Ipsen bets up to $855M on Exelixis' once-failed cancer drug

Exelixis CEO Michael Morrissey

Exelixis ($EXEL), picking up the pieces after a value-destroying clinical failure, licensed its top cancer prospect to French drugmaker Ipsen in a deal worth up to $855 million, hoping to expand the use of its therapy around the world.

Under the agreement, Ipsen is paying $200 million up front for the rights to Exelixis' cabozantinib outside the U.S., Canada and Japan. The drug is already approved for severe medullary thyroid cancer, affecting just a few hundred patients each year, but Exelixis and Ipsen are betting it can win global nods in the larger indications of kidney and liver cancers.

Exelixis has already submitted a regulatory application for cabozantinib in renal cell carcinoma, and if the drug is approved, Ipsen will kick over $60 million. Cabozantinib is also in the midst of a Phase III trial in hepatocellular carcinoma with data expected next year, and Ipsen has promised to pay out another $50 million if regulators sign off on that indication. Exelixis is also in line for as much as $545 million in milestone payments plus tiered royalties of up to 26% on all of Ipsen's future cabozantinib sales.

"Ipsen's established international oncology marketing presence, late-stage clinical development expertise and shared vision with Exelixis for the franchise potential of cabozantinib will accelerate cabozantinib's commercialization in its territories, while Exelixis remains focused on our launch in the United States," Exelixis CEO Michael Morrissey said in a statement. "While our immediate priority will be on advanced renal cell carcinoma, Exelixis and Ipsen are committed to exploring and potentially developing cabozantinib in a variety of cancer settings."

The South San Francisco-headquartered Exelixis has been on the comeback trail since 2014, when cabozantinib missed its primary endpoint in a big Phase III trial in prostate cancer, roughly halving the company's market cap and leading the biotech to lay off about 70% of its workforce and shift its focus to kidney cancer.

The Ipsen deal, which sent Exelixis' shares up about 12% on Tuesday, follows November's approval of Cotellic, the company's MEK inhibitor, as an add-on to Roche's ($RHHBY) Zelboraf in patients with a form of skin cancer.

- read the statement