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ristol-Myers Squibb, seeking a new way to make its cancer immunotherapies more effective, is paying a shockingly steep — some will say desperate — price to lock up rights to an experimental drug from Nektar Therapeutics.

Under deal terms announced Wednesday, Bristol is paying $1 billion in cash and will make a $850 million equity investment in Nektar at an above-market price in exchange for non-exclusive rights to develop NKTR-214.

Nektar is the runaway winner Wednesday for securing a huge financial windfall from a cancer immunotherapy that’s still far from approval, while maintaining ownership and control over its future development.

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Shares of Nektar have already tripled in price since last November when the company teased out the first promising clinical data on NKTR-214. Bristol is paying almost $103 per share for its Nektar stock, a 36 percent premium to Tuesday’s $75 closing price. Bristol will own just under five percent of Nektar when the deal closes. Some investors might be disappointed given recent rumors that Nektar was considering an outright sale of the company.

For Bristol, NKTR-214 is a risky, all-in gamble to save its troubled cancer immunotherapy franchise. Opdivo is Bristol’s crown jewel, with 2017 sales of $5 billion, but the drug has been losing market share to rivals, most notably Merck’s checkpoint inhibitor Keytruda. In 2016, an Opdivo monotherapy study in lung cancer flopped. Last week, another important Bristol clinical trial combining Opdivo and Yervoy in a certain type of lung cancer patient reported results that were more positive but also mired in controversy.

Bristol intends to pair NKTR-214 with Opdivo and Yervoy in clinical trials spanning 20 indications across 9 different types of cancer, including melanoma, kidney lung, bladder, and breast. If the combination strategy is successful, the billions of dollars in new cancer immunotherapy revenue that will be generated will more than justify the steep cost of buying into NKTR-214.

But if NKTR-214 flops, Bristol will have another stunning and expensive cancer immunotherapy mess to clean up.

Paul Biondi, Bristol’s head of business development, defended the price paid for NKTR-214 in a phone interview Tuesday night ahead of the deal announcement. “We see tremendous value here. NKTR-214 is a unique asset that fits in well with our existing immunotherapy portfolio,” he said.

Nektar designed NKTR-214 to stimulate the presence of T cells and other immune cells in and around tumors. When NKTR-214 is combined with Opdivo, preliminary data have shown greater tumor responses, with the added possibility of treating cancers where checkpoint inhibitors on their own are not effective.

These promising results, however, will need to be confirmed in larger clinical trials. Bristol and Nektar intend to start pivotal clinical studies in kidney cancer and melanoma this summer, which means NKTR-214 is still years away from reaching the market.

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In addition to the large upfront payments described above, Bristol is also on the hook for an additional $1.8 billion in deferred payments to Nektar tied to unspecified development, regulatory, and sales milestones. Profits from sales of NKTR-214 will be split, with 65 percent going to Nektar and 35 percent to Bristol.

The deal is non-exclusive in that Nektar is prohibited for a certain time period from combining NKTR-214 with other competing immunotherapies, including Merck’s Keytruda. However, once that restricted period ends, Nektar is free to partner NKTR-214 with anyone it chooses.

“We’re getting remarkable economics and a remarkably broad collaboration with Bristol that still leaves us tremendous freedom to develop NKTR-214 in other settings,” said Nektar R&D chief Stephen Doberstein, also speaking by phone Tuesday night.

Remarkable might just be the understatement of the year.

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