Development-stage biotechs can finance their new drugs through clinical trials either with shareholder-diluting stock offerings or by giving up part of the drug's future profits in exchange for cash in a commercialization deal. Rule Breakers pick Exelixis'
This week, Exelixis signed yet another collaboration and commercialization deal with Bristol-Myers Squibb
Exelixis gets $60 million in cash up front from the deal, plus $20 million for each compound that Bristol-Myers selects, so the deal could be worth up to $120 million. Even better, both companies will equally share the development costs and profits from the drugs in the U.S., and Exelixis will receive royalties on sales outside the U.S.
Paying up to $120 million for drugs that aren't even in clinical trials and with no human effectiveness or safety data shows Bristol-Myers' confidence in Exelixis' ability to identify promising drug candidates. In fact, the companies have been doing cancer-specific research together since 1999 and have signed similar deals under which Exelixis does the preclinical research and Bristol-Myers advances the drug through trials.
It's always a good sign when a pharmaceutical company can stick to its goals and timelines for drug development. Exelixis has been doing a good job of bringing new drugs into the clinic and sticking to these goals. This is very important because failing in drug development is so common, and by moving its compounds into trials as fast as possible, less time and fewer resources are wasted on development if the compound is ineffective. What's even more impressive about Exelixis is that it has also been juggling 10 compounds through clinical trials with minimal delays. This helps investors separate the good biotech investments from the bad.
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