Shares of Calithera Biosciences Inc. (NASDAQ: CALA) saw a solid gain early on Monday after the company reported a global collaboration and licensing agreement with Incyte Corp. (NASDAQ: INCY). Ultimately, this agreement is working toward the commercialization of Calithera’s small molecule arginase inhibitor CB-1158 in hematology and oncology.

Considering this strategic partnership with Incyte, CB-1158 is expected to be evaluated in multiple trials of novel therapeutic combinations, hopefully accelerating its development across hematological and oncology indications.

Under the terms of the agreement, Calithera will receive an upfront payment of $45 million from Incyte. Additionally, Incyte will make an equity investment in Calithera of $8 million through the purchase of shares at a price of $4.65 per share.

In turn, Incyte will receive worldwide rights to develop and commercialize CB-1158 in hematology and oncology and Calithera will retain certain rights to research, develop and commercialize certain other arginase inhibitors in certain orphan indications.

At the same time, Incyte will fund 70% of global development, and Calithera will be responsible for the remaining 30%. In the event of regulatory approvals and commercialization of CB-1158, Incyte and Calithera will share in any future U.S. profits and losses (receiving 60% and 40%, respectively) and Calithera will be eligible to receive over $430 million in potential development, regulatory and commercialization milestones from Incyte. Keep in mind that Calithera currently has a market of less than $150 million.

Reid Huber, Ph.D., Incyte’s chief scientific officer, commented:

Arginase-expressing tumor-infiltrating myeloid cells have been shown to play an important role in orchestrating the immune suppressive microenvironment in cancer; but, to date, therapeutic targeting of the arginase enzyme has remained elusive. The addition of this first-in-class, small molecule arginase inhibitor, CB-1158, to our portfolio expands our innovative immuno-oncology pipeline and allows us to continue to advance our mission of discovering and developing immune-active combination therapies to treat patients with cancer.

Shares of Calithera were last seen up about 34% at $6.15, with a consensus analyst price target of $9.25 and a 52-week trading range of $2.20 to $6.87.

Incyte shares were trading down 2% at $119.18. The consensus price target is $127.21, and the 52-week range is $55.00 to $124.87.

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