GlaxoSmithKline to Develop Exelixis Drug

GlaxoSmithKline PLC said Friday it has exercised an option to develop and commercialize Exelixis Inc.'s cancer compound XL880 under a licensing agreement.

The move triggers a $35 million payment to Exelixis, which will be used to repay an advance given by GlaxoSmithKline in 2005.

GlaxoSmithKline announced its interest in the drug candidate in August and asked Exelixis to send a data report detailing the drug. XL880 is now in midstage studies for papillary renal cell carcinoma, gastric cancer and head and neck cancer.

Under a collaboration agreement signed in 2002 and amended in 2005, GlaxoSmithKline has the option to develop up to three compounds in Exelixis' product pipeline. Exelixis is entitled to milestone payments and royalties on future sales.

"We believe that GlaxoSmithKline's selection of XL880 validates our strategy of building a franchise in the area of MET inhibition to exploit the potential of this promising target," said Exelixis President and Chief Executive George A. Scangos in a statement.

MET inhibition refers the technology used by the cancer compounds to prevent tumor growth.

Shares of U.K.-based GlaxoSmithKline fell 38 cents to $53.55 and shares of South San Francisco, Calif.-based Exelixis jumped 76 cents, or 8.6 percent, to $9.62 in morning trading. Exelixis shares have ranged from $7.82 to $12.77 over the past year.