NewLink Genetics Corp. (NASDAQ: NLNK) announced that it has entered into an exclusive worldwide license agreement with Genentech, a member of the Roche Group, for the development of NLG919, NewLink’s IDO pathway inhibitor. The companies also entered into a research collaboration for the discovery of next generation IDO/TDO compounds. According to the agreement, NewLink will receive an upfront payment of $150 million, but what is driving such a strong gain in the stock is that this could be more than $1 billion down the road.
NewLink Genetics will be eligible to receive in excess of $1 billion in payments by achieving certain milestones and growing double-digit royalties on potential commercial sales of multiple products by Genentech.
Genentech will also provide research funding to NewLink for support of the research collaboration. NewLink will continue to pursue development activities associated with NLG919 in combination with its HyperAcute vaccine platform. NewLink will keep the option for co-promotion rights for NLG919 and potential next generation IDO/TDO compounds in the United States.
Dr. Charles Link, chairman and chief executive officer of NewLink, said:
This alliance enables us to accelerate and expand development of NLG919 while we continue to advance our other promising clinical and preclinical development programs. Genentech’s oncology development expertise, commercial leadership and history of successful strategic alliances make it an ideal collaborator to bring the potential benefits of NLG919 to patients.
In premarket trading following this announcement, shares were up over 27% to $37.39 from the previous close of $29.35. Right after the open on Monday, NewLink shares were up 19.5% at $35.15. The shares have a consensus analyst price target of $39.00 and a 52-week trading range of $16.00 to $53.48. After this major pop, NewLink’s market cap is right at $1 billion.