What happened

Shares of the clinical-stage cancer immunotherapy company Agenus (NASDAQ:AGEN) rose by as much as 46.2% in early-morning trading today on sky-high volume. The spark? Agenus's shares are marching higher today in response to an immuno-oncology collaboration with biotech heavyweight Gilead Sciences (NASDAQ:GILD).

According to the press release, the two companies will develop up to five novel therapies. Since blasting off in the first half of today's trading session, Agenus's shares have cooled off to some degree, but remain up by 30% as of 12:00 p.m. EST. 

Drawing of a rocket taking off from a person's hand set against a dark sky filled with clouds.

Image source: Getty Images.

So what

Apart from the validation this development deal provides for Agenus's checkpoint inhibitor platform, the company will also receive a much-needed infusion of cash. Per the terms of the agreement, Agenus will pocket a healthy $150 million once this deal closes -- $120 million in upfront cash as well as a $30 million equity investment by Gilead.

This sizable upfront cash payment is key because the company ended the most recent quarter with only $46.3 million in cash and cash equivalents, but a quarterly burn rate often exceeding $25 million over the course of 2018. 

In the longer term, Agenus could also take home around $1.7 billion in additional milestone payments and associated fees. That's a staggering amount of future milestone payments for a company with a market cap of only $315 million at the time of writing.  

Now what

By virtue of this deal with Gilead, Agenus has seemingly put to bed two key concerns surrounding its value proposition to investors: the validity of management's decision to pursue a therapeutic area -- anticancer checkpoint inhibitors -- that was arguably already oversaturated with experimental candidates, and the company's exceedingly short cash runway.

With both of these headwinds fading in the wake of this deal, Agenus's risk-to-reward ratio has become far more compelling for investors quite literally overnight. Now, the company still has a lot of work to do to ultimately hit pay dirt, but this Gilead partnership is without question a positive development. 

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.