Nabi Biopharmaceuticals, the first firm ever to enter Phase III testing of an antinicotine vaccine, inked a deal potentially worth $500 million, including $40 million up front, granting GlaxoSmithKline Biologicals a worldwide option to exclusively in-license NicVAX and develop follow-on next-generation nicotine vaccines using Nabi's intellectual property.

Investors reacted Monday by pushing shares of Rockville, Md.-based Nabi (NASDAQ:NABI) up 26.4 percent, or 94 cents, to close at $4.50.

Nabi CEO Raafat Fahim said the partnership not only gives his company a financial boost, but "it gives us also the respect and prestige that comes with not just any big pharma, but the right big pharma for this product."

Nabi recently received a $10 million grant from the National Institute on Drug Abuse (NIDA) to fund the first of two Phase III studies, which got under way earlier this month, testing NicVAX as a treatment for nicotine addiction and as a therapy to prevent smoking relapse. (See BioWorld Today, Nov. 4, 2009.)

The GSK deal, Fahim said, will help make certain that Nabi achieves NIDA's expectations of completing Phase III testing and the ultimate objective of "getting us to market fast to help those poor individuals who are addicted to smoking.

"NIDA wanted us to go to the finish line, not just do a Phase III," he added.

NicVAX works by stimulating the immune system to produce antibodies that bind to nicotine in the bloodstream, making the nicotine molecule too large to cross the blood-brain barrier and enter the brain. That ultimately prevents the pleasure that keeps people addicted to smoking and other nicotine use.

Unlike nicotine replacement treatments, NicVAX does not enter the brain, and therefore, does not have the same adverse psychological effects, such as depression or suicidal ideation, associated with other treatments.

Along with $40 million at closing, Nabi stands to gain more than $500 million in option fees and regulatory, development and sales milestones for NicVAX and any follow-on antinicotine vaccines, Fahim told BioWorld Today.

Nabi also could bank double-digit royalties on global sales of NicVAX, plus royalties on global sales of any next-generation antinicotine vaccines developed by GlaxoSmithKline Biologicals, a subsidiary of London-based GSK.

Fahim noted that the royalties would be higher for NicVAX - the company's homegrown product - than for the second-generation products developed by GSK. But, he added, those royalties will all "continue for a long period of time" to be paid to Nabi, assuming successful development and commercialization of the vaccines.

GSK could elect to exercise its option to further develop and commercialize NicVAX as soon as the deal closes, which is expected to occur in the first quarter of 2010, or wait until the first Phase III results are available, which Fahim said was anticipated in the second half of 2011.

Independent of whether GSK exercises its option to in-license NicVAX, the pharma giant plans to develop a next-generation antinicotine vaccine based on Nabi's intellectual property, combined with GSK's own technology, Fahim noted.

Given GSK's broad expertise in the vaccines market, which includes vaccines for influenza, including the H1N1 flu, hepatitis A and B, the human papillomavirus and several diphtheria-tetanus-pertussis products, plus the company's success with smoking cessation products like NiQuitin, NicoDerm CQ, Nicorette, Nicabate and the Commit lozenge, the UK drugmaker was the "perfect partner" for Nabi's antinicotine program, Fahim said.

"They understand these areas just as well as anybody else," he said, adding that GSK's expertise also "improves the risk profile" of NicVAX and any second-generation products developed.

Nabi already had an ongoing relationship with GSK, he noted. The company earlier this month completed the sale of PentaStaph (pentavalent S. aureus vaccine) and related assets to GSK for $47.5 million under a deal announced in August.

Under the PentaStaph agreement with GSK, Nabi will receive cash payments of $21.5 million, of which $20 million is associated with the PentaStaph transaction close, $1 million associated with the sale of a separate preclinical program for a vaccine against S. epidermedis, plus $500,000 in reimbursement for license fees and clinical materials previously manufactured for use in the firm's Phase I trial. The company also will receive $26 million in future milestone payments.

As with most deals, Fahim said the NicVAX negotiations had been in the works for "quite a bit of time."

Nabi's board and management are still determining the firm's development path and business strategy going forward after GSK takes control of NicVAX, the Maryland biotech's lead product, Fahim said.

For GSK, said spokeswoman Alexandra Harrison, the NicVAX deal helps the pharmaceutical maker meet one of its main strategic priorities set in 2008 of growing a diversified global business.

The Nabi partnership, she told BioWorld Today, is a "tangible demonstration" of that goal.