Exelixis, Inc. has entered into an agreement with Genentech, Inc. for the worldwide co-development of XL518, a small-molecule inhibitor of MEK, which is a key component associated with tumors. Inappropriate activation of MEK/ERK can promote cell growth in the absence of exogenous growth factors. Exelixis submitted an IND for XL518 in December 2006.

Under the terms of the agreement, Exelixis will receive upfront and milestone payments totaling $40 million. Exelixis is responsible for developing XL518 through the end of Phase I. If Genentech exercises its option to further develop XL518, Exelixis will receive an additional payment and Genentech will be responsible for further development. Exelixis has the option to co-promote in the U.S. and will share a portion of the marketing and commercialization costs, as well as an initial equal share in profits in the U.S., which will decrease as sales increase. Exelixis will receive royalties on any sales of the product outside the U.S.

“Genentech is a leading innovator of important new cancer therapies, and we believe that this collaboration validates the significant potential of XL518 to be the first in a new class of drugs targeting critical intracellular signaling pathways,” said George A. Scangos, Ph.D., president and chief executive officer of Exelixis. “This collaboration also combines our world class drug discovery and development platform with Genentech’s proven track record in commercializing novel compounds that positively impact the lives of patients with cancer.”