It's not going to be the climactic decision on a late-stage drug candidate that Exelixis (NASDAQ:EXEL) has faced two times this year, but by the end of next month, Bristol-Myers Squibb (NYSE:BMY) will choose whether to continue developing one of Exelixis' early-stage treatments for cancer.

Bristol-Myers and Exelixis have been partners in one form or another since before the millennium started. Somewhat similar to its collaboration agreement with GlaxoSmithKline (NYSE:GSK), Exelixis has a deal with Bristol-Myers under which it will do the discovery and preclinical stage research on certain anti-cancer targets; Bristol-Myers then gets to take up to three of these candidates into phase 1 testing in return for milestone and royalty payments on any of the compounds it selects. 

One of the main differences between the Glaxo and the Bristol-Myers oncology collaborations is that Bristol-Myers is making its selection on Exelixis drugs much earlier in the development process than Glaxo, thereby reducing some of the clinical trial expenses and risks for Exelixis. In return, Bristol-Myers will only have to pony up $20 million in selection milestone payments for every drug that it opts in on, compared with the $35 million that Glaxo just paid Exelixis to take over development of XL880.

Exelixis expects Bristol-Myers' decision on the preclinical stage XL139 by the end of January. However, a negative decision wouldn't necessarily be negative for Exelisis: If Bristol-Myers chooses not to take over development of XL139, then the rights revert back to Exelixis.

Because running phase 1 and 2 clinical studies is relatively cheap, Exelixis would be able to handle early-stage development of the drug on its own with little financial difficulty -- this is not the case with the later-stage compounds in the Glaxo collaboration. If the results were positive, then Exelixis would have no problem finding a partnership for XL139 on even better terms.

Only one out of five drug candidates entering phase 1 studies (like XL139) is able to earn Food and Drug Administration approval. With other candidates like the later-stage XL647 and XL880 much more crucial to Exelixis' existence, the Bristol-Myers decision lacks the drama and significance of the Glaxo opt-in decision from two weeks ago.

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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. GlaxoSmithKline is an Income Investor pick. The Fool has an A+ disclosure policy.