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EXEL Terminates Second Collaboration Agreement

|Includes: Exelixis, Inc. (EXEL)

Exelixis (NASDAQ: EXEL) announced today that it entered into an agreement with Sanofi, pursuant to which the two parties mutually agreed to terminate their collaborative partnership. The decision comes a little more than two months after the termination of EXEL’s collaboration with Bristol-Myers Squibb (NYSE:BMS).

The partnership with Sanofi, which became effective in Jul-09, related to the discovery of inhibitors of phosphoinositide-3 kinase for the treatment of cancer. EXEL reported that its decision to focus resources and development efforts on cabozantinib, its most advanced compound, was a significant factor in the mutual decision to terminate the partnership.

While cabozantinib may be EXEL’s most advanced compound, the loss of the partnerships raises the risk for EXEL as it is essentially placing all of its eggs in one basket. The company did announce yesterday, however, that it had licensed certain other phosphoinositide-3 kinase compounds to Merck. Under that agreement, EXEL received a $12 million upfront payment and will be eligible to receive up to $239 million in milestone payments as well as royalties on any resulting products.

In Jul-11, EXEL disclosed that it had received notice from BMS of its decision to terminate a collaboration agreement relating to XL281 effective 8-Oct-11. BMS cited the drug’s context in its overall research and development priorities and pipeline products as the reason for its decision. The collaborations with BMS and Sanofi accounted for 50% and 42% of 2010 total revenue, respectively. The Sanofi agreement accounted for just 21% of 9M11 revenue, largely due to the accelerated recognition of previously deferred revenue in connection with the BMS termination.

EXEL had $66.2 million in cash and equivalents as of 30-Sep-11. As part of the termination of the Sanofi partnership, the company will receive a one-time $15.25 million payment within 10 days of the effective date. Net cash used in operating activities totaled $130.1 million in 9M11.