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



Exelixis Has Friends With Cash

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

It's nice to have friends with money -- especially if you're a drug developer.

Bristol-Myers Squibb (NYSE: BMY  ) has decided to pick up the development of one of the compounds -- XL413 -- developed under its collaboration with Exelixis (Nasdaq: EXEL  ) . The preclinical drug candidate inhibits a protein required for DNA replication, and therefore might be used to treat tumors that increase production of the protein.

Exercising the option triggers a $20 million milestone payment to Exelixis. That's not chump change, but it's not going to get Exelixis to its guidance of at least $200 million in the bank at the end of the year. At the end of last quarter, it had just $135 million in cash and investments, according to remarks in a conference call. Even with the cutbacks in staff earlier this month, the company will have to sign at least one deal before the end of next month.

The good news for Exelixis investors? The press release hints that management is pretty confident it'll be able to find partners for one or more of its drugs -- perhaps one of those GlaxoSmithKline (NYSE: GSK  ) passed on last month.

Under the terms of their collaboration, when Bristol-Myers picks up development of a drug candidate, it triggers a $20 million milestone payment and gives Exelixis two options. It can choose to co-promote the drug and get half the profits, which would put it on the hook for 35% of the development costs, or give Bristol-Myers the drug in exchange for future milestone and royalty payments. In this case, Exelixis chose to co-develop the drug, which leads me to believe that management thinks it'll have cash coming from another source.

It's clear that in this market, cash is king. Fortunately, Exelixis has been able to change its drug candidates and drug-discovering abilities into cash fairly easily. In addition to the Bristol-Myers and Glaxo deals, it also has partnerships with Wyeth (NYSE: WYE  ) , Genentech (NYSE: DNA  ) , and Daiichi Sankyo. That skill is one of the reasons it was picked for The Motley Fool's Rule Breakers newsletter. Even so, this market is full of skeptics. I'd wager Exelixis will have to make another deal or two before we see its shares take off again.

Find out why The Motley Fool picked Exelixis for the high-growth Rule Breakers newsletter by grabbing a free 30-day trial. You'll get access to all our back issues and the most recent picks. 

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool owns shares of Exelixis. Glaxo is a selection of the Income Investor newsletter. The Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (10)

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: 782984, ~/Articles/ArticleHandler.aspx, 10/26/2016 5:45:12 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 8 hours ago Sponsored by:
DOW 18,169.27 -53.76 -0.30%
S&P 500 2,143.16 -8.17 -0.38%
NASD 5,283.40 -26.43 -0.50%

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

10/25/2016 4:00 PM
BMY $49.55 Up +0.32 +0.65%
Bristol-Myers Squi… CAPS Rating: ****
EXEL $11.30 Up +0.01 +0.09%
Exelixis CAPS Rating: ****
DNA $94.97 Down +0.00 +0.00%
Genentech CAPS Rating: ****
GSK $40.32 Down -0.36 -0.88%
GlaxoSmithKline CAPS Rating: ***
WYE.DL $0.00 Down +0.00 +0.00%
Wyeth CAPS Rating: ***