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COPENHAGEN (Reuters) - Bavarian Nordic (BAVA.CO) has struck a prostate cancer drug deal with Bristol-Myers Squibb (BMY.N) that could be worth $1 billion should its trials, part of a new field in cancer treatment, be successful.
Shares in the Danish company soared and by 0950 GMT (0450 ET) they were trading at 282 Danish crowns ($42), up 33 percent. The jump added over $260 million to its market value of $880 million.
The agreement gives the U.S. company an exclusive option to license Bavarian's Prostvac drug, an immunotherapy treatment that helps the body's own immune cells fight tumors.
Immunotherapy for cancer is a rapidly evolving field which promises better and longer-lasting treatments, although oncology experts warn financial costs are high.
Under the deal, Bavarian Nordic stands to receive up to $975 million, including $60 million it will get upfront, if it passes trials and sales milestones, and could also receive royalties.
Prostvac is currently undergoing Phase III trials -- the last set of tests before it can be sold on global markets.
"A significant Phase II survival benefit suggests Prostvac immunotherapy has the potential to revolutionize prostate cancer treatment," analysts at Jefferies said in a note.
Last week Bavarian said results from a small early-stage trial conducted by the U.S. National Cancer Institute, showed Prostvac helped extend survival in patients with advanced prostate cancer significantly.
In that trial, patients were treated with Prostvac in addition to escalating doses of Bristol-Myers Squibb's Yervoy, an injectable treatment for advanced melanoma that works by taking the brakes off the body's immune system.
Bavarian Chief Executive Paul Chaplin said full results of the Phase III trial are expected by early 2017 but that the company is looking to improve the potential sales position of the drug by combining it with other treatments.
"We will be approved as a monotherapy but what our colleagues at NCI have already shown is that there are synergistic benefits of combining Prostvac," he told Reuters. "That is where the treatment will be moving."
The two companies said on Wednesday they were preparing for Phase II trials of Prostvac together with Yervoy.
"Scientific rationale exists to evaluate Prostvac in combination with Yervoy and other agents from Bristol-Myers Squibb's immuno-oncology portfolio," they said in a statement.
The deal follows Bavarian's agreement last year with a unit of Johnson & Johnson (JNJ.N) to trial an Ebola vaccine, as an outbreak spread across West Africa.
Chaplin said the two deals would allow Bavarian to invest more aggressively in its pipeline of drugs that cover infectious diseases including smallpox and cancer because a Phase III trial for such a small company is very costly.
"Fortunately we had the sales of the smallpox vaccine, which was driving our ability to invest in this space, but it was limiting our ability to do other things," he said. "We're spoilt for choice as to where to invest."
Additional reporting by Teis Jensen; Editing by Mark Potter and Jason Neely