Shares of Nektar Therapeutics (NKTR) are on the rise after the company announced that Bristol-Myers Squibb (BMY) is paying $1.85B in cash and share purchase as an upfront payment for a global development and commercialization deal on NKTR-214, a promising cancer drug. Wells Fargo and Mizuho believe that the potential for Nektar to be acquired remains on the table despite this deal. COLLABORATION PACT: Bristol-Myers Squibb and Nektar Therapeutics announced that the companies have executed a global strategic development and commercialization collaboration for Nektar’s lead immuno-oncology program, NKTR-214. Under the collaboration, the companies will jointly develop and commercialize NKTR-214 in combination with Bristol-Myers’ Opdivo and Opdivo plus Yervoy in more than 20 indications across 9 tumor types, as well as potential combinations with other anti-cancer agents from either of the respective companies and/or third parties. NKTR-214 is an investigational immuno-stimulatory therapy designed to selectively expand cancer-fighting T cells and natural killer cells directly in the tumor micro-environment and increase PD-1 expression on those immune cells. Under the terms of the agreement, Bristol-Myers Squibb will make an upfront cash payment of $1B and an equity investment of $850M, buying 8,284,600 shares of Nektar’s common stock at $102.60 per share. Bristol-Myers has agreed to certain lock-up, standstill and voting provisions on its share ownership for a period of five years subject to certain specified exceptions. Nektar is also eligible to receive an additional $1.78B in milestones, of which $1.43B are development and regulatory milestones and the remainder are sales milestones. Nektar will book revenue for worldwide sales of NKTR-214 and the companies will split global profits for NKTR-214 with Nektar receiving 65% and Bristol-Myers 35%. Bristol-Myers Squibb will retain 100% of product revenues for its own medicines. ‘STEEP’ PRICE: Bristol-Myers paid a “shockingly steep” price to lock up rights to Nektar’s NKTR-214, STAT’s Adam Feuerstein wrote following the announcement. While Bristol is paying almost $103 per share for its Nektar stock, a 36% premium to Tuesday’s closing price, Nektar investors may be disappointed with the collaboration agreement given recent rumors that it was considering an outright sale of the company, the biotech reporter pointed out. TAKEOVER NOT OFF TABLE: Also commenting on the deal, Jefferies analyst David Steinberg highlighted that Nektar retains 65% of future profits and ownership of NKTR-214, and therefore can continue to collaborate with other companies. Despite the minimum three-year exclusivity period involving the Opdivo/Yervoy targets, ongoing trials with Roche’s (RHHBY) Tecentriq and Merck’s (MRK) Keytruda may continue, he noted. Additionally, the analyst believes the new agreement with Bristol-Myers will rapidly advance NKTR-214 plus Opdivo and a NKTR-214/Opdivo/Yervoy triplet into Phase 3 clinical studies, and thinks Nektar’s potential to be acquired is not off the table. Steinberg reiterated a Buy rating and $88 price target on the latter’s stock. Meanwhile, Mizuho analyst Difei Yang told investors in a research note of her own that she believes Bristol-Myers’ deal values Nektar at approximately $9B-$10B and may lead to an eventual takeout. She reiterated a Buy rating and $89 price target on Nektar shares. PRICE ACTION: In afternoon trading, shares of Nektar have gained almost 13% to $85.27, while Bristol-Myers’ stock has advanced about 3% to $65.66.