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Biotech / Medical : Exelixis, Inc. (EXEL) -- Ignore unavailable to you. Want to Upgrade?

To: scaram(o)uche who wrote (158)	6/13/2005 1:17:43 AM
From: Doc Bones	Read Replies (1) \| Respond to of 930

Exelixis Seeks to Raise Cash Using 3 of Its Top Drug Candidates By DAVID P. HAMILTON Staff Reporter of THE WALL STREET JOURNAL June 13, 2005; Page C4 Exelixis Inc., an unprofitable and cash-hungry biotechnology company, plans to raise as much as $80 million by splitting off three of its most promising drug candidates into a new company funded by private investors. The complex transaction, which Exelixis casts as a relatively low-risk and low-cost way to raise funds without risking dilution of its stock, may herald a comeback of sorts for so-called special-purpose entities -- a once common way of raising cash for biotech-drug development that had fallen into disfavor over the past decade or so. The plan effectively allows private investors to temporarily "own" part of the company's research program. If all goes well, within four years, the investors can expect their money back, plus a generous annual rate of return and a moderate allotment of warrants on Exelixis stock. If things go badly, investors may end up with nothing but a handful of failed drugs and the Exelixis warrants, which could also be worthless if Exelixis shares don't rise in coming years. Under terms of the deal, which is expected to be announced today, Exelixis, South San Francisco, Calif., will license three of its four most advanced experimental drugs to a new private venture named Symphony Evolution Inc. In turn, Symphony Capital Partners LP, a New York private-equity fund, and its investors will put an initial $40 million into Symphony Evolution, which can call for an additional $20 million to $40 million within its first year. Closely held Symphony Evolution will then "contract" with Exelixis to continue human tests of the three drug candidates, two of which are cancer drugs already in early-stage Phase I trials. The third candidate, an experimental treatment for kidney failure, should enter a midstage Phase II test later this year. Special-purpose entities such as Symphony Evolution were common in biotech's early days, in part because they enjoyed tax advantages and in some cases kept losses off the earnings statements of young biotech concerns. But they fell out of favor as their tax advantages disappeared, investors grew more concerned about their risks, and other forms of private-equity financing became available. online.wsj.com

To: scaram(o)uche who wrote (158)	6/13/2005 5:12:28 AM
From: nigel bates	Read Replies (1) \| Respond to of 930

...Exelixis intends to consolidate the financial results of Symphony Evolution into its financial statements... If all three compounds crash & burn, they apparently walk away from the losses; if all three look good and they elect to buy them back, they end up paying around 2x what Symphony put into them... I can't quite see how consolidating the results reflects reality - though you have to give them credit for avoiding the 'off-balance-sheet' stigma. Be interesting to see the detail in the next 10K.