GlaxoSmithKline To Form Alliance with San Francisco-Based Exelixis To Develop New Drugs

Officials from GlaxoSmithKline yesterday announced the company has entered into a deal with San Francisco-based biotechnology company Exelixis to "discover and develop" drugs for cancer, inflammatory diseases and blood vessel disorders, the New York Times reports. Under the agreement, GSK will pay Exelixis $30 million immediately and will purchase two million shares, or a 3% stake, of Exelixis stock for $14 million. GSK will also provide $90 million in development financing over six years and a loan of up to $85 million. Exelixis will be required to discover drugs and conduct clinical trials in the first and part of the second of three stages of testing. GSK will then have the right to take over the remaining clinical trials and the manufacturing and marketing of the treatment. If Exelixis proves successful in developing treatments, it could receive additional payments of $220 million to $350 million (Pollack, New York Times, 10/29). Those payments could double if both companies decide to expand the agreement, the San Francisco Chronicle reports (Tansey, San Francisco Chronicle, 10/29). Exelixis will also receive royalties on drugs it develops and will be able to assist in marketing those drugs (New York Times, 10/29). GSK Chair Tadataka Yamada said, "For GlaxoSmithKline, this alliance promises to complement our own accelerating drug-discovery activities by gaining access to the expanding array of capabilities which Exelixis has assembled rapidly in recent years" (San Francisco Chronicle, 10/29).

The alliance between GSK and Exelixis marks the latest example in the trend of large companies joining with small biotechnology companies to boost product pipelines, the Times reports. Several similar alliances have been made recently, including those between Novartis and Vertex Pharmaceuticals; Abbott Laboratories and Millennium Pharmaceuticals; and Bayer and CuraGen (New York Times, 10/29). In addition, Eli Lilly last month agreed to pay San Diego-based Amylin Pharmaceuticals as much as $325 million for the rights to an experimental diabetes drug that is currently in late-stage development, the Los Angeles Times reports (Gellene, Los Angeles Times, 10/29). While "[s]uch deals can have risks" -- Bristol-Myers Squibb, for example, paid $2 billion for a cancer drug from ImClone Systems that failed to win FDA approval -- GSK "appears to have limited its risk" by agreeing to large payments only if Exelixis produces products, according to the New York Times (New York Times, 10/29).