French drug maker Aventis (NYSE:AVE) will pay up to $510 million to New York-based drug developer Regeneron (NASDAQ:REGN) for the rights to its promising but early-stage cancer drug.

The drug, known as Vascular Endothelial Growth Factor (VEGF) Trap, is one of a new class of drugs designed to stop angiogenesis -- the formation of blood vessels. (For more on this, see Tom Jacobs's interview with the head of the Angiogenesis Foundation.) By blocking angiogenesis associated with tumors, the VEGF Trap may prevent tumor growth.

Although Regeneron's VEGF Trap is still in Phase I, Genentech's (NYSE:DNA) Avastin recently lent validity to the anti-angiogenesis approach in solid tumors. In June, Genentech announced that Avastin -- another anti-VEGF drug -- improved survival in colorectal cancer patients during a Phase III trial.

Upfront, Aventis will pay Regeneron $125 million -- $80 million cash, plus $45 million as an investment in newly issued Regeneron common stock. It will also pay $25 million when an early clinical milestone is reached, plus up to $360 million in milestone payments related to the approval of VEGF Trap for up to eight indications in Europe and the United States. Aventis will also shoulder the remainder of the development costs.

If the partnership is successful, the two companies will split profits and marketing rights. Regeneron will also pay back half of the development costs.

Regeneron clearly benefits from this deal, as it could end up with 50% of the profits while passing on developments risks and costs. Aventis, meanwhile, adds to its portfolio of promising cancer drugs. But clearly, there's work yet to be done. Newer biotech drugs are earning Food & Drug Administration approval at a better rate than the historic 10% of all drugs that enter human trials, but the odds are still daunting. Either way, benefits to either company are still several years away.

Shares of Regeneron are up almost 25%, while Aventis remains mostly unchanged.