New entity will obtain preclinical assets and will be seeded with $20 million.

Maxygen and Astellas Pharma have formed a joint venture (JV) to take over R&D of Maxygen’s protein therapeutics. Substantially all the company’s related R&D assets, technologies, operations, and personnel will be transferred to the JV. As a result, Maxygen plans to downsize corporate and administrative staff including senior management. 

Maxygen and Astellas will each contribute $10 million to the JV. Maxygen will have an 83% ownership interest, but Astellas has the option to buy Maxygen’s stake in the JV over the next three years. The exercise price will increase each quarter from $53 million to $123 million.

This comes about eight months after Maxygen reported that it was letting go of 30% of its employees and putting its lead candidate, MAXY-G34 in Phase IIa trials for chemotherapy-induced neutropenia, on hold to focus on the MAXY-4 program. This program, which is in preclinical development for rheumatoid arthritis, will now be transferred to the JV along with other preclinical assets. Additionally, Maxygen has granted the JV certain licenses to use its MolecularBreeding™ technology platform and ancillary protein-expression technologies.

As part of the joint venture arrangement, the JV and Astellas entered a collaboration under which Astellas will fund substantially all the costs over the three-year option term related to the discovery, research, and development by the JV. This is estimated to be about $30 million and does not include expenses related to MAXY-4, which is the lead candidate. Astellas will be granted an option to obtain a license to one product developed by the JV under this collaboration arrangement, exercisable only if Astellas does not exercise its buy-out option.

The MAXY-4 program will be funded by Astellas and the JV under the terms of the partnership formed between Astellas and Maxygen. This includes development and commercialization of MAXY-4 program candidates for autoimmune diseases and transplant rejection.

If Astellas does not exercise its buy-out option, Astellas will be required to provide up to 18 months of transition funding to the JV in the form of revolving loans of up to $20 million on preagreed terms if the MAXY-4 collaboration agreement between the joint venture and Astellas remains in force.

The consummation of this transaction is expected in the third quarter or early in the fourth quarter of 2009. “Today’s announcement largely completes a multi-year strategic process to position Maxygen’s programs and assets in collaborations and other arrangements that are primarily supported by external parties,” said Isaac Stein, the executive chairman of the board of directors of Maxygen.

“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,” Stein adds. “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.”

In addition to its majority ownership of the joint venture, Maxygen will retain approximately $200 million in cash, its MAXY-G34 program (including the previously announced licensing arrangement with Cangene for acute radiation syndrome), a 22% ownership interest in Codexis, its MolecularBreeding™ platform and intellectual property portfolio, and a vaccine discovery program.

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