The Biotech Garage Sale Continues

And the garage sale at Exelixis (NAS: EXEL) continues, but these aren't nickel-here, dime-there type transactions.

The development-stage biotech disclosed yesterday that it was ending its two-year-old agreement to develop drugs with Sanofi (NYS: SNY) . The companies were working on a pre-clinical program to develop inhibitors of PI3K alpha and beta. Earlier this week, Exelixis licensed its PI3K delta program to Merck (NYS: MRK) .

As part of the shutdown of the preclinical program, Sanofi is paying Exelixis $15.25 million. That's slightly more than Exelixis got from Merck. It isn't clear from the disclosure whether that payment was built into the original contract or negotiated upon early termination. Wherever it came from, it's a welcome addition to Exelixis' coffers even if it meant giving up some milestone or royalty payments for drugs developed from the pact.

During its breakup with Sanofi, Exelixis pulled the "it's not you, it's me" card, saying that it wants to focus on cabozantinib, its lead compound. But Sanofi and Exelixis will still remain friends. The original deal included drugs already in the clinic -- XL147 and XL765 -- which Sanofi will continue to develop.

The cash will be useful to help pay for clinical trials for cabozantinib in prostate and other cancers. And there's potential for more cash to role in. Exelixis still has at least seven other preclinical and phase 1 compounds it's looking to trade for cash.

Cabozantinib looked good in advanced medullary thyroid cancer and should get approved for that indication next year, but the big potential for cabozantinib is in prostate cancer. Exelixis is hoping to prove that the drug can control pain in late-stage patients that have already failed Sanofi's (NYS: SNY) Taxotere and Johnson & Johnson's (NYS: JNJ) Zytiga. That should be a faster pathway to approval than increasing overall survival, which it's also going after.

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At the time thisarticle was published Fool contributorBrian Orelliholds no position in any company mentioned. Check out hisholdings and a short bio. The Motley Fool owns shares of Exelixis and Johnson & Johnson.Motley Fool newsletter serviceshave recommended buying shares of Johnson & Johnson and Exelixis and creating a diagonal call position in Johnson & Johnson. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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