Why Applied Genetic Technologies Corporation Stock Jumped Today

What: Shares of the clinical-stage biopharmaApplied Genetic Technologies Corporation rose by 23% today on a huge surge in volume after the company inked a broad research collaboration with biotech giant Biogen to develop multiple gene therapy treatments for rare diseases of the eye. Per the terms of the agreement, Biogen will pay$124 million upfront, which includes a $30 million investment in Applied Genetic shares. If any products make it to the commercial stage, Applied Genetic would also be eligible to receive royalty payments in the range ofsingle-digits to the mid-teens percentage-wise on annual net sales.

So what: This agreement is obviously a much bigger deal for Applied Genetic than Biogen, but it does signal that Biogen is deeply interested in diversifying its clinical pipeline. Specifically, this collaboration gives Biogen a foot in the door in terms of rare diseases of the eye, as well as gene therapy. Regarding Applied Genetic, this tiny biopharma could receive milestone payments in excess of $1 billion, if its gene therapy platform bears fruit.

Now what: The two companies agreed to a rather fluid deal that allows Applied Genetic to opt-in in terms of sharing development costs and profits after the initial clinical data are a known entity. Applied Genetic will also be responsible for shepherding these experimental products through the clinical trial process, with Biogen playing a supportive role during this process.

This relatively unknown gene therapy company is thus gaining big time partner that's willing to help build out its clinical pipeline, but it's also retaining a fairly substantial level of autonomy over the conduct of its clinical program at the same time. All told, Applied Genetic is definitely worth a deeper look following this licensing agreement with a top dog in biotech, but you may not want to buy shares until its therapeutic platform matures a bit further.

The article Why Applied Genetic Technologies Corporation Stock Jumped Today originally appeared on Fool.com.

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