Blis will research and develop probiotics - naturally occurring bacteria with "built-in" defences against disease-causing bacteria - to protect against upper respiratory tract infections common in infants.
Under the agreement, Nestle will finance research to develop probiotics suitable to use in infant formula up to the clinical trial phase. Nestle will take responsibility for clinical studies.
Blis' chief executive, Barry Richardson, said: "It's a deal which has potential in the short term from the point of view of aiding cashflow and so on, but its most significant potential long-term [benefit] is obviously the commercial revenues."
He was not able to reveal exact figures for cashflow generated by the deal but said up-front payments and milestone payments were "all in reasonable six-figure numbers" on an annual basis.
"A substantial amount of money in the context of Blis' current operation."
Richardson said that initially the project would be managed with existing staff levels but they would be looking to recruit more people in the product development area over the longer term.
"Not only will we be managing this relationship, but because of our current developments offshore I anticipate that we'll be managing more than one of these relationships."
Blis Technologies shares closed up 1.3c at 9c yesterday.
From the April 9, 2007, Prepared Foods e-Flash