What happened

Wednesday will go down in history for Codex DNA (DNAY 1.05%). The genetics-focused biotech saw its share price rocket 39% higher, thanks to a potentially very lucrative deal with a deep-pocketed pharmaceutical giant.

So what

Codex DNA disclosed in a regulatory filing that it has entered into a research collaboration and license agreement with U.S. pharmaceutical company Pfizer (PFE 1.80%), these days best known as the co-developer of the Comirnaty coronavirus vaccine.

Three strands of DNA.

Image source: Getty Images.

Under the terms of the deal, the two companies will work together to further develop Codex DNA's BioXP, which its maker describes as "the world's only fully automated gene synthesis platform." Once further developed, BioXP will be utilized to manufacture materials that can potentially be used by Pfizer in its products.

For its participation, Codex DNA will receive an upfront payment of $8 million. It's also eligible for up to an additional $10 million in near-term milestone payments, if it meets certain technical milestones for BioXP. Down the road, Codex DNA can earn up to $180 million in sales milestones provided that its technology results in marketable products for Pfizer, in addition to royalty payments. 

Now what

A large-scale cooperation deal with a global pharmaceutical powerhouse is a dream situation for most ambitious biotech companies. In the likely case that Codex DNA can advance BioXP aided by the considerable financial and scientific resources of Pfizer, it stands to benefit greatly from this arrangement. Investors are right to be very excited about it, and immensely hopeful for Codex DNA's future.