What Is Going On With Exelixis, Inc. (NASDAQ:EXEL)?

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Exelixis, Inc. (NASDAQ:EXEL) stock was trading in green in early trading hours on Thursday. The company in January reported that Genentech, Inc. has pulled its counterclaim against company in the underway JAMS arbitration pertaining alleged violations of the parties’ collaboration deal. Genentech had proclaimed a counterclaim for violation of contract, which sought interest and monetary damages linked to cost allocations under the deal.

When informing Exelixis, and the arbitral panel of this unilateral step, Genentech further reported that it is altering the manner in which it assigns promotional costs of the COTELLIC® plus Zelboraf® combination treatment. As an outcome of Genentech’s choice to change its cost allocation plan, Exelixis is reassured of $18.7 million of disputed expenses initially charged by Genentech. Exelixis has billed Genentech further $7.1 million with interest for costs that Exelixis compensated previously.

The buzz

Genentech’s revised distribution applies prospectively and retrospectively and will substantially minimize Exelixis’ exposure to expenses linked with COTELLIC + Zelboraf combination promotion in the U.S. Genentech and Exelixis have shared promotional expenses since commercial measures were commenced in early 2013.

As shown in preliminary regulatory submissions, Exelixis debited its Profit and Loss Statement almost $38 million for promotional expenses through 3Q2016. With the fresh plan that Genentech has accepted unilaterally, Exelixis’ obligation for promotional charges will be condensed to about $15 million for the same period.

Other major issues remain in argument between the parties. Genentech’s measure does not resolve the claims in company’s Demand for Arbitration linked to Genentech’s clinical advancement, pricing and promotional charges for COTELLIC in the U.S., nor does it fully address claims over revenue distribution. And, Genentech has yet to confirmed how it plans to allocate promotional charges incurred with respect to the deal’s promotion of other combination treatments that comprise cobimetinib for other signs that are in advancement and may be approved.

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