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Why Lineage Cell Therapeutics Stock Popped Today

What happened?

Shares of clinical-stage biotech Lineage Cell Therapeutics (NYSEMKT: LCTX) rose sharply on Tuesday after the company announced a worldwide license agreement with privately held biotech Immunomic Therapeutics. Lineage Cell Therapeutics' stock rose as much as 10.6% but closed the day by 4.6%.

So what

Per the terms of the deal, Lineage Cell Therapeutics and Immunomic Therapeutics will collaborate to develop a potential cancer therapy derived from Lineage's VAC allogeneic cancer immunotherapy platform. While the two entities will initially work together on this project, Immunomic Therapeutics will, at some point, assume full responsibility for the clinical development and commercialization of the candidate.

Lineage Cell Therapeutics will receive an upfront payment of $2 million in the first year, with additional development and commercial milestone payments reaching up to $67 million. Lineage Cell Therapeutics will also be eligible to receive royalties of up to 10% of the sales of this product.

Image source: Getty Images.

Now what

Lineage Cell Therapeutics doesn't currently have any products on the market, and none of its candidates are even close to commercialization. As such, the company generates little by way of revenue. During the fiscal year 2020, the company recorded total revenue of $1.8 million, mostly from grants and royalties.

Thanks to this deal with Immunomic Therapeutics, the biotech company should be able to improve its top line in the coming quarters, which will help it fund its clinical programs. These factors explain why investors bid up shares of Lineage Cell Therapeutics today.

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