What: Shares of Five Prime Therapeutics (NASDAQ:FPRX), a clinical-stage biotechnology company, rose by more than 65% today on tremendous volume after the company announced a new worldwide license and collaboration agreement with Bristol-Myers Squibb (NYSE:BMY) for its colony stimulating factor 1 receptor (CSF1R) antibody program. According to the press release, this agreement replaces the two companies' current collaboration agreement regarding the development of Bristol's PD-1 immune checkpoint inhibitor Opdivo in combo with Five Prime's FPA008 across six tumor types.

So what: Although an extended research agreement with a Big Pharma like Bristol is noteworthy in and of itself for a tiny biotech, the real reason Five Prime's shares are screaming higher today is because the company will receive an upfront payment of $350 million, per the terms of this deal. Put plainly, this upfront payment isn't far off of where Five Prime's market cap stood upon yesterday's close:

FPRX Market Cap Chart

FPRX Market Cap data by YCharts.

Now what: Per the terms of the deal announced today, Five Prime is eligible to receive up to $1.74 billion in total milestone payments and double-digit royalties on future sales of any products emerging from this collaboration. This small-cap biotech could be looking at a huge upswing in revenue during the next few years if this partnership goes according to plan.

While I don't have any deep insight into this mystery, it does seem to indicate that Bristol isn't entirely convinced that Five Prime's CSF1R antibody program can ultimately deliver the goods. As such, investors may want to exercise caution with Five Prime following this huge upward move.

I think the question on most investor's minds right now is: Why didn't Bristol simply buy Five Prime? Presumably, Bristol could have landed Five Prime lock, stock, and barrel for perhaps just a few hundred million more than the upfront portion of this deal -- and a buyout would save them hundreds of millions more if the clinical and regulatory milestones are met by Five Prime's CSF1R antibody program.