passed over and Exelixis takes to market.

Symphony financing setup ends next June

With Symphony Capital, Exelixis has a 2005 deal that gives Symphony, through the funding vehicle Symphony Evolution, rights to three Exelixis compounds: XL647, XL784 and XL999, in exchange for up to $80 million in funding over four years.

Exelixis has the option of buying back the compounds, pending success in the clinic.

"GSK was very helpful with [the Symphony deal]," agreeing to boost milestones for compounds developed as part of the Symphony arrangement, Scangos said. "It was in everybody's interest."

XL647 was part of the GSK deal, but the pharma firm declined its option last summer (² Also see "GlaxoSmithKline Passes On Option For Exelixis’ XL647 Lung Cancer Candidate" - Pink Sheet, 26 July, 2007.).

"At this point, Symphony's independent of GSK," Scangos said, noting that the Symphony deal ends next June, "when we have to fish or cut bait - buy back the compound or not. There's still money left in [the Symphony agreement]."

That cash will go toward more work with Phase II-stage XL647 for non-small cell lung cancer.

Earlier this month, Exelixis entered a deal with Deerfield Management to provide up to $150 million through a flexible credit facility. The funds can be drawn at any time over the next 18 months at Exelixis' discretion, in $15 million increments.

None of the Deerfield money has been tapped yet, Scangos said, and talks are under way with partners for "a lot of assets here, a lot of compounds outside the GSK [deal]."

Meanwhile, Deerfield provides backup if needed. "With that and the collaborations we sign, we're hoping to be fine," he said.

- Randall Osborne (r.osborne@elsevier.com)

Exelixis, GSK Deal Comes To A ‘Natural, Positive End’

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