(Reuters) – Bristol-Myers Squibb Co will pay Nektar Therapeutics $1.85 billion for a global development and profit-sharing deal on a promising Nektar cancer drug, the companies announced on Wednesday.
In one of the largest single-drug collaboration deals ever, Nektar will receive $1 billion in cash upfront and Bristol-Myers will purchase about 8.28 million Nektar shares at $102.60 per share, or an equity stake of just under 5 percent of the company. Nektar shares closed at $75.66 on Tuesday.
If all potential development, regulatory and sales milestones in the deal are met, it could be worth more than $3.6 billion to Nektar, while giving Bristol-Myers a new immunotherapy platform.
Nektar shares were up 8 percent at $81.74, while Bristol-Myers shares rose 0.7 percent to $64.32.
“We believe the deal economics are favorable to both parties,” Cowen analyst Chris Shibutani said in a research note.
The partnership is built around the Nektar drug, NKTR-214, which will be tested with Bristol’s immuno-oncology (IO) drugs Opdivo and Opdivo and Yervoy in 20 cancer indications across nine different tumor types, including melanoma, kidney and lung cancers, following “very encouraging” early data from clinical trials.
“We’ve been in a clinical collaboration with Nektar since 2016. This partnership was a natural next step,” Paul Biondi, head of business development for Bristol-Myers, said in a telephone interview.
The combination therapies could become “potentially a new backbone in the IO space,” he added.
The announcement comes as early immunotherapy leader Bristol-Myers has been viewed by investors as having fallen behind Merck & Co in the burgeoning field, especially in the most lucrative lung cancer space.
NKTR-214, a CD122 agonist that utilizes the interleukin-2 (IL-2) pathway, is designed to increase the number and activation state of cancer-fighting T cells in the tumor microenvironment, while limiting IL-2 toxicity, with the hope of improving and lengthening patient responses.
Nektar is also eligible to receive an additional $1.78 billion in milestone payments, of which $1.43 billion are development and regulatory milestones and the remainder are sales milestones.
Following approvals, Nektar will book revenue for worldwide NKTR-214 sales and the companies will split global profits, with Nektar receiving 65 percent and Bristol-Myers 35 percent, they said. Bristol-Myers will retain 100 percent of revenues for its own medicines.
The transaction is expected to be completed in the second quarter of 2018, the companies said.
Both companies would be free to develop NKTR-214 with other drugs for uses not laid out in the deal.
Reporting by Bill Berkrot; Editing by Rosalba O’Brien and Jonathan Oatis