Why Compugen Shares Skyrocketed

Why Compugen Shares Skyrocketed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Compugen , a biotechnology company focused on developing therapeutic and diagnostic biomarkers, skyrocketed by as much as 52% (shares were up nearly 60% in pre-market trading) after announcing a collaboration and licensing agreement with Bayer for two antibody-based cancer immunotherapies.

So what: Under the terms of the deal, Bayer and Compugen will jointly develop the preclinical research program for the compounds in question, with Bayer gaining worldwide rights to the drug upon commercialization (if they make it that far). Compugen will receive $10 million up front and could earn in excess of $500 million in potential milestone payments -- including $30 million in the preclinical stage. Compugen is also eligible to receive a mid-to-high single-digit royalty should either drug be commercialized.

Now what: Compugen effectively killed two birds with one stone here. It locked up an industry development giant to handle the nitty-gritty of marketing and selling either drug if they are approved, and it garnered precious capital that'll help it fund future research endeavors without having to turn to dilutive secondary offerings. With cancer immunotherapy treatments - those that enhance the body's own immune system to help fight cancer - are all the rage at the moment, Compugen could have a shot at stretching its gains even higher depending on its early-stage clinical results down the road.

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The article Why Compugen Shares Skyrocketed originally appeared on Fool.com.

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Originally published