Collaborations have abounded in the red-hot health care sector, specifically the biotech industry, over the past year. Meet the newest collaboration. Amgen Inc. (NASDAQ: AMGN) and Xencor Inc. (NASDAQ: XNCR) entered into a research and license agreement to develop and commercialize novel therapeutics in the areas of cancer immunotherapy and inflammation.

Ultimately, this collaboration will bring together Amgen’s capabilities in target discovery and protein therapeutics with Xencor’s XmAb bispecific technology platform. However the agreement doesn’t stop there. The collaboration includes molecular engineering by Xencor and the preclinical development of bispecific molecules for five programs proposed by Amgen.

Under the terms of the agreement, Amgen will be fully responsible for preclinical and clinical development and commercialization worldwide. Also Xencor will receive a $45 million upfront payment and up to $1.7 billion in clinical, regulatory and sales milestone payments in total for the six programs.

Separately, Xencor is eligible to receive mid to high single-digit royalties for candidates directed against Amgen’s targets, and high single to low double-digit royalties for Xencor’s CD38 bispecific T cell engager.

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Sean E. Harper, M.D., executive vice president of Research and Development at Amgen, commented on the collaboration:

We are pleased to be joining forces with Xencor to expand our immuno-oncology and inflammation position by leveraging Amgen’s antibodies and Xencor’s bispecific antibody platform. We are especially excited about the T cell engaging bispecific antibody directed against CD38, which complements Amgen’s BiTE platform, while growing our hematology and oncology portfolio that includes two bispecific T cell engager antibodies, BLINCYTO (blinatumomab) and AMG 330, as well as Kyprolis (carfilzomib) for relapsed multiple myeloma.

Bassil Dahiyat, Ph.D., president and CEO of Xencor, said:

Amgen, which has pioneered the use of bispecific antibodies, has chosen to access our XmAb bispecific technology for its robustness, long half-life, and the plug and play ease-of-development of our platform. This opportunity expands the reach of our technology with a partner that has proven experience in bispecifics and immuno-oncology. Xencor will continue to focus on its internal programs including its immuno-oncology XmAb bispecifics, XmAb14045 in acute myeloid leukemia and XmAb13676 in B-cell malignancies, which are expected to enter clinical development in 2016.

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Shares of Xencor were up about 18% to $18.84 late Wednesday morning. The stock has a consensus analyst price target of $27.25 and a 52-week trading range of $9.00 to $24.82.

Amgen shares were down less than 2%, at $149.31 in its 52-week range of $127.67 to $181.81. The consensus price target is $186.00.

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