When Merck announced plans a few weeks back to open a BioTech production unit that would produce generic versions of protein-based drugs, some analysts worried that the new business model would be quite risky and expensive for the pharmaceutical giant.
Similar reasoning probably underlies Bristol-Meyers Squibb’s recent decision to pay Exelixis $240 million to develop 2 cancer drugs rather than acquire the troubled, mid-sized BioTech company.
In addition to the $240 million upfront, BMS forks over several hundred million dollars more if and when the compounds pass regulatory milestones and meet sales targets.
The arm’s length deal makes sense for BMS which was looking to make a splash in oncology ever since it lost ImClone Systems in a bidding war with Lilly (BMS co-markets ImClone’s cancer fighter Erbitux in the US, receiving 61% of US sales for the honor).
XL184 and XL281 are 2 of 16 compounds developed by Exelixis since 1994. None has received FDA approval and only XL184 has reached human testing.
XL184 is furthest down the regulatory road as a treatment for thyroid cancer, but human testing for that drug is also underway for cancers of the brain and lung.