$AGEN from a Catalyst Trader’s Perspective

Congratulations to everybody that is invested in $ATRS and $ACRX; it’s been a great day for both stocks. Today, we want to take a look at the upcoming catalyst of $AGEN. Just as in the case of $INVA, we noticed that many traders have misinterpreted the company and the implications of this catalyst, so we decided to do give you an extremely simplified yet clear version of the story.

Agenus Inc. ($AGEN) is in the business of researching and developing immunotherapies for cancer patients. Immunotherapy is a form of treatment through which the immune system is strengthened in order to fight a certain type of disease.

Currently, $AGEN does not have any drugs that have been approved, nor any that are in the PDUFA stage. While that may be the case, what they do have is a patent to an adjuvant called QS-21 Stimulon. In medical terms, an adjuvant is a substance which is added to vaccines with the purpose of enhancing the body’s immune response to the vaccine.

$AGEN monetizes its patent by forming partnerships with large pharmaceutical manufacturers and giving them the rights to use QS-21 in the development of their drugs. The drug manufacturers make payments to Agenus at milestones up until the approval of the drug, and pay royalties on sales after the approval of the drug.

Now coming to the ‘catalyst’ next week: it isn’t $AGEN that has a PDUFA date, its the giant $GSK (GlaxoSmithKline). They are manufacturing a drug called Shingrix which is used to treat shingles, a virus which leads to skin lesions (most commonly in the elderly). $GSK is using QS-21 in Shingrix and has therefore been an important income source for $AGEN thus far. However, the approval of the drug isn’t very likely to have a major short-term effect on the stock price of $AGEN. The reason being is that in order to (very creatively) raise capital for the development of its own pipeline drugs, Agenus has given the rights of the future royalties which it would receive from $GSK to Oberland Capital for $100mn. This essentially means that they have taken a $100mn loan from Oberland Capital, and that they will not actually receive any income from QS-21 until the $100mn plus interest has been paid back in full.

The potential approval of Shingrix next week would create a huge long-term revenue stream and partnership opportunity for $AGEN. Additionally, there are several drugs in their pipeline, along with licensing agreements of QS-10 to GSK, Incyte, and Merk. However, it is important for traders to realize that the first $100mn+ of this deal has already been monetized, and that its value will probably not be fully unlocked until a few years from now!

Interested in other catalysts? Check out our BioPharm Catalyst Calendar! We also have similar articles on other catalysts here. Stay tuned for more soon!

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