Novartis has signed a deal with Transgene which could give it access to the French biotechnology firm’s investigational lung cancer vaccine.

The Swiss major has signed an exclusive option agreement to develop and commercialise Transgene’s TG4010, an immunotherapy which uses the Modified Vaccinia Anakara virus vector, for the first-line treatment of non-small cell lung cancer and other potential cancer indications. Under the terms of the deal, Novartis is paying $10 million for an option to acquire the licence for TG4010, depending on the outcome of a Phase IIb mid-stage trial.

If Novatis takes up the option, and if the vaccine achieves its various milestones, Transgene is eligible to receive a total of 700 million euros. The latter will begin a 1,000-patient worldwide Phase IIb/III clinical trial with MUC1-positive NSCLC by the end of this year, wuth results due in 2013.

If the option is exercised, Novartis will take over all costs related to the drug's development, regulatory approval process and marketing, while Transgene will receive royalties and retain co-promotion rights in certain countries including France and China. It will also retain primary manufacturing rights for TG4010 to supply Novartis.

Philippe Archinard, Transgene’s chief executive, said “this agreement represents the best way to accelerate development and create long term value for our shareholders”. He added that It is also consistent with the firm’s goal “of becoming a fully-integrated biopharmaceutical company”.

Investors were not overly impressed, however, and Transgene’s shares fell steeply as analysts noted that, given the structure of the deal, the company will continue to bear the financial burden and most of the technical risk involved for TG4010.