What happened

Shares of Selecta Biosciences (NASDAQ:SELB), a clinical-stage biotech company focused on developing proprietary gene therapies to improve patient tolerance to treatments, rocketed higher by as much as 16% during Monday's trading session after the company announced an experimental compound licensing deal with the National Cancer Institute (NCI).

So what

According to today's press release, Selecta Biosciences is in-licensing LMB-100, a next-generation immunotoxin from the Center for Cancer Research (CCR), which is part of the NCI.

LMB-100 contains a particular bacterial toxin that binds to a mesothelin, a protein expressed in a number of cancer types. Selecta believes that LMB-100 can be combined with its proprietary Synthetic Vaccine Particle (SVP) technology to effectively treat select cancer types and allow patients to tolerate treatment for an extended period of time.

Cancer drug research with pipettes and test tubes in a lab.

Image source: Getty Images.

CCR is currently working on completing two dose-finding studies of LMB-100 in patients with mesothelioma and pancreatic cancer. Selecta notes that a preclinical research study conducted last year under the Cooperative Research and Development Agreement with the NCI demonstrated that the administration of SVP-Rapamycin with LMB-100 had the potential to extend LMB-100 use and mitigate tumor activity.

In return for out-licensing LMB-100, the NCI will receive a $50,000 up-front cash payment, and can earn royalties, as well as milestone payments of up to $9.25 million.

Now what

Adding a new compound that's demonstrated promise in preclinical trials for essentially peanuts is a smart move for Selecta, but investors would be wise not to get too carried away with their reaction to the news.

A quick glance at Selecta's pipeline reveals that a majority of its work is currently in the discovery stage of development, which is highly prone to failure. It only has one clinical-stage program at the moment: the combination of SVP-Rapamycin administered with pegsiticase in midstage studies for refractory gout. Even if Selecta sees a number of these discovery programs advance into preclinical or even clinical studies, we're probably talking about a drug developer that's many, many years away from generating recurring revenues.

For the time being, your best move is going to be adding Selecta to your radar and monitoring it safely from the sidelines.

Sean Williams has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.