Astellas Pharma and San Diego-based biotech Ambrx have entered into a potential $300 million collaboration to discover and develop antibody drug conjugates, or ADCs, in oncology.

Under the terms of the deal, Ambrx will use its technology to create optimized therapeutic ADC candidates against targets selected by the Japanese Pharma. Astellas will have worldwide rights to develop and commercialize the ADCs for cancer and will pay Ambrx $15 million upfront plus up to $285 million in near and long-term research, development, regulatory and sales-based milestones for an undisclosed number of targets for ADCs in oncology.

ADCs permit the delivery of drugs to targeted tumor cells and allow for increased payloads with less fear of toxicity to surrounding tissue. ADC-based drugs represent a growing area of interest within the industry since Seattle Genetics’ won approval for its lymphoma drug Adcetris and more recently Roche’s breast cancer drug Kadcyla won approval.

Kadcyla was developed by Roche’s Genentech using ImmunoGen’s ADCs, which is a first generation antibody drug conjugate technology. However, first generation technologies used to create ADCs produce a mixture of therapeutic candidates, which results in less-than-optimal safety and efficacy properties, Ambrx CEO Lawson Macartney told The Burrill Report in an email. In contrast, Ambrx’s technology enables the site-specific linkage of the antibody and drug, creating a best-in-class ADC, which is achieved through the insertion of a non-natural amino acid, which enables control over the site of conjugation, says Macartney. In the preclinical setting, Ambrx ADCs have demonstrated high potency and a wider therapeutic index than ADCs created using conventional non-specific conjugation, he said.

Ambrx will work with researchers from Astellas’ Agensys subsidiary. “Ambrx offers a novel approach to allow creation of site-specific and highly stable conjugations that have the potential to further optimize drug delivery to tumor cells,” says David Stover, senior vice president and Agensys site head.

Ambrx’s struck a similar deal with Merck in June 2012, including a $15 million upfront payment and milestones of up to $288 million to discover antibody drug conjugates against pre-specified targets selected by Merck. It also has collaborations with Bristol-Myers Squibb, and Eli Lilly, among others. The company is also developing its own pipeline that includes a long-acting growth hormone that recently successfully completed mid-stage clinical trials.

Ambrx says it will continue to focus on forming partnerships involving its technology with major drug developers, as well as advancing its internal pipeline candidates.