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Shares in Montreal cancer drug developer Repare Therapeutics Inc. RPTX-Q soared Thursday after the company announced a deal with pharmaceutical giant F. Hoffmann-La Roche AG that could be worth north of US$1-billion to the Canadian startup.

Repare’s share price increased by more than 40 per cent on the Nasdaq exchange after the company revealed late Wednesday it had entered into a worldwide licence and collaboration agreement with Roche to develop and commercialize the Montreal company’s drug camonsertib, also known as RP-3500.

RP-3500 is the lead molecule of a series of “precision oncology” drugs Repare is developing that attack genetic defects in cancerous tumours, preventing toxic cells from repairing their DNA. The goal is to treat smaller patient groups based on their genetic makeup, with the hope the drugs will respond more effectively while generating fewer side effects.

Repare will receive US$125-million upfront from Roche and up to US$1.2-billion if its drug reaches a series of clinical, regulatory, commercial and sales milestones. Repare also stands to earn royalties on sales if the drug makes it to market.

“Roche is excited about the emerging DNA damage response field, which represents a promising new approach to precision oncology,” James Sabry, global head of pharma partnering with the Swiss giant, said in a release. He called RP-3500 “a new potential treatment option for patients with significant unmet needs across a range of tumor types.”

The deal is a bright spot for a biotechnology sector that has suffered severe stock price devaluation in the past few quarters in Canada and elsewhere, mirroring the broad selloff of technology stocks in the face of rising interest rates and inflation and economic uncertainty. With Thursday’s gains, Repare shares are still trading at about a third of their 52-week high price of US$35.75. It closed Thursday at US$12.67, up 44.8 per cent.

Bloom Burton analyst David Martin nicknamed RP-3500 “the Rodney Dangerfield of oncology drugs” in an April research report, arguing that, like the late comic, the drug “got no respect” despite promising early clinical data from human trials on the drug published in the past year.

In the face of investor indifference to a potential “blockbuster drug,” Mr. Martin said in an interview that “a licensing deal like this is a very nice monetizing event, especially given the company’s pipeline behind RP-3500″ and the company’s drug discovery technology. He added it was one of the larger product licensing deals across the sector in the past two years and one of the largest ever in Canada.

Repare chief executive officer Lloyd Segal said in an interview the Roche partnership marked an important moment for the company, providing validation and a deep-pocketed partner that could shepherd the drug through large-scale trials during what could be a prolonged period of bleak capital markets activity.

“It’s fair to say that for the foreseeable future the capital markets are shut down for even the most promising biotech companies,” he said.

The cash injection provides Repare with two years’ worth of operating funds, allowing it to develop its other early-stage drugs. Repare had US$305-million in cash and equivalents as of March 31.

The company was founded in 2016 by research scientists from New York University and Toronto’s Mount Sinai Hospital. Mr. Segal, a veteran Canadian biotech entrepreneur whose wife Clarissa Desjardins is also an accomplished entrepreneur in the sector, joined Repare after serving as an entrepreneur-in-residence with San Francisco’s Versant Ventures, which created Repare. He led the company through a successful initial public offering in 2020, which at the time was the largest by a Canadian biotech firm.

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