Genentech has entered into an agreement to get access to Seattle Genetics’ early-stage cancer drug in a deal that could net the smaller company up to $860 million.

The US biotechnology behemoth has signed an exclusive worldwide license agreement for the development and commercialisation of SGN-40, a humanized monoclonal antibody currently in Phase I and Phase II trials for multiple myeloma, chronic lymphocytic leukemia and non-Hodgkin's lymphoma.

Under the terms of the alliance, Seattle Genetics will receive an upfront payment of $60 million, potential milestone payments exceeding $800 million and “escalating double-digit royalties” on annual net sales of SGN-40. The milestone payments include $20 million in committed payments during the first two years of the pact and Genentech will fund future R&D, manufacturing and commercialisation costs.

The firms also noted that Seattle Genetics, whose shares soared over 20% on the news, will continue certain Phase I and Phase II clinical trials and development activities, the costs of which will be reimbursed by Genentech and the former also has an option for co-promotion rights on SGN-40 in the USA. This type of co-promotion agreement is becoming increasingly common as a number of smaller firms try to get the most value from their portfolios. Their larger counterparts, desperate to fill their pipelines, are having to pay big money and offer interesting deals to get hold of these innovative compounds.

Clay Siegall, Seattle Genetics’ chief executive, said the deal will also help it expand other early-stage projects as well as SGN-40. The firm has five other drug candidates in its pipeline.

Separately, Seattle Genetics noted that it has entered a multi-year agreement with privately-held US biotechnology company Agensys to jointly research, develop and commercialise antibody-drug conjugate (ADC) therapies for cancer. The firm already has an ADC deal with Genentech.