Personal Finance

Why Agenus Stock Is Soaring Today

Drawing of a rocket taking off from a person's hand set against a dark sky filled with clouds.

What happened

Shares of the clinical-stage cancer immunotherapy company Agenus (NASDAQ: AGEN) rose by as much as 46.2% in early-morning trading today on sky-high volume. The spark? Agenus's shares are marching higher today in response to an immuno-oncology collaboration with biotech heavyweight Gilead Sciences (NASDAQ: GILD) .

According to the press release, the two companies will develop up to five novel therapies. Since blasting off in the first half of today's trading session, Agenus's shares have cooled off to some degree, but remain up by 30% as of 12:00 p.m. EST.

Drawing of a rocket taking off from a person's hand set against a dark sky filled with clouds.

Image source: Getty Images.

So what

Apart from the validation this development deal provides for Agenus's checkpoint inhibitor platform , the company will also receive a much-needed infusion of cash. Per the terms of the agreement, Agenus will pocket a healthy $150 million once this deal closes -- $120 million in upfront cash as well as a $30 million equity investment by Gilead.

This sizable upfront cash payment is key because the company ended the most recent quarter with only $46.3 million in cash and cash equivalents, but a quarterly burn rate often exceeding $25 million over the course of 2018.

In the longer term, Agenus could also take home around $1.7 billion in additional milestone payments and associated fees. That's a staggering amount of future milestone payments for a company with a market cap of only $315 million at the time of writing.

Now what

By virtue of this deal with Gilead, Agenus has seemingly put to bed two key concerns surrounding its value proposition to investors: the validity of management's decision to pursue a therapeutic area -- anticancer checkpoint inhibitors -- that was arguably already oversaturated with experimental candidates, and the company's exceedingly short cash runway.

With both of these headwinds fading in the wake of this deal, Agenus's risk-to-reward ratio has become far more compelling for investors quite literally overnight. Now, the company still has a lot of work to do to ultimately hit pay dirt, but this Gilead partnership is without question a positive development.

10 stocks we like better than Agenus

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Agenus wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of November 14, 2018

George Budwell has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Gilead Sciences. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

AGEN GILD

Other Topics

Stocks

Latest Personal Finance Videos

    #TradeTalks: The Changing E-Commerce Landscape

    e-Commerce Consultant James Thomson joins Jill Malandrino on Nasdaq #TradeTalks to discuss the changing e-commerce landscape, what consumers should prepare for as we head into shopping season and why you shouldn’t do last minute shipping.

    4 days ago

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More