Exelixis Inc and GlaxoSmithKline plc plan to form a broad alliance to discover, develop and commercialize novel therapeutics in the areas of vascular biology, inflammatory disease and oncology. The alliance combines Exelixis' powerful gene-to-drug discovery platform and GSK's strengths in development and commercialization by means of an innovative model for sharing risks and potential rewards in a research and development collaboration.

Under the terms of the agreement, Exelixis will have responsibility for the delivery to GSK of an undisclosed number of small-molecule compounds that have met agreed-upon criteria in early Phase II clinical testing. GSK will have the right to further develop these compounds and exclusive, worldwide commercialization and manufacturing rights. Exelixis retains co-promotion rights in North America.

GSK will make an upfront payment of $30 million to Exelixis. GSK will also initially acquire two million newly issued shares of Exelixis common stock at approximately $7 per share, which represents a premium of 100% to the current stock price. Exelixis has the option to sell GSK additional shares at a specified time in the future.

Over the initial six years of the agreement, GSK will provide Exelixis with a minimum of $90 million in development funding. Exelixis will receive clinical and regulatory milestone payments based on the number and timing of compounds reaching specified points of progression. Based on the continued successful development of these compounds, these payments could range from $220 million to $350 million up to and including first commercialization. In addition, GSK will make available a loan facility to Exelixis of up to $85 million. Exelixis will also receive sales-based milestone payments and royalties on product sales.

Two years from the start of the collaboration, GSK and Exelixis may elect to expand the collaboration, and under this option, Exelixis' milestone payments could double in size, and the development funding and the loan facility would also be significantly expanded.

"For GlaxoSmithKline this alliance promises to complement our own accelerating drug-discovery activities by gaining access to the expanding array of capabilities which Exelixis has assembled rapidly in recent years," said Tadataka Yamada, Chairman, Research & Development, GSK. "Success for this innovative alliance will be not just the identification of targets and lead compounds but also the delivery of drugs that have demonstrated a therapeutic concept and shown promise for continuing development. We look forward to working with an accomplished partner like Exelixis to shape a productive effort."

"The breadth and depth of this collaboration utilizes the full strength and productivity of our proprietary gene-to-drug discovery and development platform," said George A. Scangos, Exelixis President and Chief Executive Officer. "The unique collaborative and financial structure of this alliance ensures that our companies will benefit from each others' efforts, work diligently together to select and advance the most promising drug candidates, and share mutually in the benefits of our successes. This collaboration is an extraordinary opportunity for us to work with GSK, one of the world's leading pharmaceutical companies, to fulfill our shared goal of delivering important new medicines to patients. Having made the critical strategic decision three years ago to build Exelixis from a genomics platform company into a mature drug discovery and development company, this collaboration is a landmark achievement for our company."