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GSK/Exelixis and In-Licensing: Earlier, Richer, Rarer

Executive Summary

The broad partnership to discover and commercialize drugs in vascular biology, inflammatory diseases, and oncology announced this month between GlaxoSmithKline and Exelixis recalls the halcyon big-deal era of 2000. But the new deal's objects, structure, and value confirm industry changes in the last two-plus years: a focus on compounds, not discovery-stage science; that Big Pharma's poor R&D productivity is becoming obvious even to its research leadership; and that the biotechs who can sign these kinds of deals combine a set of discovery technologies into a package that, theoretically, produces clinical compounds.

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End of an Era for GSK and Exelixis

GlaxoSmithKline in October decided to decline its option to license Exelixis's late-stage XL184 small molecule oncology candidate and four earlier-stage compounds, effectively ending the six-year R&D collaboration between the two firms. The decision ends an early foray into license-and-option agreements by GSK, a company that has been at the forefront of striking option deals over the past several years. Its latest such agreement was announced the same day the Exelixis deal wrapped, as part of an alliance with the Austrian vaccines play Affiris in the area of Alzheimer's disease.

End of an Era for GSK and Exelixis

GlaxoSmithKline in October decided to decline its option to license Exelixis's late-stage XL184 small molecule oncology candidate and four earlier-stage compounds, effectively ending the six-year R&D collaboration between the two firms. The decision ends an early foray into license-and-option agreements by GSK, a company that has been at the forefront of striking option deals over the past several years. Its latest such agreement was announced the same day the Exelixis deal wrapped, as part of an alliance with the Austrian vaccines play Affiris in the area of Alzheimer's disease.

Feeding the Machine: Exelixis Buys X-Ceptor

Exelixis' needs to address its increasing burn rate--expected to hit 90 million this year. With a stock mired around $8, any significant equity financing would be dilutive. Partnering was the obvious answer--except that Exelixis didn't have much to partner. By acquiring X-Ceptor Therapeutics it gets a set of much-needed near-term partnering opportunities, and it did so without significantly increasing its projected burn.

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