Bayer has signed a cancer immunotherapy deal with Compugen which could be worth over $540 million to the Israeli biotech.

The collaboration centres around the development of antibody-based therapeutics for cancer immunotherapy against two Compugen discovered immune checkpoint regulators. Cashwise, Bayer is paying an upfront fee of $10 million and over $500 million in potential milestone payments for both programmes, plus an extra $30 million associated with preclinical activities.

Compugen is also eligible to receive mid-to-high single-digit royalties on sales of any resulting products. Chief executive Anat Cohen-Dayag said that "the prediction and validation of these two targets…provides additional validation for our long-term commitment to establishing this unique capability".

Andreas Busch, head of global drug discovery at Bayer Healthcare, added that antibody-based immunotherapies are promising approaches in oncology which can stimulate the body’s own immune cells to fight cancer cells. He stated that immunotherapy, which aims at combatting cancer by stimulating the body's own immune cells, "is one of our focus areas in oncology research".

The announcement led to a leap in Compugen's stock and the Tel Aviv-based firm's shares were up 40.6% to 28.45 shekels.