Shares of

Vertex Pharmaceuticals

(VRTX) - Get Report

rose 8.2% after the drugmaker announced a collaboration with

Merck

(MRK) - Get Report

to develop and commercialize VX-680, a promising cancer fighter.

Under the terms of the agreement, Vertex will receive a $20 million upfront payment from Merck, plus $14 million in research funding over the next two years. VX-680 is expected to enter Phase 1 clinical development for the treatment of cancer sometime this year. Tests in the spring showed that VX-680, an Aurora kinase inhibitor, suppressed tumor growth by blocking the cell-cycle progression in cancer cells.

If all goes well for VX-680, Vertex could receive up to $350 million in milestone payments, with $130 million for VX-680's first oncology indication. Merck will be responsible for the clinical development and commercialization of the drug, and will pay Vertex royalties on product sales.

Just after the start of trading, in reaction to the news, shares of Vertex rose 80 cents to $10.53, while Merck fell 5 cents, or 0.1%, to $47.90.

"This collaboration unites Vertex's drug discovery leadership targeting Aurora kinases with Merck's proprietary molecular profiling technologies and clinical development infrastructure in oncology," said Stephen Friend, senior vice president of basic cancer research at Merck.

With the drug's promise in suppressing Aurora kinases, the companies are conducting a joint-research program to study VX-680's effect on a number of cancer types. The joint research will be funded by Merck, which will lead the clinical development.