Aptevo Therapeutics Inc (NASDAQ:APVO) Is Running, Here's Why And What's Next

Aptevo Therapeutics Inc (NASDAQ:APVO) was a biotechnology runner on Friday, gaining 58% during the session. The appreciation comes on the back of news detailing a transaction with an entity called Saol Therapeutics, which will see the latter pick up three of Aptevo's real assets in return for a substantial prepayment and some additional potential milestone payments rooted in gross profit. APVO Daily ChartThis transaction highlights Aptevo as one to watch going forward in the sector through its removal of one of the primary risks associated with picking up an exposure to the company at this end of biotechnology.Specifically, the deal is worth a total of $74.5 million to Aptevo, which Saol is set to pay by way of an initial upfront cash payment of $65 million and a further $7.5 million earmarked as milestone payments. The remaining $2 million (that brings the total value to the above noted $74.5 million) is related to the collection of certain accounts receivable after the closing.The three products that Saol will get are all picked from Aptevo's hyperimmune portfolio and are WinRho SDF for autoimmune platelet disorder and hemolytic disease of the newborn; HepaGam B for the prevention of Hepatitis B following liver transplantation and for treatment following hepatitis B exposure; and VARIZIG for treatment following exposure to varicella zoster virus for individuals with compromised immune systems.So why is this a good deal for Aptevo, if the company is losing three of its lead assets?Because the real long-term revenue potential for this company is rooted in a proprietary technology platform called ADAPTIR. It's a modular protein technology platform that can generate highly-differentiated, bispecific antibodies with unique mechanisms of action to treat cancer or autoimmune diseases. Not only that, but it can do so relatively quickly and comparatively cheaply when looked at against the cost of developing a unique asset in this type of oncology indication.Aptevo has five of these assets in development right now, all of which are set up to target a different cancer and all of which have served up promising early stage results as part of their respective development programs. The lead program, a drug called APVO414, is targeting prostate cancer. It works by redirects T cells to specifically kill tumor cells that express a prostate specific membrane antigen (PSMA), which is an enzyme that is expressed on the surface of prostate cancer cells, by targeting what's called CD3, a component of the T cell receptor complex expressed on all T cells.The program is in a phase I study right now and preclinical data that's already in place suggests it could be a real winner as it progresses.The problem is, however, when you are a young biotech company with limited revenues, funding the concurrent development of 5 or more assets is tough – and this is where the latest transaction comes in to play.If an investor was to take a look at this company last week they would see revenues of around $36 million in 2016 (which isn’t too bad, but it far from covers costs) and a cash balance insufficient to fund even two of the lead development assets through to mid stage programs.Take a look at the same company now, however, and things have changed considerably. The revenues are going to take a hit (but that's not where the long term value lies, so it's not too big a deal) and the cash balance is dramatically improved (assuming the deal closes out as expected). In other words, there's practically no dilution risk between now and at least two or three major catalysts hitting press.There aren’t many sub $100 million market cap biotech companies you can say that about.We will be updating our subscribers as soon as we know more. For the latest updates on APVO, sign up below!Image courtesy of Owen Moore via FlickrDisclosure: We have no position in APVO and have not been compensated for this article.