(Reuters) - Shares of OncoMed Pharmaceuticals Inc more than doubled on Tuesday after the biotechnology company said Celgene Corp would help it develop and market six of its experimental anti-cancer stem cell drugs.
OncoMed will get upfront payments of $177.25 million, including $22.25 million for new stock that would give Celgene a stake of about 5 percent, the companies said.
The deal gives Celgene an entry into the market for treatments targeting cancer stem cells.
Cancer stem cells play a significant role in the establishment, spread and recurrence of cancer.
OncoMed said it would conduct the initial clinical studies on five of the drugs, giving Celgene the option to license them based on the trial results.
Celgene will also get an option to license OncoMed's most advanced clinical candidate, demcizumab, during or after the completion of certain mid-stage trials.
The drug is in early-stage development in combination with standard-of-care therapy for non-small cell lung cancer and pancreatic cancer.
OncoMed, based in Redwood City, California, is eligible to receive up to $790 million in development, regulatory and commercial milestones for demcizumab.
"Demcizumab's substantial early clinical activity warrants aggressive yet careful evaluation in several indications where we have strength", said Tom Daniel, Celgene's president of global research and early development.
OncoMed is eligible to get up to $3 billion in milestone payments if Celgene exercises all its options and all six drugs are approved.
The potential monetary benefits of the deal with Celgene could take all six drugs through to commercialization, OncoMed Chief Executive Paul Hastings told Reuters.
OncoMed already has agreements with GlaxoSmithKline Plc and Bayer AG to develop and market other anti-cancer stem cell therapies.
OncoMed's stock was up 105 percent at $28.75 in afternoon trading on the Nasdaq. Up to Monday's close, the company's stock had halved in value since it went public in July.
Summit, New Jersey-based Celgene will pay $15.13 per share for its stake in OncoMed. OncoMed's stock closed at $14 on Monday, valuing the company at about $390 million.
Celgene shares were down 1.4 percent at $160.76.
(Reporting by Natalie Grover in Bangalore; Editing by Savio D'Souza)