What happened

Sangamo Therapeutics (NASDAQ:SGMO) is up 20% at 11:43 a.m. EST after announcing a collaboration with Kite, which was acquired by Gilead Sciences (NASDAQ:GILD) last year. The duo plans to use Sangamo's zinc finger nuclease technology to edit DNA to develop cell therapies to treat cancer, which is Kite's specialty.

So what

Kite's current treatments -- chimeric antigen receptor (CAR) and T cell receptor (TCR)-engineered cell therapies -- take immune cells from patients, train the T cells using CAR or TCR to attack the cancerous cells, and then reintroduce the cells to the patient. Since the cells are from the same patient, it's considered an "autologous" therapy.

A female technician in a lab coat standing over a seated male patient and preparing him for an infusion

Image source: Getty Images.

Sangamo and Kite are hoping to develop "allogeneic" cell therapies that are made from healthy donor cells or from renewable stem cells. The treatments could be premade and available for infusion into cancer patients as soon as the decision to treat with cell therapy is made. It should also be cheaper to manufacture an allogenic cell therapy compared to an autologous one.

The deal between Sangamo and Gilead covers 10 or more products and includes a $150 million up-front payment to Sangamo and up to $3.01 billion in potential milestone payments. Like most drug-company partnerships, the milestones weren't spelled out, but the companies noted that the milestones are tied to successfully reaching certain research, development, regulatory, and commercialization events. Sangamo also gets undisclosed tiered royalties on products that result from the collaboration. Gilead is covering all the expenses for development, manufacturing, and commercialization of the products and will reimburse Sangamo for its agreed-upon expenses.

Now what

This is a good deal for Sangamo and certainly worthy of today's jump in the stock price. The $150 million will help pad its coffers to fund its internal pipeline of hemophilia and other treatments. It's hard to put a value on the large milestone payment, but presumably at least some of that $3 billion will flow through to Sangamo eventually.

The endorsement of Sangamo's technology by Gilead should also give investors some comfort, although considering that Sangamo has already done deals with such big names as Pfizer, the backing by Gilead is really just icing on the cake.

Brian Orelli 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.