Oxford could soon see its first biotechnology drug on the market following a £350m deal with pharmaceutical giant Sanofi-aventis.

Alan Kingsman, chief executive of Oxford Biomedica, said the deal was being described as the biggest ever for British biotechnology.

Sanofi-aventis has agreed to develop and commercialise Biomedica's groundbreaking cancer treatment, TroVax, which uses a horse virus to introduce genes to boost the body's immune system to fight cancer.

It has been evaluated in clinical trials involving more than 180 patients with various forms of cancer, but has yet to pass final tests.

Sanofi-aventis will pay the £350m only if all development and registration targets are met.

Oxford BioMedica will receive an initial payment of £20m and further near-term payments of £16m if an ongoing trial with kidney cancer patients - to be co-funded by the two companies - is successful.

Prof Kingsman said that across the industry, 30 per cent of drugs failed their final phase 3 trials.

He added: "Clearly, Trovax needs to work for us to get the big bucks. But even without it working, there is still a significant amount of money."

He said the company now had enough to develop its other treatments - for Parkinson's and vision loss.

The Oxford company will earn escalating royalties on global sales if TroVax does make it to market, which would be 2009 at the earliest.

Sanofi-aventis will fund all future research, development, commercialisation, including developing TroVax for bowel cancer.

TroVax may also be developed for lung, breast and prostate cancer.

Oxford BioMedica chief executive Professor Alan Kingsman said: "We look forward to working with our new partner to advance the development and commercialisation of TroVax and, importantly, to provide cancer patients with new treatment options."

Oxford Biomedica, founded by Prof Kingsman and his wife Sue, employs about 90 people at Oxford Science Park, and at San Diego in the US.

Earlier this month, Oxford BioMedica paid £16m to buy fellow university spin-off firm Oxxon Therapeutics - producer of a vaccine designed to fight melanoma, the only solid tumour that will not be treatable with TroVax.