Editor's note: A previous version of this article misstated the nature of the partnership between Phyton and Agenus, and implied that Phyton manufactures vaccines. The Fool regrets the error.
Shares of Agenus (NASDAQ:AGEN) soared over 13% higher today after the company announced it had received a $1 million grant from the Bill & Melinda Gates Foundation to develop a new manufacturing process for QS-21, a product added to various vaccines. To get started, the company also announced a partnership with Phyton Biotech that will leverage the new partner's novel plant-based manufacturing technology.
If successful, the effort could increase the availability of QS-21, reduce its cost, and reduce the environmental impact from current product methods, creating the potential to significantly expand the product's market opportunity.
As of 3:11 p.m. EST on Thursday, the stock had settled to a 10% gain.
In technical terms, QS-21 is a saponin-based vaccine adjuvant. That means it's extracted from the soapbark tree native to Chile. As is often the case with rare and high-value natural products, the extraction process is not very efficient. That poses a problem as QS-21 finds a use in more and more vaccines, notably the Shingrix shingles vaccine from GlaxoSmithKline and many others under development at the industry leader.
Enter Phyton Biotech. The company's plant cell fermentation (PCF) technology grows plant cell cultures in steel bioreactors -- similar to brewing beer. PCF makes it possible to leverage high-yield, high-efficiency industrial biotechnology processes for manufacturing various pharmaceutical products that are difficult to produce by other means. A plant-based production process is a great fit for manufacturing QS-21.
While industrial plant cell cultures aren't unique to Phyton Biotech, the company is a leader in the niche manufacturing process. It's currently the world's largest producer of taxanes, a class of chemotherapy drugs, and owns significant global manufacturing capacity.
That said, while the partnership is potentially great news for ensuring a stable supply of QS-21, the material benefit to Agenus appears limited. In January 2018, it sold the royalty rights to the saponin-based vaccine adjuvant for a quick cash injection of $190 million. It could earn up to $40.4 million in milestone payments based on sales figures this year and next, but the PCF-based platform may not be fully ramped up by then. It can take 12 to 24 months to ramp up a new industrial biotech process -- and this one is still being developed.
In other words, today's news doesn't really move the needle for long-term investors, although Agenus is making progress developing its pipeline elsewhere.