Dive Brief:

• Gilead Sciences will pay $30 million and invest another $13.5 million in Xilio Therapeutics to access an experimental immunotherapy drug the Massachusetts biotechnology company is developing for cancer.

• The deal will give Gilead an exclusive license to the drug, called XTX301 and currently in a Phase 1 clinical trial of people with solid tumors. Xilio could receive as much as $604 million in additional payments and equity investment if certain milestones are met.

• Alongside the Gilead agreement, Xilio announced a private placement equity financing Thursday that will give it another $11.3 million in funding for its cancer drug development work. The company will focus on XTX301 and another molecule called XTX101, while discontinuing further investment in a third drug as a monotherapy. Xilio is also laying off 15 employees, or about 21% of its workforce, in the restructuring.

Dive Insight:

With the Xilio deal, Gilead is taking a bet on a drug it hopes could turn “cold” tumors “hot” as a way to stimulate anti-tumor immunity.

XTX301 is a form of the cytokine IL-12 that’s designed to be activated only within the local area surrounding a tumor. IL-12 drugs have been explored for years as a possible cancer immunotherapy, but their track record is mixed. Bristol Myers, for example, paid Dragonfly Therapeutics $475 million in 2020 to license an IL-12 medicine, only to terminate the license and return rights back to Dragonfly three years later. Eli Lilly, AstraZeneca and Merck & Co. have also done IL-12 research.

With XTX301, Gilead is intrigued enough that it is paying nearly three times Xilio’s market value prior to the deal’s announcement. Gilead is in the midst of a second wave of cancer dealmaking, after a series of transactions from several years ago — including the $21 billion purchase of Immunomedics and the $5 billion acquisition of Forty Seven — didn't pan out as well as the company had hoped.

Shares in Xilio rose by nearly 150% Thursday morning on news of the licensing agreement.

“Xilio’s novel tumor-activation platform naturally complements Gilead’s clinical development program in difficult-to-treat cancers and expands our focus in immuno-oncology,” said Bill Grossman, Gilead’s head of oncology clinical development, in a statement. The company sees potential for XTX301 both as a monotherapy and in combination, Grossman said.

Per the deal, Xilio will handle the ongoing Phase 1 trial of XTX301 through dose expansion. After a certain point, Gilead can choose to take over development responsibilities for an additional $75 million fee.

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