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Press Release Source: Exelixis, Inc.
Exelixis Announces Transaction to Fund Clinical Development for XL647, XL999 and XL784
Monday June 13, 12:01 am ET
Exelixis Plans Broad-based Phase II Programs in Second-Half of 2005
SOUTH SAN FRANCISCO, Calif., June 13 /PRNewswire-FirstCall/ -- Exelixis, Inc. (Nasdaq: EXEL - News) announced that it has entered into a transaction with Symphony Capital Partners, L.P. and its investors to provide up to $80 million of funding for the further clinical development of XL647, XL999 and XL784. Under the terms of the agreement, Symphony Capital, a private equity fund focused on biopharmaceutical development, has formed Symphony Evolution, Inc., which will be initially capitalized with $40 million and holds an option to call an additional $20 million to $40 million within one year of closing.
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Symphony Capital investors, through Symphony Evolution, will provide funding to Exelixis, which, in collaboration with Symphony Evolution, will continue to conduct the clinical trials for the three compounds. Exelixis has granted a license to the intellectual property for the three compounds to Symphony Evolution, but retains the exclusive right, through a purchase option, to acquire Symphony Evolution's equity. If Exelixis chooses not to exercise the purchase option, Symphony Evolution will retain the rights to the compounds. As part of its collaboration with Exelixis, GlaxoSmithKline plc (GSK) has previously agreed to increase the selection milestone payments for compounds that are funded through Symphony Evolution.
"This transaction provides up to $80 million to fund the clinical development of these very promising compounds on favorable economic terms without significant dilution to our current shareholders," said George A. Scangos, Ph.D., president and chief executive officer of Exelixis. "We have retained exclusive rights to the compounds, obtained attractive funding to enable aggressive, thoughtful clinical development, and have off-loaded the financial risk of compound failure. We are very enthusiastic about these compounds, and we are pleased that the collaboration with Symphony Evolution will enable us to explore their utility in a variety of indications. Although these terms are attractive on their own, the increased selection milestones to which GSK has agreed further reduces the cost of capital if GSK elects any of these compounds."
Dr. Scangos continued, "We have been remarkably productive over the past few years, and are on track to have eight compounds in clinical trials by the end of the year. We believe that conducting extensive Phase II trials is an important aspect of avoiding late-stage product failures. Obviously more extensive programs require significant financial investment, and this transaction is one example of how we intend to finance these programs while minimizing dilution to our investors."
Phase I trials are currently ongoing for XL647 and XL999, and XL784 is expected to re-enter clinical development later this year. The clinical development funds to be provided by Symphony Evolution will be used to conduct broad Phase II clinical programs for XL647 and XL999 in multiple tumor types and patient populations to determine the broadest possible potential for each compound. For XL784, the funds will be used to conduct comprehensive trials in diabetic nephropathy.
Summary Terms of the Transaction
Of the $80 million in committed funds, $40 million was drawn upon closing, and an additional $20 million to $40 million will be drawn within one year of closing. Exelixis has licensed the intellectual property for XL647, XL999 and XL784 to Symphony Evolution. Exelixis will issue to Symphony Evolution's investors five-year warrants to purchase up to 1.5 million shares of Exelixis common stock at $8.90 per share. The actual number of underlying shares will be determined by the total amount of capital actually drawn by Symphony Evolution. In exchange, Exelixis has received an exclusive purchase option from Symphony Evolution's investors allowing Exelixis to reacquire the intellectual property by purchasing all of Symphony Evolution's equity. This option is exercisable by Exelixis at any time beginning June 2006 and ending June 2009, and the purchase price is calculated by applying a compounded annual rate of return of 25% to the funded capital, subject to an early exercise premium if the option is exercised before December 2007. Exelixis' decision to exercise the option is entirely discretionary and whether Exelixis exercises it may depend on the outcome of clinical trials and other considerations. The option exercise price may be paid in cash or a combination of cash and up to 33% of the purchase price in Exelixis common stock, at Exelixis' sole discretion. Exelixis also has the option, under certain conditions, to purchase at a premium price the rights for any one of the three compounds separately, while retaining the option to subsequently purchase the equity of Symphony Evolution and reacquire rights to the remaining compounds. Exelixis intends to consolidate the financial results of Symphony Evolution into its financial statements.
Symphony Evolution
Symphony Evolution is required by the agreements to use the cash raised through this transaction exclusively for activities relating to the clinical development of XL784, XL647 and XL999. Exelixis has one of five seats on Symphony Evolution's Board of Directors. This seat will be filled initially by George A. Scangos, Ph.D., president and chief executive officer of Exelixis. Symphony Capital has two seats on the Board. The remaining two Board members are mutually agreed to by both parties. GSK has an observer seat on Symphony Evolution's Board of Directors.
Symphony Evolution has retained RRD International, LLC to serve as the management of Symphony Evolution, and will collaborate with Exelixis to conduct the clinical trials.
GSK Collaboration
XL647, XL999 and XL784 are part of Exelixis' collaboration with GSK. As part of an amendment to the collaboration, announced in January 2005, Exelixis was granted the ability to develop XL647, XL999 and XL784 by making use of third-party financing vehicles, such as Symphony Evolution. GSK retains the option to elect these compounds for further development after proof-of-concept, in which case such compounds will be subject to a premium on proof-of-concept milestone payments.
Conference Call and Webcast
Exelixis' management will discuss this clinical development financing transaction and other business developments during a conference call beginning at 5:30 a.m. PDT / 8:30 a.m. EDT today, Monday, June 13, 2005. To listen to the discussion, please visit the Webcast section under Investor Information on the Exelixis website at exelixis.com or vcall.com. |
