By: Hannah Ishmael

Published: Mar 4, 2015 at 2:19 pm EST

Bristol-Myers Squibb Co (NYSE:BMY) has announced an exclusive agreement with BAVARIAN NORDIC (OTCMKTS:BVNRY) over the Danish-based company’s prostate cancer drug Prostvac, which is currently undergoing clinical trials. The deal could be worth up to almost $1 billion if the clinical trials yield positive results.

Bavarian Nordic’s lead experimental candidate Prostvac, a prostate-specific antigen, is being analyzed in the ongoing Phase III trials for its efficacy in treating patients with asymptomatic or minimally symptomatic metastatic castration-resistant prostate cancer (mCRPC). One of these major Phase III trials is the PROSPECT study, which is being carried out in partnership with the National Cancer Institute as part of the Special Protocol Assessment granted by the US Food and Drug Administration (FDA).

As per the results from an early-stage clinical trial revealed last week, Prostvac succeeded in showing significant potential for extending the lives of patients suffering from mCRPC. The positive results mean the regulatory approval for Prostvac can be expected to come soon; Bristol-Myers has grabbed a timely opportunity by signing a deal with Bavarian Nordic.

Prostate cancer, the second leading cause of cancer-related deaths in the US after lung cancer, is expected to lead to around 220,800 new cases in the US in 2015, while as many as 27,540 people might die from the deadly cancer, as per estimates by the American Cancer Society. Prostate cancer is one of the most debilitating and life-threatening forms of cancer, which further increases the need for a potential cure in the market. Bristol-Myers, with its current capabilities, can offer the best combination of assets for developing such a treatment.

As per the terms of the agreement, the US pharmaceutical giant will enjoy the exclusive option to license and commercialize Bavarian’s Prostvac, which works by strengthening the body’s immune system to fight prostate cancer. Bavarian, on the other hand, will be responsible for carrying out the clinical trials up to the final regulatory approval.

Under the deal, Bavarian Nordic will be entitled to an upfront payment of $60 million and will be receiving $975 million overall if specific targets are met and milestones achieved. These milestones would include a payment of $80 million when Bristol-Myers exercises the option to license the drug, which it can do only within a specific time period after the final results from the ongoing Phase III trial are revealed. Bavarian Nordic will then receive incremental payments beginning from $50 million and reaching more than $230 million if Prostvac is able to show a higher overall survival benefit in Phase III results. Additionally, Bavarian Nordic would also be entitled to $110 million as part of the regulatory milestone payment, while receiving as much as $496 million in achieving the sales targets.

Bristol-Myers, in its efforts to develop a potential cure for prostate cancer, has already been exploring the option of combining Prostvac with its skin cancer immunotherapy drug Yervoy. Bristol-Myers carried out an early-phase trial for treating prostate cancer patients with Prostvac in combination with increasing doses of Yervoy; both the companies are now planning to advance the development into a Phase II trial for investigating the efficacy of the combination treatment.