Xilio Therapeutics Inc (NASDAQ:XLO) shares are surging as the company announced an exclusive license agreement with Gilead Sciences Inc (NASDAQ:GILD) to develop and commercialize Xilio's Phase 1 tumor-activated IL-12 program, XTX301.

Xilio Therapeutics is using its proprietary tumor-activation platform to build a pipeline of novel, tumor-activated molecules, including antibodies, cytokines, bispecifics, and cell engagers, which are designed to optimize the therapeutic index and localize anti-tumor activity within the tumor microenvironment.

XTX301 is currently being evaluated in a Phase 1 dose-escalation trial in patients with advanced solid tumors.

"Gilead's confidence in our tumor-activated technology, combined with their deep expertise in developing and commercializing novel immuno-oncology products, will enable us to accelerate and expand the development of XTX301, our tumor-activated IL-12," said René Russo, President and Chief Executive Officer of Xilio.

Xilio will receive $43.5 million in upfront payments, including a cash payment of $30.0 million and an initial equity investment by Gilead of $13.5 million in Xilio shares at a premium.

Xilio will be eligible to receive up to $604.0 million in additional contingent payments, including additional equity investments by Gilead, a transition fee, and specified development, regulatory, and sales-based milestones.

Xilio will also be eligible to receive tiered royalties ranging from high single digits to mid-teens on annual global net product sales.

Xilio will conduct clinical development of XTX301 in the ongoing Phase 1 clinical trial through dose expansion.

Following the delivery by Xilio of a specified clinical data package for XTX301, Gilead can elect to transition responsibilities for the development and commercialization of XTX301 to Gilead, subject to the terms of the agreement and payment by Gilead of a $75 million transition fee.

Before the potential transition fee, Xilio is eligible to receive up to $29.0 million in additional equity investments and a development milestone payment.

Gilead says the transaction is expected to reduce its GAAP and non-GAAP 2024 EPS by approximately $0.03 – $0.04.

Concurrently, Xilio Therapeutics announced a $11.3 million capital raise via private placement.

The company will issue and sell 1.95 million shares at $0.64 per share and pre-funded warrants to purchase up to an aggregate of 15.6 million Xilio shares at $0.6399 per pre-funded warrant share.

Price Action: XLO shares are up 131.6% at $1.48, and GILD shares are up 0.64% at $73.48 on the last check Thursday.

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