What happened
Ginkgo Bioworks (DNA 10.60%) is having a strong showing today. Specifically, the synthetic biology company's shares were up by 10.1% on heavy volume as of 9:57 a.m. ET Wednesday morning.
What's behind this double-digit uptick? Ahead of the opening bell, Ginkgo Bioworks announced an RNA-based drug development collaboration with biopharma heavyweight Pfizer (PFE 0.55%).
So what
Per the terms of the deal, Ginkgo Bioworks will receive an upfront cash payment (amount undisclosed at the time of this writing), along with the right to research fees and development and commercial milestone payments, for a total potential value of up to $331 million for three programs. The synthetic biology pioneer is also eligible to receive royalty payments on any commercial-stage products arising from the collaboration, although the exact details weren't released on this point, either.
What's the big deal? RNA therapeutics isn't exactly a new field, but it has attracted significantly more attention from major biopharmaceutical companies since the successful development of several mRNA-based vaccines for COVID-19. So in a sense, this collaboration isn't all that surprising.
Still, it is definitely good news for Ginkgo Bioworks shareholders. After all, shares of the synthetic biology company have been going through a protracted down period due to the market's aversion to cash-flow-negative biotech companies over the past 24 months.
Now what
Is this collaboration agreement a good reason to buy the biotech's shares? Without more information about the indications being targeted or the timelines involved, it is hard to say. Having Pfizer as a partner is definitely a positive, but the actual value proposition of this deal isn't altogether clear. In other words, prospective investors probably shouldn't rely on this news when deciding whether to buy shares.
