Big pharmaceutical companies everywhere are playing the mix and match game to come up with the best possible combination of immunotherapy drugs to treat cancer. Hampton, NJ-based Celldex Therapeutics (NASDAQ:CLDX) has become the latest beneficiary of that strategy through a deal today with Bristol-Myers Squibb (NYSE:BMY).

Celldex and Bristol-Myers said today that the two companies will work together to run a clinical trial combining two cancer immunotherapy "checkpoint" inhibitors: Celldex's varlilumab—an antibody that targets the molecular target CD27, helping T cells better recognize tumors—and Bristol-Myers' nivolumab, a so-called PD-1 inhibitor. The two will begin running a Phase 1/2 study in the fourth quarter of 2014 that could examine the combination's effect on multiple cancer types such as lung, ovarian, colorectal, head and neck, and melanoma.

Under the agreement, Celldex and Bristol-Myers will share the cost of the study. Celldex will be precluded from pairing its drug with any other PD-1 inhibitors, while Bristol-Myers will get a time-limited first right to cut a deal with Celldex should the company decide to license out its drug altogether (Celldex owns full rights to varlilumab). Celldex CEO Anthony Marucci says that once the study wraps up, should Celldex decide it wants to license out varlilumab, Bristol-Myers will have an exclusive 30-day window to do a deal before the company can shop the drug to others.

"We could always tell them we don't want to license it out and then they have the ability to go do another trial if they want to, or we have the ability to do another trial if they don't want to move forward," Marucci says. "There's a lot of flexibility, and it gets us to the point where we can negotiate in real time, with data, as opposed to anticipating what that data would be and possibly doing a deal that's not as [good] as we would like."

In the meantime, Celldex is free to potentially pair up varlilumab with, say, a PD-L1 inhibitor or some other type of cancer immunotherapy drug in a different study, he says

Bristol-Myers is paying Celldex $5 million up front. Incidentally, Bristol-Myers would have been entitled to future milestone payments and royalties on Celldex's program, because of an old deal Celldex had in place with Medarex—the company Bristol-Myers bought in 2009, and the one Celldex was spun out of a few years earlier. But those potential milestone payouts have been waived—and the royalty rates reduced—as part of the transaction.

"As we spun out of [Medarex] we got access to their technology at a discounted rate," Marucci says. "But [that deal] doesn't give them any clawbacks into the molecule. All it gave them was...milestones and some low to mid single digit royalties."

The Medarex buyout gave Bristol-Myers, meanwhile, its present-day cancer immunotherapy franchise, headed by ipilimumab (Yervoy)—which releases a brake on the immune system to help the body better fight tumors—and what's now known as nivolumab.

Nivolumab is a member of a class of PD-1 inhibitors that help remove a cloaking device tumors use to hide from the immune system, and it has become a key asset for Bristol-Myers. Up until recently, Bristol-Myers, on the back of nivolumab, was thought to have the lead in the big cancer immunotherapy race with industry giants like Merck and Roche Genentech—until Merck just last week filed an application for approval of its own PD-1 inhibitor, MK-3475.

Pharmaceutical companies have been rushing to combine checkpoint inhibitors with other therapies to boost their overall abilities. This has led to an industrywide scramble to amass as many immno-oncology assets as possible, or put together combination trials with other companies' drugs. Recently, for instance, Bristol-Myers cut a deal with Five Prime Therapeutics to develop more checkpoint inhibitors. The Celldex transaction gives Bristol-Myers another proverbial shot on goal. And just this morning, AstraZeneca announced a similar-type deal with Incyte.

The two companies said today that preclinical data suggest combining the two mechanisms of their respective drugs might boost their anti-tumor immune response. Celldex indicated that it is looking to combine varlilumab with other drugs through other collaborations as well.

"Celldex believes the future of immunotherapy lies in combination regimens that further unlock the power of the immune system to deliver the greatest benefit to the largest population of patients possible," said Marucci, in a statement. "Based on our clinical data and preclinical models for both programs, we think the combination of varlilumab and nivolumab could play an important role in maximizing the body's immune response to cancer."

Celldex shares were up about 24 percent, to $15.34 apiece, in early trading Wednesday.

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This article originally appeared on Xconomy, along with:

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