Agenus Inc (NASDAQ:AGEN) shares ripped higher on Thursday in response to the company’s newly announced deal with Gilead (GILD). We will cover the nuts and bolts of the deal below. But the first order of business is to discuss the stock’s price action following the announcement because we would imagine shareholders may be nonplussed by its failure to hold onto powerful gains seen early on in the day.

The big issue to understand is that this news hit in the most extremely risk averse broad market tape on Wall Street since August of 2015 in terms of CBOE total put/call data. Puts were bought en masse at 1.8x calls for most of the day, and the 10-day average of the put/call ratio jumped above 1.2 for the first time in over three years. That is not an environment where any story is going to grab serious bullish attention from big market participants.

Agenus Inc (NASDAQ:AGEN) announced earlier today that it has entered into an immuno-oncology (I-O) partnership with GILD ostensibly focused on the development and commercialization of up to five novel immuno-oncology therapies.

According to the release, “Under the terms of the agreement, Agenus will receive $150 million upon closing, which includes a $120 million upfront cash payment and a $30 million equity investment. The agreement also includes approximately $1.7 billion in potential future fees and milestones. Gilead will receive worldwide exclusive rights to AGEN1423, which has an estimated IND filing by year-end 2018. Gilead will also receive the exclusive option to license two additional programs: AGEN1223 and AGEN2373. Agenus has filed the IND for AGEN1223 and has a planned IND filing for AGEN2373 in the first half of 2019. Agenus will be responsible for developing the option programs up to the option decision points, at which time Gilead may acquire exclusive rights to the programs on option exercise. For one of the option programs, Agenus will have the right to opt-in to shared development and commercialization in the U.S. Gilead will also receive right of first negotiation for two additional, undisclosed preclinical programs.”

The first thing that pops out here is the $150 million. AGEN is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($46.2M against $58.2M, respectively). The next thing that pops out is the $1.7 billion, though that will come with a combination of luck, time, and hard work by talented people, and there are no guarantees there.

In any case, it’s a big deal, literally.

“Gilead is an ideal partner for Agenus for the rapid advancement of our pipeline,” said Garo Armen, PhD, Chairman and CEO, Agenus. “By year end, our discovery platforms will have resulted in six INDs in 2018 and 13 INDs by the 1H2019. Gilead’s established global presence and commitment to disruptive therapies, combined with our track-record in building a broad pipeline in I-O, has the potential to yield breakthrough I-O treatments for patients with cancer.”

However, as noted above, the timing for this announcement couldn’t have been worse from a broad market perspective. Imagine trying out the best fishing bait ever made in a pond where someone just detonated a stick of dynamite. You’re not going to get many bites, but that isn’t a proper reflection of the value of the bait.

The proximal catalyst for the extreme risk-off attitude in the market is a combination of a far less-supportive Fed than the market has generally known in recent years and a clear technical breach of support earlier in the week when the major indices recorded new lows for 2018 just ahead of bonus time. Even before the Fed, we had already seen the biggest overall week of mutual fund and ETF redemptions in market history.

So, we would encourage AGEN investors to avoid worries that the market was reading into the GILD deal as somehow problematic with the weak afternoon action. It looks to us like a great deal. Now, you just need the market to cooperate.

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Agenus Inc (NASDAQ:AGEN) bills itself as a clinical-stage immuno-oncology company that focuses on the discovery and development of therapies that engage the body’s immune system to fight cancer.

The company offers Retrocyte Display, an antibody discovery platform for the identification of fully-human and humanized monoclonal antibodies; SECANT yeast display, an antibody discovery platform used for the generation of novel monoclonal antibodies; and phage display technologies.

It is also developing checkpoint modulating antibody candidates targeting GITR, OX40, TIM-3, LAG-3, and others. In addition, the company develops vaccine programs, including Prophage cancer vaccine candidate; AutoSynVax, a synthetic neo-antigen; and PhosPhoSynVax, a vaccine candidate designed to induce immunity against a class of tumor specific neo-epitopes.

Further, it develops QS-21 Stimulon adjuvant, a saponin-based vaccine adjuvant. Additionally, the company engages in the development of CTLA-4 and PD-1 antagonists; and anti-CTLA-4, CD137, and anti-TIGIT antibodies, as well as various multi-specific antibodies that are under various stages of development.

Agenus Inc. has collaboration agreements with Incyte Corporation, Merck Sharpe & Dohme, and Recepta Biopharma SA. The company was formerly known as Antigenics Inc. and changed its name to Agenus Inc. in January 2011.

Agenus Inc (NASDAQ:AGEN) pulled in sales of $12.8M in its last reported quarterly financials, representing top line growth of 281.1%.

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