What happened

Shares of the small-cap biotech Agenus (NASDAQ:AGEN) reversed its year-long down trend by gaining a stately 20.1% last month, according to data from S&P Global Market Intelligence. What sparked this marked turnaround?

As the company didn't release any major clinical or regulatory news last month, Agenus' shares appear to have gotten a boost mainly from the stronger-than-expected launch of GlaxoSmithKline's (NYSE:GSK) shingles vaccine Shingrix.

A man celebrating while sitting in front of a laptop.

Image Source: Getty Images.

Agenus contributed its proprietary immune adjuvant QS-21 Stimulon to the vaccine's development, making the biotech eligible to receive royalty payments from the vaccine's sales. These forthcoming royalty payments, however, have already been partly monetized via a licensing deal with HealthCare Royalty Partners that went into effect earlier this year. 

So what

Agenus is facing a serious cash crunch. The biotech, after all, has been losing over $25 million per quarter of late, which is a rather worrisome burn rate for a company that only had $43.2 million remaining in cash and cash equivalents at the end of the second quarter. As such, investors were probably right to cheer the strong commercial performance of Shingrix -- even though the company is unlikely to receive any additional milestone payments near-term due to its licensing agreement with HealthCare Royalty Partners. 

Now what

If Agenus wants to continue advancing its broad pipeline of checkpoint inhibitors toward a regulatory filing by 2020 as planned, it will undoubtedly need to raise a significant chunk of capital soon. Unfortunately, the biotech's immuno-oncology partnerships with Incyte Corp and Merck & Co. simply won't yield enough in terms of milestone payments over the next few quarters to achieve this goal. 

As a result, Agenus may have to resort to a secondary offering to shore up its balance sheet within the next three to four months at the latest. So, while this small-cap biotech could be a big winner in the long run, investors might want to wait until the company has addressed its dwindling cash position before buying shares.