Sweden’s Karo Bio saw its share price rocket by as much as 38% during trading on Friday after the firm said that it had received a “significant” milestone payment from Merck & Co after a compound arising from a 1997 collaboration between the two firms entered clinical trials.

The exact value of the milestone has not been disclosed, but investors were impressed enough to send the firm’s share price up to a new 52-week high on the Stockholm Stock Exchange.

The two firms first hooked up back in November 1997 with the aim of developing new treatments targeting oestrogen receptors. The joint drug discovery phase of the collaboration with Merck was completed in 2002 and has been successful in the discovery of numerous selective compounds. Karo Bio could be set to receive additional milestone payments if new drug candidates are selected, as well as the successful clinical development of the compounds and final drug approval. Karo Bio also has rights to royalties on future drug sales.

Merck has exclusive worldwide rights to all compounds identified during the collaboration and is responsible for their further pre-clinical and clinical development. In addition to the most advanced compound, which now has progressed into clinical testing, Merck is continuing to evaluate additional compounds for potential use in other clinical indications.