Precision BioSciences shares surged 10.7% on Nov. 20 as the biotechnology company along with Eli Lilly (LLY) announced a research collaboration and exclusive license agreement to utilize Precision’s ARCUS genome editing platform for the research and development of potential in vivo therapies for genetic disorders. The initial focus of this partnership will be on Duchenne muscular dystrophy (DMD) and two other undisclosed gene targets.
Under the terms of the agreement, Precision (DTIL) will receive an upfront cash payment of $100 million and an equity investment of $35 million in its common stock from Eli Lilly. It will also be eligible to receive up to $420 million in potential development and commercialization milestones per product. In addition, it will be entitled to tiered royalties ranging from mid-single digits to low-teens on product sales if Eli Lilly successfully commercializes a therapy from the collaboration.
Precision will lead pre-clinical research and IND-enabling activities, with Eli Lilly then assuming responsibility for clinical development and commercialization. Eli Lilly will have the right to select up to three additional gene targets for this collaboration. Precision can co-fund clinical development of one product in exchange for an increased royalty rate on co-funded product sales.
In reaction to the news, William Blair analyst Raju Prasad, who has a Buy rating on Precision, stated, “We view the collaboration positively as it removes the company’s immediate financial overhang and will expand the utility of ARCUS without taking away from the core focus of the company.”
“Updated data set from PBCAR0191 remains a key near-term catalyst for shares and will answer questions raised by the company’s initial data presented at 2019 ASH. If the company is able to show increased engraftment, no dose-limiting toxicities, and a higher overall response rate, we believe it would de-risk the company’s allogeneic CAR-T platform and the stock may see significant upside,” added Prasad. (See DTIL stock analysis on TipRanks)
Overall, Precision BioSciences scores a Moderate Buy analyst consensus based on two recent Buys. With shares down 23% year-to-date, the average price target of $22 implies a significant upside potential of 105.2% over the coming months.
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