On July 29, 2021 Loxo Oncology at Lilly, a research and development group of Eli Lilly and Company (NYSE: LLY), and Kumquat Biosciences reported an exclusive collaboration focused on the discovery, development and commercialization of potential novel small molecules that stimulate tumor-specific immune responses (Press release, Eli Lilly, JUL 29, 2021, View Source [SID1234585379]).

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Through the multi-year collaboration, Kumquat will utilize its small molecule immuno-oncology (IO) platform to discover novel clinical candidates and Lilly has the option to select a certain number of drug candidates for further development and commercialization worldwide, excluding Greater China. Kumquat has retained development and commercialization rights in Greater China for each of the drug candidates selected by Lilly, subject to Lilly’s option to co-commercialize in Greater China. Additionally, Kumquat has the option to co-develop and co-commercialize a certain number of the drug candidates selected by Lilly in the U.S.

Kumquat will receive an aggregate of $70 million consisting of a cash upfront payment and an equity investment. Kumquat is eligible to receive over $2 billion in potential milestone payments based on the achievement of preclinical, development and future commercial milestones, as well as royalties on sales of commercialized products resulting from the collaboration.

"We are very excited to enter into this collaboration with Lilly," said Yi Liu, chief executive officer of Kumquat. "Kumquat is developing a novel small molecule IO platform and this collaboration with Lilly is expected to greatly expedite the development of this platform and maximize its full potential. We look forward to working with Lilly to identify the next generation IO drugs that will benefit a broad population of patients."

"Using small molecule inhibitors to target specific tumor antigens in complex with the immune machinery presents a unique opportunity to stimulate an enhanced tumor-specific immune response," said Jacob Van Naarden, chief executive officer of Loxo Oncology at Lilly. "We look forward to working with the accomplished Kumquat team to identify candidate medicines that interact with this target class."

This transaction will be reflected in Lilly’s reported results and financial guidance according to Generally Accepted Accounting Principles (GAAP). There will be no change to Lilly’s 2021 non-GAAP earnings per share guidance as a result of this transaction.