What happened

After the company announced that Japanese biopharma Astellas (OTC:ALPMY) is licensing its technology, shares in Adaptimmune Therapeutics (NASDAQ:ADAP) are rallying 11.4% at 1:45 EST on Tuesday.

So what

Astellas will work with Adaptimmune to develop T-cell receptors (TCRs), chimeric antigen receptors (CARs), and HLA-independent TCRs derived from stem cells that can be used as off-the-shelf cancer treatments.

In exchange, Adaptimmune gets a much-needed $50 million in upfront money, up to $7.5 million annually in research funding, plus potential milestones and royalties on products developed through the collaboration.

The upfront money and ongoing research funding is particularly important because Adaptimmune's had some past stumbles and is currently facing a bit of a cash crunch. In the third quarter of 2019, the biotech stock's research and development expenses, and general and administrative costs totaled $29.6 million and $10.7 million, respectively, resulting in a net loss of $39.3 million. As a result, management only expected its cash to last until Q3 2020.

Thanks to the new financial wiggle room, Adaptimmune should be better able to continue developing ADP-A2M4, a clinical-stage therapy for synovial sarcoma. In September, management reported a 58% response rate and a 92% disease control rate in an ongoing 12-patient phase 1 study of ADP-A2M4. A phase 2 study in this indication is currently enrolling patients. 

Now what

Astellas will fund the research on each product covered by this collaboration through phase 1. Afterward, the two companies will decide if they want to enter into a co-development and co-commercialization agreement for each product or go it alone via milestone and royalty agreements. 

A man in a suit looking through binoculars.


If they go the co-develop and co-commercialize route, then Adaptimmune can receive up to $73.75 million in development milestones for each product discovered via the collaboration. If Astellas goes it alone, then Adaptimmune can receive up to $147.5 million in milestone payments per product, up to $110 million in sales milestones per product, plus royalties ranging from the mid-single digits to the mid-teens. 

Alternatively, if Adaptimmune goes it alone, then Astellas can receive up to to $147.5 million in milestone payments per product, up to $110 million in sales milestones, and tiered royalties in the mid-single digits to mid-teens.

There's a lot of work to do before we get to that point, though. So, investors are probably better off focusing on Adaptimmune's progress on ADP-A2M4. If it continues to deliver high response rates in larger studies, then Adaptimmune thinks it has a shot at commercializing it as soon as 2022. 

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