What happened

Shares of Immunomedics (NASDAQ:IMMU), a clinical-stage drug developer focused on proprietary monoclonal antibody-based therapies designed to fight cancer, surged as much as 12% on Monday following a business update on Friday that saw a controversial licensing come to a close. Shares of Immunomedics rose nearly 18% on Friday following the news.

So what

Normally when two companies scrap a licensing deal, the smaller one, or the one most perceived to need the capital associated with the up-front licensing fee, takes it on the chin. That's not been the case since Friday's announcement, which ended a licensing pact with Seattle Genetics (NASDAQ:SGEN) over the rights to antibody-drug conjugate IMMU-132, also known as sacituzumab govitecan.

A biotech lab researcher working with a dropper and test tubes.

Image source: Getty Images.

In February, Seattle Genetics inked a deal that would have given $250 million in up-front cash to Immunomedics, as well as dangled a $1.7 billion carrot in various development, regulatory, and sales-based milestones. It was also to take a $57 million equity investment in the company at the time, which worked out to 9.9%.

However, investment fund venBio Select Advisor and a number of investors felt that Immunomedics markedly undervalued its lead asset with the Seattle Genetics deal. Thus, the announcement on Friday that the two were mutually ending their licensing pact came as positive news to Wall Street. Under the termination agreement, all rights to sacituzumab govitecan will be returned to Immunomedics, and Seattle Genetics will hang on to 3 million Immunomedics shares, with warrants to acquire up to 8.7 million shares at $4.90 through the end of this year.

Additionally, the press release notes that Immunomedics has agreed to sell 1 million shares of preferred stock in an effort to raise $125 million in gross proceeds, which will add to the $46 million in cash it had as of the end of the first quarter.

And finally, Immunomedics announced that its CEO was stepping down, as well as its founder, from all current officer positions. Founder David Goldenberg will be sticking around on Immunomedics' board of directors.

The words "What's next?" written on paper, laying on a pile of cash.

Image source: Getty Images.

Now what

Talk about some very big changes afoot at Immunomedics.

Perhaps the only downside to the company's late-week press release was the timeline for filing a biologic license application for sacituzumab govitecan. The company now anticipates a filing for approval in third-line metastatic triple-negative breast cancer in the fourth quarter of this year or perhaps first quarter of next year, compared to a prior timeline of mid-2017. Even with an accelerated approval process, it could be a good year or more before we have any real answers, and if approved before Immunomedics sees any recurring revenue.

There's also a lot of wiggle room with regard to what the Food and Drug Administration will deem "effective." The company's confirmed overall response rate (ORR) in metastatic triple-negative breast cancer of 29% (for 85 patients) should be good enough to give sacituzumab govitecan a real shot at approval. On the other hand, a 43-patient ORR of 16% with a median progression-free survival of 3.7 months may not pass muster.

Nonetheless, with a fresh round of capital and a new management team at the helm, investors are excited about the future. I'll need to see more definitive clinical evidence from IMMU-132, and perhaps other pipeline products, before I'm as excited as Wall Street appears to be.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.