Why OncoMed (OMED) Shares Flew Sky High

NEW YORK (TheStreet) -- Shares of OncoMed Pharmaceuticals (OMED) opened sharply higher on news the small-cap biopharmaceutical company was partnering with biotech industry leader Celgene  (CELG). As part of the agreement, the two companies will develop and co-market up to six anti-cancer stem cell medicines in OncoMed's pipeline.

At Tuesday's open, OncoMed shares were up 77.4% to $23.99.

OncoMed will be responsible for early clinical trials and will retain the rights to co-develop, co-commercialize and share in profits. Celgene has an exclusive option to license demcizumab, OncoMed's most advanced product which is in early-stage trials. OncoMed will be eligible to receive 50% of U.S. profits and royalties for sales internationally if demcizumab makes it to market.

As part of the agreement, OncoMed will receive $177.25 million in an upfront payment from Celgene. Celgene will also purchase $22.25 million of OncoMed's shares, giving it an approximate 5% stake in the company.

"By retaining co-development and co-commercialization rights to up to five biologic product candidates in our pipeline, we expect to add commercial capabilities to our core research and development competencies as we continue to build a premier oncology biotherapeutics company," said OncoMed CEO Paul J. Hastings.

Celgene shares fell 0.95% at market open. The Summit, N.J.-based company is up 107.9% since January.

--Written by Keris Alison Lahiff.

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