Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Exelixis Secures Its Future

In one of the more complicated financing deals ever made by a development-stage drugmaker, Exelixis (Nasdaq: EXEL  ) helped bring in enough cash to keep guiding its lead drugs closer to market.

In a deal with one of its largest shareholders, Deerfield Management, Exelixis secured the right to as much as $150 million in loans over the next 18 months. Intriguingly, Exelixis is under no obligation to actually take this cash; if it does, it can accept the money in increments as small as $15 million. It can borrow the money and pay back its debt, in its choice of cash or in shares, by 2013. That's a fairly unusual option for a development stage drugmaker.

Simpler variations on this sort of financing, allowing a drugmaker to access cash at its own pace, have become more popular in recent months. Development-stage drugmakers like Discovery Labs (Nasdaq: DSCO  ) and Cyclacel Pharmaceuticals (Nasdaq: CYCC  ) have similar deals recently. Most of these transactions have been far simpler, but all share the basic premise of selling shares piecemeal at opportune times, rather than all at once in a potentially hostile market environment.

Exelixis ended its first quarter with $252 million in cash and investments on its balance sheet. Considering that its guidance for 2008 called for revenue of $115 million (at the midpoint) and cash expenses of nearly $300 million, Exelixis could definitely use the added cash.

If Exelixis chooses to access all of this $150 million over the coming months, it will have more than enough funds to see compounds like its lead drug, lung cancer treatment XL647, and multiple other compounds through continued clinical testing. That extra time could help the company potentially extract a better deal in any partnership negotiations.

This financing deal doesn't eliminate the company's development and commercialization risks, but it does remove some of the near-term financial risk. Money woes can sink even drugmakers with valuable assets, as we saw with Encysive Pharmaceuticals earlier in the year.

Even as companies ranging from financial giants like Lehman Brothers to small consumer health-care companies like American Oriental Bioengineering (NYSE: AOB  ) struggle to raise cash, Exelixis just secured sufficient funding for several years to come. Better yet, it did so at relatively reasonable rates for a company of its kind.

Exelixis is a Rule Breakers pick. The newsletter is always on the hunt for cutting-edge picks. See all of our latest discoveries with a free 30-day trial subscription.

Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Motley Fool owns shares of Exelixis. American Oriental Bioengineering is a pick of the Motley Fool Hidden Gems. The Fool has an A+ disclosure policy.

Read/Post Comments (0) | Recommend This Article (13)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 661845, ~/Articles/ArticleHandler.aspx, 10/27/2016 1:54:17 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 4 hours ago Sponsored by:
DOW 18,199.33 30.06 0.17%
S&P 500 2,139.43 -3.73 -0.17%
NASD 5,250.27 -33.13 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/26/2016 4:00 PM
EXEL $11.18 Down -0.12 -1.06%
Exelixis CAPS Rating: ****
AOBID $0.00 Down +0.00 +0.00%
American Oriental… CAPS Rating: **
CYCC $4.37 Down -0.16 -3.53%
Cyclacel Pharmaceu… CAPS Rating: **
WINT $2.20 Down -0.22 -9.09%
Discovery Laborato… CAPS Rating: **