What happened

Shares of Nektar Therapeutics (NASDAQ:NKTR) rose nearly 20% today after the company announced a new development plan with Bristol-Myers Squibb (NYSE:BMY)

The collaboration will advance bempegaldesleukin (bempeg) from Nektar Therapeutics and Opdivo from Bristol-Myers Squibb in multiple new registrational trials. The combination therapy is already being investigated in first-line metastatic melanoma, first-line cisplatin-ineligible metastatic urothelial cancer, and first-line metastatic renal cell carcinoma (RCC). 

As of 11:50 a.m. EST on Friday, the pharma stock had settled to a 17.8% gain.

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Image source: Getty Images.

So what

The new development agreement represents a significant expansion from current efforts. The duo will advance the combination therapy in two registrational trials in adjuvant melanoma and muscle-invasive bladder cancer. Nektar and Bristol-Myers will also initiate phase 1/2 dose escalation studies in first-line RCC. The collaborators will split all costs.

Additionally, Bristol-Myers will fund a phase 1/2 dose optimization study exploring the combination therapy's potential in first-line non-small-cell lung cancer (NSCLC). 

Nektar will be eligible to receive up to $125 million total once the first patients are dosed in the adjuvant melanoma trial ($25 million), muscle-invasive bladder cancer trial ($25 million), and NSCLC trial ($75 million). 

Now what

The near-term milestone payments won't move the needle for Nektar Therapeutics, which ended September with $81 million in cash and $1.4 billion in short-term investments. But the new development agreement clearly shows that Bristol-Myers Squibb sees value in bempeg. Now investors will need to await the initial results from clinical trials.

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