Amgen (AMGN) recently entered into a collaboration with Xencor, Inc. for the development of XmAb5871, an Fc- engineered monoclonal antibody dually targeting CD19 and CD32b. The candidate is currently being evaluated in preclinical studies for autoimmune diseases.
Terms of the Deal
Per the terms of the deal, Xencor will be responsible for clinical development of the candidate through phase II testing. Amgen will become responsible for future development if it exercises its option to acquire an exclusive worldwide license on the completion of a pre-defined phase II study.
Xencor is entitled to receive an up-front payment and payments based on the achievement of early development milestones. If Amgen acquires the exclusive worldwide license, Xencor will receive an option-exercise fee. Taken together, the up-front and milestone payments and the option exercise fee could amount to $75 million. Besides this, Amgen could make payments of up to $425 million on the achievement of clinical, regulatory and commercialization milestones. Amgen will also pay tiered royalty on product sales.
Xencor has collaboration agreements with other major players in the including Pfizer (PFE), Boehringer Ingelheim, and Human Genome Sciences (HGSI) among others.
Neutral on Amgen
We currently have a Neutral recommendation on Amgen, which is supported by a Zacks #3 Rank (short-term “Hold” rating). Amgen is in a challenging period given the slowdown in sales of key products like Aranesp due to several reasons like labels restricting usage and other safety related issues. Moreover, products like Enbrel are facing intense competition from new competitors.
With several of Amgen’s key products slated to lose patent protection over the next few years, the company has a lot riding on the successful commercialization of Prolia/Xgeva. The recent approval of Xgeva is a major boost for the company and should help drive revenues going forward.
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