Take a look at the one-year chart for Pharmacopeia Drug Discovery Inc.'s stock, and you'll see a steady climb upward with a particular spike recently, when the firm entered a juicy collaboration with GlaxoSmithKline plc.

The overseas pharma giant GSK formed the Center of Excellence for External Drug Discovery and tapped Pharmacopeia as its first partner, pledging up to $98 million in payments if GSK elects to further develop one compound past clinical proof of concept.

Under the terms, Pharmacopeia will cast a wide net for active molecules in a range of therapeutic areas and bring them to proof of concept. GSK holds exclusive options to conduct Phase III trials and commercialize the compounds worldwide, and Pharmacopeia may develop any compounds on which GSK chooses to pass.

The deal brings $15 million in cash payments from GSK, including $5 million upon signing of the agreement and $10 million more related to "performance metrics" that Pharmacopeia's vice president and chief financial officer, Michio Soga, called "well within our control." Best of all, GSK is paying preclinical and clinical milestones of up to $83 million for each program pursued.

Double-digit royalties come with the deal, and GSK is getting warrants to buy Pharmacopeia stock at a 25 percent premium to the trailing 30-day closing price average at the start of the collaboration, although the firms didn't say how many shares might be purchased.

Adam Noah, analyst with Merriman Curhan Ford & Co., reiterated his "buy" rating on Pharmacopeia and wrote in a research note that shares "could trade toward the $8 range" over the next year. Late last week, the stock hovered near $5.20.

Noah wrote that he was "pleased that Pharmacopeia is retaining more of the upside in this [GSK] partnership than in previous agreements. We expect additional partnerships with good terms."

Another came fast. Last Monday, Pharmacopeia entered an exclusive licensing agreement with Bristol-Myers Squibb Co. for worldwide development and commercialization rights to BMS compounds with dual angiotensin and endothelin receptor antagonist (DARA) activity.

Specifically, Pharmacopeia acquired exclusive rights to certain lead and backup DARA development candidates under BMS patents that claim the compounds, and the biotech firm said it planned to start preclinical development right away. Pharmacopeia will provide BMS with a set of compound libraries and provide clinical and regulatory milestone payments, along with royalties.

Since antagonism of either angiotensin or endothelin receptors has been shown to knock down systemic and pulmonary blood pressure, the idea is that compounds with dual capability might show better efficacy. Pharmacopeia's shares dipped a little on the news - even though the firm paid no cash to pick up compounds on which BMS already had spent $20 million before backing off cardiovascular research. Noah wrote in another report that he "conservatively" expects the filing of an investigational new drug application within one year and Phase I data within two years.

"I personally don't like in-licensing, I'm skeptical of it," Noah told BioWorld Financial Watch. "But I think there are always exceptions, and this may be one of the few."

Because the in-licensed compounds might work in not only the growing hypertension market but also against such conditions as diabetic nephropathy and congestive heart failure, Pharmacopeia "should have multiple avenues to monetize these assets" when Phase II studies are finished, Noah said, adding that the hypertension indication most likely would be out-licensed after Phase II, with Pharmacopeia pulling down milestones in the range of $250 million to $500 million and double-digit royalties.

Pharmacopeia probably is shelling out less than $25 million in milestones to BMS, with single-digit royalties, which means "impressive returns" could appear in two or three years, Noah said.

Wall Street responded to the BMS arrangement with a "slightly negative overreaction," he said. "People didn't see the details of the deal." Pharmacopeia's stock jumped almost 19 percent on word of the GSK collaboration, and "the knee-jerk reaction [to the BMS news] was, let's take some money off the table," Noah said.

Because work has already been done with their mechanisms of action, the BMS compounds don't represent a shot in the dark, he said. And Pharmacopeia's chief scientific officer, David Floyd, came to the firm in 2005 after many years as BMS' worldwide head of chemistry, so Pharmacopeia might have had some added understanding of what was offered in the deal.

Ultimately, though, Pharmacopeia's main value lies in the discovery machinery, Noah said.

"That's still the iceberg under the water - what they've been doing for pharma all these years and now are doing for themselves," he said, adding that the BMS deal "gives them something to talk about short term in the clinic. It's ironic that companies have to in-license something to get visibility."

Marketed blood pressure therapies include beta blockers, angiotensin converting enzyme (ACE) inhibitors, diuretics, angiotensin receptor blockers, calcium channel blockers, central alpha receptor agonists, peripheral alpha antagonists and vasodilators. The condition affects about 50 million people in the U.S. and about 1 billion people worldwide, but most patients need to experiment and combine drugs to get benefits.

Another approach being tried against the condition involves nitric-oxide donating drugs, the subject of a deal in March worth up to $351.4 million for the French firm NicOx SA, including €€9.2 million in an up-front payment from Merck & Co. Inc., as well as up to €€279 million (US$340.2 million) in potential milestone payments. The two firms' relationship began as a research collaboration in the summer of 2003.

Less inspiring news in pulmonary arterial hypertension came the same month for Encysive Pharmaceuticals Inc., which lost almost half its stock on news that the FDA might require additional clinical trial work for the pulmonary arterial hypertension drug Thelin. The company filed its new drug application in May. The only approved endothelin antagonist for PAH is Tracleer, from the Swiss firm Actelion Ltd., approved in late 2001.

Myogen Inc.'s oral, Phase III ambrisentan goes after the same target in PAH and is described specifically as a non-sulfonamide, propanoic acid-class, type-A selective endothelin receptor antagonist - which bagged a potential $100 million ex-U.S. marketing deal with GSK, also in March. That agreement came with a three-year, renewable agreement for Myogen to sell GSK's intravenous PAH therapy, Flolan, in the U.S.

Could BMS' compounds work against PAH?

"It's possible, but I don't think anybody knows," Noah said. "[Pharmacopeia] isn't talking about it. They're very careful about the indications and just talking about hypertension," an indication in which the Phase I studies can be "fairly short, cheap and fast" - another bonus.

Although Pharmacopeia seems to be "suddenly doing everything right," Noah said, the apparent overnight success has been building steadily. Other firms are likely to enjoy similar success in the near term. Among them he named Arena Pharmaceuticals Inc., Array BioPharma Inc., and Neurogen Corp.

"They have true discovery capabilities, vs. just modifying something that's already been approved," he said, acknowledging the widespread investor wariness about smaller firms.

"If the [drug-discovery] machinery is messed up, the whole thing is a house of cards."