After the market closed on June 11, Selecta Biosciences, Inc. (NASDAQ:SELB) announced it had entered a licensing deal with $SOBI (STO:SOBI), granting most of the global rights to Selecta’s phase III gout drug, SEL-212, to SOBI.

Selecta’s stock fell about 25% on the news this morning. SanaCurrents is suspending coverage of the report on SEL-212 it issued on February 21, 2020; remaining capital in Selecta shares will be reinvested in pending SanaCurrents’ catalysts.

While licensing deals usually are a boost to a company’s stock, the agreement reached by Selecta management essentially licensed away the majority of the potential profits from SEL-212.

As Selecta does not have a deep pipeline of clinical candidates for its ImmTOR immune tolerance platform, the company’s valuation – it closed yesterday at $3.69 per share – largely was based on SEL-212. Many companies seek to complete an ongoing phase II or phase III trial to secure a better licensing deal or partnership for the drug. Selecta said on its last earning call it would release data on the phase III trial by the end of the third quarter.

Selecta shares were exchanging between $2.80 per share and $2.90 per share this morning, following the first hour of the market trading.

At the time of the SanaCurrents report, Selecta shares traded at $4.12 per share. Late February also represented the market peak before the severe correction driven by the coronavirus pandemic.

Under the agreement between Selecta and SOBI, Selecta will receive an initial $100 million from SOBI via a  $75 million up-front licensing fee and $25 million for the purchase of Selecta common stock at $4.62 per share.  Selecta also is eligible to receive potential development, regulatory, and commercial milestone payments of up to $630 million, and tiered double-digit royalties on net sales.

SOBI retains marketing rights to SEL-212, now in phase III testing, in all global markets, excluding China.

In February, SanaCurrents’ assigned an advantageous sentiment that SEL-212 will be superior to pegloticase, a market leader in gout, in a head-to-head comparison trial. SOBI now takes over responsibility for completing the trial.

SanaCurrents issued a report on SOBI’s phase III trial of Doptelet on January 31, 2020. SOBI shares were up 2% on Friday at $2.15 per share.