Here's Why Agenus Shares Rose as Much as 13.5% Today

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What happened

Shares of Agenus (NASDAQ: AGEN) soared over 13% higher today after the company announced a vaccine manufacturing partnership with Phyton Biotech for QS-21, one of Agenus' vaccine products. The partnership comes after the duo successfully concluded a proof-of-concept project made possible by a $1 million grant from the Bill & Melinda Gates Foundation.

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The collaboration will focus on developing a new manufacturing process for QS-21, a plant extract added to various vaccines to make them more potent. The process is based on a novel technology platform wielded by Phyton Biotech. If successful, the effort could increase the availability of QS-21 and reduce its cost, creating the potential to significantly expand its market opportunity.

As of 3:11 p.m. EST on Thursday, the stock had settled to a 10% gain.

So what

In technical terms, QS-21 is a saponin-based vaccine adjuvant. That means it's extracted from the soapbark tree native to Chile. As is often the case with rare and high-value natural products, the extraction process is not very efficient. That poses a problem as QS-21 finds a use in more and more vaccines, notably the Shingrix shingles vaccine from GlaxoSmithKline and many others under development at the industry leader.

Enter Phyton Biotech. The company's plant cell fermentation (PCF) technology grows plant cell cultures in steel bioreactors -- similar to brewing beer. PCF makes it possible to leverage high-yield, high-efficiency industrial biotechnology processes for manufacturing various pharmaceutical products that are difficult to produce by other means. A plant-based production process is a great fit for manufacturing QS-21.

While industrial plant cell cultures aren't unique to Phyton Biotech, the company is a leader in the niche manufacturing process. It's currently the world's largest producer of taxanes, a class of chemotherapy drugs, and owns significant global manufacturing capacity.

Now what

That said, while the partnership is potentially great news for ensuring a stable supply of QS-21, the material benefit to Agenus appears limited. In January 2018, it sold the royalty rights to the saponin-based vaccine adjuvant for a quick cash injection of $190 million. It could earn up to $40.4 million in milestone payments based on sales figures this year and next, but the PCF-based platform may not be fully ramped up by then. It can take 12 to 24 months to ramp up a new industrial biotech process -- and this one is still being developed.

In other words, today's news doesn't really move the needle for long-term investors, although Agenus is making progress developing its pipeline elsewhere.

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Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.