Eli Lilly has licensed exclusive worldwide rights to Ignyta’s Phase I taladegib oncology development program, in a deal the San Diego biotech said could generate up to $53 million-plus.

Taladegib is an oral bioavailable small molecule hedgehog/smoothened antagonist. The compound has achieved clinical proof-of-concept and a recommended Phase II dose based on earlier clinical studies, Ignyta said.

“The exclusive license from Lilly of this clinical program with demonstrated compelling Phase I activity is well aligned with our strategic vision of developing first-in-class and/or best-in-class therapeutics that can potentially eradicate residual disease in precisely defined patient populations,” Ignyta Chairman and CEO Jonathan Lim, M.D., said yesterday in a statement.

Ignyta said it also licensed Lilly to exclusive worldwide rights to the topical formulation of taladegib, a late preclinical program being developed for patients with superficial and nodular basal cell carcinoma.

Under their licensing agreement, Lilly agreed to pay Ignyta $2 million cash upfront; 1.213 million shares of Ignyta common stock valued at more than $13.4 million based on the Friday closing share price of $11.06; up to approximately $38 million in payments tied to development and sales milestones—part of which may be paid in Ignyta stock—and royalties on net sales.

At the same time, Ignyta and Lilly entered into a stock purchase agreement in which the pharma giant will invest $30 million in the biotech by purchasing another 1.5 million shares of Ignyta common stock at $20 per share in a private placement. The purchase and sale of the shares is expected to close tomorrow subject to customary closing conditions, Ignyta said in a regulatory filing.

However, Lilly agreed not to sell or otherwise transfer any of the shares acquired from Ignyta until May 10, 2016. Ignyta is required to register the resale of shares issued to Lilly with the Securities and Exchange Commission (SEC) before that date.

In addition, Ignyta granted Lilly exclusive rights to develop and commercialize taladegib-containing products in combination with certain Lilly compounds. Ignyta will receive in return from Lilly a royalty on net sales of commercialized combination products.

“We are pleased to be working with Ignyta to further the development of taladegib and explore its potential to help patients across multiple tumor types,” added Richard Gaynor, M.D., svp, product development and medical affairs for Lilly Oncology.

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