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UPDATE: Exelixis Deal with Bristol-Myers Pushes Company Deeper into Oncology

This story has been updated from a previous version.

NEW YORK, July 18 - With its sights set on joining the ranks of big pharma--at least in the field of oncology--Exelixis said Wednesday that it had signed a far-reaching deal with Bristol-Myers Squibb to jointly discover potential drug targets for cancer.

The collaboration includes a $20 million Bristol-Myers equity investment in Exelixis, and a $5 million upfront payment from Bristol-Myers for Exelixis' functional genomics services. The equity investment means that Bristol-Myers will own 600,600 shares of Exelixis stock, or about one percent of the outstanding shares. The purchase represents a 100 percent premium on Tuesday's closing price for the company's stock.

In addition, Bristol-Myers will pay Exelixis $3 million a year for at least three years, and Exelixis could also receive multiple milestone payments for its efforts. "We're extremely confident that early milestones will add significantly to our revenue," Exelixis CEO George Scangos said in a conference call. The company estimated the value of the deal at $200 million.

In the new arrangement, Exelixis will use its invertebrate and vertebrate gene knockout models to study how certain genes interact in cancer cells to identify particular genes that help suppress tumor growth. Specifically, Exelixis will study the genes' biological activity and role in tumor suppression, their potential as targets for a small molecule compound, and the intellectual property claims associated with a gene's function.

Because the two companies have collaborated previously, the new arrangement could be seen as a validation of Exelixis' technology, company executives said. In an ongoing collaboration, Exelixis is using its knockout models to study how certain Bristol-Myers drugs work at a molecular level.

The deal also appears to solidify Exelixis' claim that it is developing a drug discovery infrastructure focused on oncology. Although the company has relationships with Bayer and Dow AgroSciences to develop pesticides and fungicides, the company is devoting just 20 percent of its resources to these efforts, and Geoffrey Duyk, Exelixis' chief scientific officer, told GenomeWeb that cancer is the company's franchise area.

"We have nearly 200 people working [in oncology] between target identification, validation, discovery, and increasingly in the clinical side," Duyk said. "Our goal is to be competitive on an indication basis with the major pharmaceutical companies, starting first with cancer."

Under the arrangement with Bristol-Myers, Exelixis will vet the gene targets using its knockout technologies, and then add the candidate genes to a pool of drug targets shared between the two companies. Exelixis and Bristol-Myers will then alternately pick a candidate gene from the pool to take forward into further testing and drug development. Although Exelixis executives did not disclose the total number of drug targets that the companies had agreed to identify, Duyk said that he expected the companies to pick targets from the common pool once every three to four months.

"What we're looking for are genes that either selectively kill cells based on [tumor growth] or induce cell death, or that replace the [tumor suppressing] function that would normally be there," Duyk said. "We're biologically manipulating the cells, asking the question, 'if this knockout were equivalent to a drug, would it selectively kill a cell that carried a [tumor]?'"

Exelixis will have rights to half of the targets the companies identify. While Bristol-Myers must pay Exelixis royalties on any drugs that result from the collaboration, the agreement allows Exelixis to keep revenue from its drug sales for itself.

Additionally, Exelixis negotiated with Bristol-Myers to acquire exclusive rights to an analog of rebeccamycin, an anticancer drug that Bristol-Myers currently has in phase I and early phase II clinical trials. Although Exelixis does not currently have an established infrastructure for pursuing clinical trials, Duyk said the company expects to hire a head of clinical development "in the near term."

In its own proprietary oncology research Exelixis has identified 18 anticancer drug targets, a fact that may have contributed to Bristol-Myers willingness to trade rebeccamycin for access to Exelixis' knockout model capabilities, Duyk said.

Earlier this month, Exelixis announced that Protein Design Labs had agreed to pursue several cancer antibody targets provided by the company. In May, Protein Design Labs signed a deal to have Exelixis identify novel antibody targets to create antibodies for the diagnosis, prevention, and treatment of cancer.  
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