The widely accepted biotech rule of thumb for partnering is: Hold onto programs for as long as possible to build value.

But that's not the way Maxygen Inc. sees it. After partnering its recombinant Factor VIIa program with F. Hoffmann-La Roche Ltd., the company has two preclinical deals with the pharma firm for an overall total potential value of $325 million.

The companies signed their first deal in spring 2003, when they agreed to develop improved interferon alpha protein therapeutics for hepatitis B and C in an arrangement worth up to $230 million. Thursday, they announced a collaboration worth up to $95 million, plus royalties, centered on recombinant Factor VIIa for severe bleeding - an assortment of indications that fall outside the main market of hemophilia.

Roche, of Basel, Switzerland, and Maxygen will share costs as they take the program forward worldwide, although the exact split was not disclosed. Maxygen will handle development through Phase IIa then pass it to Roche. The pharma company gets exclusive global rights to commercialize any Factor VIIa products for severe bleeding indications, which include intracerebral hemorrhage, surgery and trauma.

Maxygen, of Redwood City, Calif., receives $8 million up front, and would get another $17 million by reaching preclinical milestones - meaning the company could end up with more than $20 million in the first two years of the collaboration, while retaining all rights in hemophilia.

It's been more than 2.5 years since the next-generation interferon alpha deal was signed, and work progresses on track. Maxygen said Wednesday it had earned $5 million for reaching an undisclosed milestone, and the companies expect to start clinical trials next year.

The milestone payment, coupled with the Factor VIIa up-front money, allowed Maxygen to revise its end-of-year predictions. Instead of burning through $40 million to $45 million in 2005, it now expects to use about $32 million and end the year with $190 million in cash. The company's stock (NASDAQ:MAXY) rose 16 cents Thursday to close at $7.26.

Still, it's the royalty rate that makes the deal. Maxygen has the option to co-fund marketing in the U.S. for the severe bleeding indications, and while the rate was not officially disclosed, exercising that option pushes the royalty rate "to something that is broadly comparable to a 50-50 profit split," said Simba Gill, Maxygen's president. There is an undisclosed deadline for deciding, but it's "late" in development, he added.

"Consistent with [Maxygen's] general philosophy, we wanted to make sure we had a lot of value capture" from the Factor VIIa program, should it make it to market, Gill told BioWorld Today. That's shrewd negotiating on one hand, but it's also a necessity.

Antibody firm Medarex Inc., of Princeton, N.J., for example, can accept royalties in the 3 percent to 5 percent range because it has so many deals ongoing - as of March, it had 25 collaborations. Maxygen, on the other hand, does not have the pipeline to support those economics, and it must maximize each deal.

Does Roche Interest Suggest Buyout?

Although it now has partnered with Maxygen twice, Roche has no equity stake. On the conference call Thursday, an analyst asked about Roche as a possible partner for Maxygen's granulocyte-colony stimulating factor product, which is being developed for neutropenia, also expected to enter the clinic in 2006. With so much interest in what Maxygen is able to do, it might at some point make sense for Roche to simply snap up Maxygen.

That's for Roche to decide, but for Maxygen, the main goal remains building value for shareholders, Gill said, whether through independent growth or "an exit of some sort."

"We aren't looking to sell the company at all," he said, but added that "we aren't averse" to being bought outright or becoming involved in a scenario similar to the 1990 transaction in which Roche paid $2.1 billion for a majority stake in Genentech Inc., of South San Francisco. It's safe to say that move has been profitable for Roche.

Factor VIIa products sell about $800 million annually, Gill said. Clinical data have shown that the products could be effective in severe bleeding, and analysts estimate that the market will increase to $2 billion by 2010, with the new growth mostly fueled by the bleeding indications.

On the market is NovoSeven, a recombinant coagulation Factor VIIa approved for bleeding episodes in hemophilia A or B patients with inhibitors to Factor VIII or Factor IX. Overall, though, there is "very little competition" out there, Gill said, adding that it's rare today to see a company chasing "a true unmet medical need."

"It's what biotech and pharma should be focusing on," he said.