Paradigm Biopharmaceuticals (ASX:PAR) secured a binding term sheet with AVet Health for the co-development and licensing of an oral combination therapy for the treatment of osteoarthritis in companion animals, according to a Monday filing with the Australian bourse.

AVet Health will hold exclusive rights in Australia and New Zealand under the deal, with a first right of refusal for all other markets excluding the US, with the company eligible to receive up to AU$1 million in development milestones, the filing said.

Once the licensing agreement is finalized, the company will receive tiered royalties of up to 20% on net sales and run for 15 years post-registration with the Australian Pesticides and Veterinary Medicines Authority, per the filing.

Paradigm Biopharmaceuticals shares rose 3% in morning trade on Monday.