Gilead Sciences, Inc. (NASDAQ:GILD) said Monday that it has entered into a collaboration, option and license agreement with Gritstone Oncology Inc (NASDAQ:GRTS) to develop a vaccine-based immunotherapy that could serve as a curative treatment for HIV infection.

What Happened: The two companies will develop a HIV-specific therapeutic vaccine using Gritstone's proprietary prime-boost vaccine platform that would use antigens developed by Gilead, the statement said.

Gritstone's vaccine platform comprises self-amplifying mRNA and adenoviral vectors.

"Curing HIV remains the ultimate aspiration for Gilead's HIV research and development efforts. Gritstone's vaccine technology has the potential to educate the immune system to specifically recognize and destroy HIV-infected cells by leveraging SAM and adenoviral vectors," Diana Brainard, a Gilead senior vice president for virology therapeutics, said in a statement. 

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The Gilead-Gritstone Deal Terms: The agreement provides for Gilead making a $60-million payment to Gritstone at closing, which consists of a $30-million upfront payment and a $30-million equity investment at premium.

Gilead will conduct the Phase 1 study and also hold an exclusive license to develop and commercialize the HIV-specific therapeutic vaccine beyond Phase 1 study.

If Gilead exercises the option and if certain clinical, regulatory and commercial milestones are achieved, Gritstone will be eligible to receive up to an additional $725 million.

The smaller biopharma also stands to receive mid-single-digit to low double-digit tiered royalties on net sales upon commercialization.

Why It's Important: Gilead has a mature HIV portfolio. The company is now testing different monotherapy and combo options for treating the disease.

In premarket trading, Gilead shares were rising 0.41% to $65.87 and Gritstone was soaring 21.55% to $22.