Deals Boost Exelixis' Prospects

Exelixis (EXEL - commentary - Cramer's Take) is an early-stage biotechnology company that discovers and develops novel small-molecule cancer treatments. The company has garnered renewed investor attention over the past few weeks with favorable pipeline-collaboration deals with major players in the oncology segment, Genentech (DNA - commentary - Cramer's Take) and Bristol-Myers (BMY - commentary - Cramer's Take).

The company is no stranger to collaboration deals, a key strategic focus in providing funding for the continued development of its expansive pipeline opportunities. Exelixis is involved with GlaxoSmithKline (GSK - commentary - Cramer's Take) in its broadest collaboration, and it's also engaged in deals with Wyeth (WYE - commentary - Cramer's Take) and Sankyo.

I like the diversified play on multiple oncology product opportunities at Exelixis, as well as the development funding locked-up from large collaboration partners. The company now has 10 projects in phase I and II clinical developments, with up to four additional drug candidates expected to file investigational new drug (IND) applications during '07. The stock has suffered from two recent pipeline setbacks, but the sheer number of product opportunities and the level of interest shown by large collaborators provides confidence in the longer-term value of Exelixis' pipeline.

Mixed Newsflow

The last few months have been a mixed bag for Exelixis, with two pipeline setbacks offset by two new collaboration deals. In early November, the company suspended phase II trial enrollment for its XL999 project due to potential cardiovascular side-effect concerns. This project has potential in a variety of solid-tumor and blood-based cancers but remains on hold pending further safety analysis. This setback was followed by the discontinuation of a phase III trial for betacarin (XL119) by licensee Helsin Healthcare. The company did not believe the efficacy/survival data would show adequate differentiation vs. the comparator trial arm.

The company began to repair the damage in mid-December with news of an early-stage collaboration with Bristol-Myers for up to three new drug candidates for three separate disease targets. This deal will bring a $60 million upfront payment and the potential for three additional $20 million payments upon the selection of the candidates by Bristol.

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At the time of publication, Michael Latwis held no positions in the stocks mentioned, although positions may change at any time.

Michael Latwis has directed health care content at TheStreet.com Professional Products. He also has worked at Barclays Wealth management division and was previously associated with Lazard Freres and Fiduciary Trust. Latwis covered companies in the pharmaceutical and specialty pharmaceutical sectors as well as biotech, medical technology, healthcare services, retail and media stocks. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Latwis appreciates your feedback; click here to send him an email.