NanoBio Corp.’s cold sore technology is hot.

That’s the obvious conclusion after United Kingdom pharmaceutical giant GlaxoSmithKline agreed to pay $14.5 million upfront and up to $40 million in milestone payments in exchange for rights to sell NanoBio’s cold sore treatment.

The deal, which was announced in December, and the company’s venture capital fundraising success have given the University of Michigan spinoff a stockpile of cash allowing it to expand its research capabilities at its Ann Arbor headquarters.

NanoBio won AnnArbor.com Business Review’s 2010 “Deals of the Year” award Friday night in the health care category.

The firm, led by CEO James Baker, who is also director of U-M’s Michigan Nanotechnology Institute for Medicine and Biological Studies, is adding four laboratories and office space totaling an additional 4,300 square feet. The company is also renovating some existing space and will occupy 11,000 square feet when its Green Road expansion is complete, said John Coffey, NanoBio's vice president for business development.

The firm, which plans to add jobs organically to its 20-person team in Ann Arbor, received a tax credit from the Michigan Economic Development Corp. and a tax abatement from the city of Ann Arbor to support its growth.

The company’s expansion is particularly encouraging because it shows that NanoBio is committed to the Ann Arbor region. Successful biotech companies are often recruited to move to the coasts, where management and scientific talent can be more readily available.

Roger Newton, left, presents the Health Care award to Nanobio’s David Peralta and Jim Baker.

Melanie Maxwell | AnnArbor.com

The technology GSK paid for is a topical treatment for cold sores. It leverages nanoemulsion technology, allowing extremely small particles to attack infections that cause cold sores in the mouth. The company reportedly believes its technology might even be able to prevent sores from developing altogether.

GSK, which already markets a cold sore treatment called Abreva, is looking to improve its offering. The firm was one of several major pharmaceutical companies that wanted the chance to market the treatment, NanoBio chief financial officer David Peralta said.

"It's further validation of the technology, further validation of the technology platform and it's brought awareness of the potential," he said.

NanoBio will continue to direct clinical development of the treatment, which is a few years away from the market. The company will also continue work on its other nanoemulsion-based technologies, including a treatment for nail fungus and new vaccine technology.

NanoBio has the cash reserves necessary to continue pursuing its products for a couple years. The firm, which raised $22 million in venture capital in 2009, has raised some $90 million in VC and grants since it Baker founded the company 10 years ago.

Contact AnnArbor.com's Nathan Bomey at (734) 623-2587 or nathanbomey@annarbor.com. You can also follow him on Twitter or subscribe to AnnArbor.com's newsletters.