(Reuters) - Swiss drugmaker Novartis NOVN.VX is digging deeper into cancer immunotherapy, one of the hottest areas of drug research, through a tie-up with Aduro Biotech ADRO.O worth up to $750 million.
The move comes as the privately owned California-based biotech group prepares for a $86 million initial public offering (IPO), details of which were announced earlier this month.
Novartis will make an upfront payment of $200 million and Aduro could be eligible for a further $500 million if drug projects pan out.
In addition, Novartis is making an initial equity investment in Aduro of $25 million, with a commitment for another $25 million at a future date, the two companies said on Monday.
The move gives Novartis access to Aduro's experimental STING (Stimulator of Interferon Genes) technology, which is a next-generation method to harness the body's immune system to combat cancer.
In a further sign of its commitment to cancer immunotherapy, Novartis also launched an immuno-oncology research group led by Glenn Dranoff, a leading cancer vaccine expert from the Dana-Farber Cancer Institute in Boston.
The Basel-based group is already working on a number of immunotherapies to fight cancer, including chimeric antigen receptor T-cell (CART), where its CTL019 product is in mid-stage Phase II clinical trials and is viewed as a potential market leader.
Mark Fishman, president of the Novartis Institutes for BioMedical Research, said the new technologies could be used both on their own and in combination with other medicines.
"Current approaches with checkpoint inhibitors and T-cell modulation are potent but only in select tumor types. STING agonists have the potential to fully activate the immune system to attack a broader range of tumors," Fishman said.
Citigroup analyst Andrew Baum said Novartis's strategy was to target the 50 percent or so of cancer patients whose tumors are unlikely to respond to drugs known as checkpoint inhibitors, which have formed the first wave of immuno-oncology treatments.
Aduro will lead commercialization and will book sales from any eventual products in the United States, with Novartis taking the lead in the rest of the world. The companies will share in profits in the United States, Japan and major European countries, with Novartis will paying Aduro a royalty for sales in the rest of the world.
Reporting by Ben Hirschler; Editing by Jeremy Gaunt and David Holmes