It's a fact of life that most small biopharmaceutical companies will have to find larger pharmaceutical partners to help them commercialize their drugs. Not knowing who this partner will be or on what terms a deal will be signed can be a great source of angst for those who invest in these small drug companies. Cell Therapeutics (NASDAQ:CTIC) removed this veil of uncertainty today with a partnership announcement for its lead drugs with Novartis (NYSE:NVS).

In a deal worth up to $285 million if Cell Therapeutics can hit all regulatory and sales milestones, Novartis will get marketing rights to CTI's lead chemotherapy compound, Xyotax, and retains an option on its late-stage drug, pixantrone, which is in clinical testing for lymphoma.

This deal with Novartis comes at a propitious time for CTI, because its cash levels have been getting fairly low due to all the clinical trials the company is running. In the first half of 2006, the company burned through $21 million, leaving it with only $48 million left in the bank.

Xyotax is currently in phase III trials for non-small cell lung cancer. The drug is a reformulated version of Bristol-Myers Squibb's (NYSE:BMY) former chemotherapy blockbuster, Taxol. CTI hopes that Xyotax will prove to be a safer and possibly more effective form of Taxol.

At its peak in 2000, Taxol brought in $1.6 billion worldwide to Bristol-Myers before generic competition started to take its toll on sales. Due to heavy generic competition, Taxol sales have declined rapidly to just $296 million in the first half of 2006. If Xyotax can prove to be superior to Taxol, then the drug should be able to command a premium price and still compete effectively against generic Taxol.

This deal was doubly important for CTI because the company has been saddled with $176 million of convertible debt by the end of this most recent quarter. By giving up a large slice of potential sales of its lead drugs to Novartis, and accepting a small royalty rate, CTI will be able to retire some of this debt and be in better financial shape should Xyotax eventually get regulatory approval in the U.S. or EU.

Absent Xyotax and pixantrone, CTI doesn't have much of a drug pipeline to speak of, since it only has one other drug past the pre-clinical stage. That's OK, though, since Xyotax holds the possibility of being successful not only in non-small cell lung cancer but in a host of other cancers as well. This deal with Novartis provides CTI with the time the company needs to see if Xyotax is a potential blockbuster or not.

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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy .