Collaborations & Alliances

We enter into strategic collaborations and alliances to complement our own internal capabilities and further accelerate the development and commercialization of our drug discovery programs. We have entered into the following alliances for the discovery and development of therapeutics based on our drug target discovery efforts:

Bristol-Myers Squibb Company. We established an alliance with Bristol-Myers Squibb in December 2003 to discover, develop and commercialize small molecule drugs in the neuroscience field. In May 2006, Bristol-Myers Squibb extended the target discovery term of the alliance for an additional two-year period which extends through December 2009. In the alliance, we use our gene knockout technology to identify additional drug targets with promise in the neuroscience field. For those targets that are selected for the alliance, we and Bristol-Myers Squibb will work together on the preclinical development of small molecule drugs addressing those targets and will share equally in the costs and work attributable to those efforts. As drugs resulting from the alliance enter clinical trials, Bristol-Myers Squibb will have the first option to assume full responsibility for clinical development and commercialization.

We received an up-front payment from Bristol-Myers Squibb under the alliance and are entitled to receive research funding during the alliance's five-year research term. For each drug developed and commercialized by Bristol-Myers Squibb from the alliance, we will also receive clinical and regulatory milestone payments and will earn royalties on net sales.

Genentech, Inc. We expanded our drug discovery alliance with Genentech in November 2005 to include the advanced research, development and commercialization of new biologic drugs. Under the expanded alliance, we will conduct advanced research on a broad subset of targets included in Genentech's Secreted Protein Discovery Initiative (SPDI) program and validated using our proprietary gene knockout technology. We may develop and commercialize drugs modulating up to six of these targets. Genentech retains an option on the potential development and commercialization of these drugs under a cost and profit sharing arrangement, with Lexicon having certain conditional rights to co-promote drugs on a worldwide basis. This alliance is an expansion of our initial drug discovery alliance with Genentech that began in December 2002.

In the expanded alliance, we receive up-front and performance milestone payments and research funding. We will also receive payments from Genentech upon achievement of milestones related to the development and regulatory approval of certain drugs resulting from the alliance that are developed and commercialized by Genentech. We are entitled to receive royalties on net sales of these products, provided they are not included in a cost and profit sharing arrangement. Genentech is entitled to receive milestone payments in the event of regulatory approval and royalties on net sales of products commercialized by Lexicon outside of a cost and profit sharing arrangement.

Organon. We established an alliance in May 2005 with Organon, the human healthcare business of Akzo Nobel, to jointly discover, develop and commercialize novel biotherapeutics. The alliance is based on 300 jointly selected genes that encode secreted proteins or potential antibody targets for inclusion in the collaboration. These 300 genes include two of our advanced drug discovery programs. We will create and analyze mouse knockouts of each of the 300 genes to identify promising human drug targets. We will jointly select targets for further research and development and will share costs and responsibility for research, preclinical and clinical activities and collaboration product revenue. Organon will have principal responsibility for the manufacturing of biotherapeutic products resulting from the collaboration.

We received an up-front payment from Organon in exchange for the exclusive right to co-develop biotherapeutic products that modulate the 300 selected genes. We will also receive research funding for Organon's share of the collaboration's costs during the four-year target function discovery portion of the alliance.

Symphony Icon, Inc. We established a product development collaboration in June 2007 with Symphony Capital Partners, L.P and its co-investors. Under the terms of the arrangement, $45 million was provided to Symphony Icon, a newly-created company established to fund and accelerate development of our first three drug candidates, LX6171 for cognitive disorders, LX1031 for irritable bowel syndrome, and LX1032 for gastrointestinal disorders. Symphony Icon holds the license to the intellectual property of the drug candidates. We retain the exclusive right to reacquire the drug candidates at any time during the final three years of the four-year collaborative development period. Symphony Icon is governed by a board of directors comprised of five members, including one member designated by us and two independent members. We will continue to be primarily responsible for the development of the drug candidates under the oversight of Symphony Icon's development committee, which is comprised of an equal number of representatives from us and Symphony Icon.

XOMA Ltd. We established an alliance with XOMA in June 2005 to jointly develop and commercialize antibody drugs for certain targets we discover in our Genome5000T program. During the three-year initial term of the alliance, we will select at least three targets from our Genome5000T program for submission to the collaboration and XOMA will generate or engineer antibodies that modulate the collaboration's targets using phage display libraries and its proprietary Human EngineeringT technology. We and XOMA will jointly develop and commercialize novel antibodies directed at these targets and will share the responsibility and costs for research, preclinical, clinical and commercialization activities. Costs and profits will be allocated 65% to us and 35% to XOMA. XOMA will have principal responsibility for manufacturing antibodies for use in clinical trials and commercial sales.

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