Editor

Maxygen Inc.'s recent decision to sell its MolecularBreeding technology to Codexis Inc. for $20 million generated next to no buzz. And that was no surprise, given the deal's relatively small size, in biotech terms.

But what's interesting about the situation is that Maxygen didn't need the cash. In fact, the Redwood City, Calif.-based biotech has so much money that it has handed some $40 million back to investors over the past year – something rarely seen in the biotech world of sky-high drug development costs and endless opportunities for reinvestment. (See BioWorld Today, Nov. 16, 2009.)

How did Maxygen end up in this enviable position?

The biotech traces its roots back to a 1997 spin-out from Affymax Inc., which was then a subsidiary of Glaxo Wellcome plc (now GlaxoSmithKline plc) but eventually completed its own spin-out. Serial entrepreneur Alejandro Zaffaroni saw promise in Maxygen's MolecularBreeding platform, which uses gene shuffling to create protein libraries. (See BioWorld Today, Aug. 27, 1997.)

Maxygen wasted no time out-licensing its technology, inking deals to develop proteins for the industrial biotech, agricultural biotech and therapeutics markets. Those revenues helped the biotech to complete a $16-per-share initial public offering in 1999. More technology license deals followed, and Maxygen began to build an internal pipeline.

The strategy of balancing revenue from license deals with internal pipeline development doesn't sound particularly different from what most platform-based biotechs are doing today. But Maxygen did make a few unusual decisions along the way.

First, the biotech formed subsidiaries to advance some of its programs. In 2002, it created the independently financed subsidiary Codexis to keep pushing the MolecularBreeding platform into industrial biotech fields, including biocatalysts and biofuels. Codexis went public this April, and Maxygen still owns 17 percent of the $358 million market cap company.

In 2003, Maxygen also spun out an application of its technology that allowed proteins to bind multiple targets, creating a biotech called Avidia Inc. When Avidia was acquired by Amgen Inc. in 2006, Maxygen got $17.8 million for its interest in the spinout. Meanwhile Maxygen's agricultural biotech interests were concentrated in subsidiary Verdia Inc., which was bought by DuPont for $64 million in 2004.

Another unusual aspect to Maxygen's strategy: the biotech partnered its internal programs early. In 2008, Maxygen sold its preclinical hemophilia drug MAXY-VII to Bayer AG in a $120 million deal that included a $90 million up-front payment. Soon afterward, Maxygen licensed its preclinical autoimmune and transplant drug MAXY-4 in a back-end loaded $170 million deal with Astellas Pharma Inc. The companies later expanded the deal into a joint venture around the rest of Maxygen's early stage programs. (See BioWorld Today, July 3, 2008 and Sept. 22, 2008.)

Maxygen CEO James Sulat said the biotech has simply been "interested in trying to maximize the value of the technology."

It seems to have achieved that goal: Maxygen had some $200 million in the bank as of mid-2009, prompting the biotech to return $38.9 million to shareholders by repurchasing stock through a modified "Dutch Auction" tender offer. The company has also repurchased shares from GlaxoSmithKline and instituted a $10 million stock buyback program.

And still Maxygen had $145.5 million in the bank as of June 30, while its market cap hovers around $195 million. The recent technology sale to Codexis was "in the best interest of shareholders," Sulat said.

But Maxygen doesn't have many assets left to monetize. There's MAXY-G34, a Phase II G-CSF drug designed to improve on Amgen Inc.'s Neulasta (pegfilgrastim), which has been on the partnering table for quite a while. Maxygen also has its interest in Codexis, a potential $30 million milestone from Bayer, and 83 percent ownership of its joint venture with Astellas, which Astellas has an option to buy out in the next two years.

So what's next? Sulat said the company's first priority is to maximize the value of its portfolio. Maxygen also expects to continue to return money to shareholders.

Does that mean the company will eventually sell everything and wind down, providing a sort of alternative exit to investors? Not necessarily. Although Maxygen isn't advancing any programs internally at the moment, Sulat said the company may "look to redeploy a portion of its capital."