Xenova Group plc has signed an exclusive development and licence agreement with South San Francisco-based Genentech Inc worth up to US$63m plus royalties. The agreement provides Genentech with worldwide rights to develop and market products primarily targeting disorders of the immune system based on Xenova's OX40 receptor protein and anti-OX40 Ligand antibody programmes.

Genentech will pay Xenova licence fees of up to US$5m (£3.4m) over the first year of the collaboration. In addition, Genentech will pay Xenova up to US$58m (£39.7m) in milestones assuming successful development and commercialisation of a product. Significant tiered royalties, depending on the level of sales, are also receivable by Xenova.

Genentech has also acquired an option, but not an obligation, to develop a second product. Should a second product be developed and commercialised, further milestone payments and royalties would apply.

Xenova will transfer to Genentech responsibility for the further development of the relevant programmes, including preclinical and clinical trials, all regulatory filings and the manufacture and sale of any products arising from the agreement worldwide. Genentech will fund all future development activities within the scope of the agreement.

Xenova retains for its proprietary development and commercialisation in oncology and other applications all rights to OX40 Ligand and stimulatory anti-OX40 antibodies. Xenova's OX40 platform technology is part of the portfolio of pre-clinical research programmes acquired through its merger with Cantab Pharmaceuticals plc in 2001.

OX40 is a platform technology capable of producing several therapeutic solutions. OX40 and OX40 Ligand are a pair of interacting cell-surface proteins which are important for the induction and regulation of immunity. The therapeutic potential of these cell-surface proteins lies in their ability to modulate the immune system. Modulation of the immune system has the potential to be of benefit in a wide range of diseases including inflammatory and autoimmune disease, infectious diseases and cancer. Xenova is the holder of exclusive licences to several patents relating to the OX40 platform.

David Oxlade, chief executive of Xenova, commented, "We are delighted with this new agreement with Genentech, our third major partnership in the last 8 months. Genentech has a remarkable track record in successfully bringing innovative therapeutic solutions to market in this field. The OX40 mechanism has been shown to be a key component of the body's immune system and is an important new therapeutic target. This agreement highlights the enhanced commercial potential in Xenova's research portfolio since the merger with Cantab and realises both immediate and long term value for the company. It also clearly illustrates our strategy of seeking partnerships with major players who are capable of exploiting our science in applications which lie outside our main focus on cancer and immunotherapy."