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Protein partners from opposite sides of the Pacific
August 2009
by Jeffrey Bouley  |  Email the author
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REDWOOD CITY, Calif.—Roughly 10 months after Maxygen Inc. entered into an agreement with Tokyo-based Astellas Pharma Inc. for worldwide rights to commercialize the California-based company's MAXY-4 lead candidates for all autoimmune diseases and transplant rejection, the two entities have decided to establish a joint venture focused on the discovery, research and development of multiple protein pharmaceutical programs, including Maxygen's MAXY-4 program and other early-stage programs.

Maxygen will contribute substantially all of its programs and technology assets in protein pharmaceuticals, including its existing MAXY-4 collaboration agreement with Astellas, together with $10 million in cash. In this joint venture, Maxygen would have an 83 percent ownership interest.

Astellas also will invest $10 million in the joint venture in exchange for the remaining ownership interest in the joint venture of approximately 17 percent. The deal does allow for Astellas to acquire all of Maxygen's ownership interest in the joint venture if desired, at specified exercise prices that will increase each quarter from $53 million to $123 million over the three-year term of the option.

"This arrangement will allow Maxygen to meet three very important goals," says Russell Howard, Maxygen's CEO. "First, the development of our MAXY-4 program will continue exactly as planned with Astellas. Our partner Astellas is well-suited for exploitation of next-generation CTLA4-Ig products in both transplantation and various autoimmune diseases. Second, this agreement provides for up to $30 million of new funding from Astellas for several early-stage discovery programs using our core MolecularBreeding platform technology. Third, this agreement creates a clear path for significant value creation over the next few years."

If Astellas does not exercise its buy-out option before the three-year option term expires, all rights to the protein therapeutics developed through the joint venture (with the exception of any product for which Astellas has exercised its license option) will be retained by the joint venture, and Astellas will be required to provide up to 18 months of transition funding to the joint venture in the form of revolving loans of up to $20 million on pre-agreed terms if the MAXY-4 collaboration agreement between the joint venture and Astellas remains in force.

"This deal will allow us to shift most of our protein pharmaceutical operating assets into a joint venture that is substantially funded by Astellas. We believe this venture provides us with the best opportunity to capture value from these assets for our shareholders," Howard notes. "Also, this transaction represents a key component of the corporate strategy we announced last October."

Under that strategy, Maxygen reduce its spending on its MAXY-G34 product for the treatment of chemotherapy-induced neutropenia—which reported positive results in mid-July Phase IIa study in breast cancer patients—while continuing to seek a partner for that program, as well as terminate approximately 30 percent of its workforce in a staggered fashion over the first four months of this year.

Maxygen will retain the MAXY-G34 program in its entirety and will not transfer it to the joint venture, Howard notes. This also means that the previously announced licensing arrangement with Cangene Corp. for acute radiation syndrome remains in place.

As a result of this joint venture transaction, substantially all of Maxygen's research and development operations and personnel would be transferred to the new joint venture.

"We intend to restructure and downsize Maxygen's corporate and administrative staff and expenses to best align the company's operations with its future business needs," says Isaac Stein, the executive chairman of the board of directors of Maxygen. "As a part of this process and following an appropriate transition period after the closing of the joint venture transaction, we also expect Maxygen's current senior management team—Russell Howard, Larry Briscoe and Elliot Goldstein—will be leaving the company."
However, Grant Yonehiro, Maxygen's chief business officer, is expected to serve as CEO of the joint venture.

In addition to securing a majority ownership of the joint venture and retaining the MAXY-G34 program, Maxygen will continue to retain a number of other assets, including: approximately $200 million in cash; 22 percent ownership interest in Codexis Inc. and a revenue stream from Maxygen's biofuels license to Codexis; a potential $30 million milestone payment from Bayer HealthCare LLC; the MolecularBreeding platform and intellectual property portfolio, including certain additional fields of application of the technology platform that have not yet been licensed; and a fully funded vaccine discovery program. Assuming that all the customary closing conditions take place, the two companies expect the joint venture transaction to close late in the third quarter of this year or early in the fourth quarter.
 
 
Code: E080924

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