What happened

Ambitious Israel-based biotech Compugen's (CGEN -1.62%) stock had one of the best days in its history Thursday. The shares rose 14% after the company revealed that a deep-pocketed strategic investor will top its list of institutional stockholders.

So what

Compugen said that it has struck a deal with pharmaceutical giant Bristol Myers Squibb (BMY 2.19%) for the latter to invest $20 million into its equity. In return, Bristol Myers Squibb will receive just over 2.33 million freshly issued Compugen shares. That equates to slightly more than $8.57 per share, which Compugen didn't hesitate to point out is 33% above its stock's closing price on Tuesday.

Piggy bank with stethoscope.

Image source: Getty Images.

The two companies are already collaborators in the laboratory. In two studies, Compugen's COM701 is being tested in combination with Bristol Myers Squibb's Opdivo for the treatment of several types of cancers.

Compugen is convinced that the new deal will bind the companies even more closely together. "Bristol Myers Squibb's strategic investment in Compugen strengthens our relationship and the goal of both companies to take forward our clinical studies conducted under our collaboration in bringing innovative therapies to cancer patients," Compugen quoted its CEO Anat Cohen-Dayag as saying.

Now what

Compugen said that a joint steering committee has been formed to, in its words, "facilitate strategic oversight and guidance for the programs run under the collaboration." This is to function next to an existing joint development committee, which is concerned with the operational aspects of the Compugen/Bristol Myers Squibb partnership.

As with any biotech, much will depend on how Compugen's experimental drugs like COM701 perform in clinical testing. However, Bristol Myers Squibb's willingness to put its money where its mouth is can be seen as a monster vote of confidence in its smaller-partner's pipeline.