Why Did Jounce Therapeutics (JNCE) Stock Gain 72% Today?

Following an amendment in a strategic agreement, shares of Jounce Therapeutics Inc. (JNCE) increased 59.75% to $1.18 on Wednesday.

Which agreement has JNCE amended?

In an announcement made yesterday, Jounce Therapeutics (JNCE) stated that it has modified its current license arrangement with Gilead Sciences Inc. (GILD) for GS-1811 (formerly JTX-1811). Gilead will now be entitled to buy out any potential future contingent payments owed to Jounce Therapeutics under the licensing agreement signed in August 2020 according to the modified agreement. The parties’ operational responsibilities under the licensing agreement for the anti-CCR8 antibody GS-1811 have also been terminated as part of the transaction.

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According to the terms of the acquisition agreement, Gilead will purchase some relevant intellectual property, including all of JNCE’s unclaimed rights to GS-1811. GS-1811, a potentially ground-breaking immunotherapy, is now undergoing Phase 1 clinical testing as a potential treatment for patients with solid tumors. It is intended to selectively reduce immunosuppressive tumor-infiltrating T regulatory cells in the tumor microenvironment.

JNCE will be able to prolong its runway and stay committed to providing significant and long-lasting benefits to cancer patients thanks to the signing of the agreement with Gilead. Given the difficulties in the financial markets for biotech businesses at this time, it was crucial for Jounce Therapeutics to strengthen its cash resources. In exchange for this purchase, JNCE will get $67 million in revenues, and Gilead will be the only party in charge of all future GS-1811 research, development, and worldwide commercialization.

How will the deal influence JNCE and Gilead?

Under the original licensing agreement, Jounce Therapeutics (JNCE) will no longer be eligible to collect the final variable payouts of up to $645 million in incentives and high single-digit to mid-teens royalties depending on worldwide sales. In line with recent industry announcements from the U.S. Securities and Exchange Commission (SEC), Gilead will no longer deduct acquired IPR&D costs from its non-GAAP financial metrics as of the first quarter of 2022. The deal with JNCE will result in a $0.04 reduction in Gilead’s 2022 GAAP and non-GAAP EPS.