Bristol-Myers Squibb Company (BMY Quick QuoteBMY - Free Report) has exercised its option to extend the term of its existing research collaboration agreement with Five Prime Therapeutics, Inc. for the discovery, development and commercialization of immuno-oncology therapies focused on targets in three undisclosed immune checkpoint pathways.

Bristol-Myers has underperformed the Zacks classified Large Cap Pharmaceuticals industry in the past one year. The stock has lost 9.7% in the past one year, while the industry inched up 0.3%.

Five Prime, on the other hand, massively outperformed the Zacks classified Medical-Biomedical and Genetics industry in the past one year. The stock has surged 33.8% in the past one year, while the industry tumbled 21.3%.

Coming back to the latest news, Bristol-Myers has extended the duration of the collaboration from Mar 2017 to Mar 2018. It will provide additional research funding during the 12-month extension period.

We remind investors that the original agreement was inked in Mar 2014 and focused on two undisclosed immune checkpoint pathways. In Jan 2016, the companies added a third immune checkpoint pathway to the collaboration.

As per the terms of the original agreement, Bristol-Myers will use Five Prime's discovery capabilities to move these three immuno-oncology programs toward the identification of candidates. Moreover, candidates developed against targets in these pathways may be studied either as single agents or in combination with approved Bristol-Myers’ immuno-oncology treatments or others in development. Bristol-Myers will get exclusive, worldwide rights to develop and commercialize the products developed under the collaboration.

Bristol-Myers paid an upfront fee of $20 million to Five Prime and will provide up to $11.6 million in research funding over the course of the entire research term. In addition, Five Prime will be entitled to receive up to $300 million in future development (including $5 million upon filing of the first investigation new drug (IND) application by Bristol-Myers), regulatory and sales-based milestone payments per collaboration product and tiered mid single-digit to low double-digit royalty payments on net sales of each product commercialized by Bristol-Myers.

We note that Bristol-Myers has moved the first antibody under the collaboration to IND-enabling activities.

Bristol-Myers has been teaming up with numerous other companies to evaluate different immune system pathways for the treatment of cancer, which may lead to potential new treatment options – in combination or monotherapy – to help patients fight different types of cancers.

Zacks Ranks & Stocks to Consider

While Bristol-Myers carries a Zacks Rank #2 (Buy), Five Prime is a Zacks Rank #3 (Hold) stock. A couple of other favorably placed stocks in the health care sector are Cambrex Corporation , and Arena Pharmaceuticals, Inc. . Both are Zacks Rank #1 (Strong Buy) stocks. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cambrex’s earnings estimates increased 5.2% for 2017 over the last 60 days. The company posted a positive earnings surprise in three of the four trailing quarters, with an average beat of 19.78%. Its share price was up approximately 27% in 2016.

Arena’s loss estimates for 2017 narrowed by 3% over the last 60 days. The company posted a positive surprise in three of the four trailing quarters, with an average beat of 11.43%.

Zacks’ Best Private Investment Ideas

In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?

Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>