Bristol-Myers puts up potential $3.6 billion in deal for 35% of a Nektar cancer drug

In the deal announced today Bristol-Myers Squibb (BMY) pays Nektar Therapeutics $1 billion upfront, $850 million for stock valued at a price of $102 a share, and a potential $1.78 billlion in milestone payments in exchange for access to NKTR 214, a drug candidate still in trials and that has shown the ability to extend the range of Bristol-Myers Opdivo to include the 70% of cancer patients without the PDL-1 genetic marker that Opvido targets to fight cancer. That would allow Bristol Myers to address 100% of a market opportunity estimated at $70 billion instead of just 30%.

The ability to use Opdivo in combination with NKTR 214 also addresses a key competitive problem in the market for drugs based on the PDL-1 genetic marker: a lack of patent protection for the basic PDL-1 technology. The use of the combination therapy would provide just that kind of intellectual property protection for Bristol-Myers.

The companies said they will begin trials including more than 20 indications and nine tumor types (including melanoma, lung, and blade cancers) with the earliest trials to begin in mid-2018. By the terms of the deal announced today Bristol-Myers will pay 67.5% of the cost of trials combining NKTR 214 and Opdivo.

The companies have agreed that Nektar will retain 65% of global profits.

Shares of Nectar climbed 11.02% today to close at $84 a share.

The stock is a member of my Jubak Picks portfolio. I hold options on Nektar Therapeutics in my Volatility Portfolio. The shares are up 126% since I added them to the Jubak Picks Portfolio on November 13, 2017. Today I’m raising my target price to $115 a share from the prior $75.

I own shares and options for Nektar in my personal portfolios.