What happened

After Celgene Corp. (NASDAQ:CELG) signed on to collaborate with it and agreed to acquire $50 million in shares, Prothena Corp. plc (NASDAQ:PRTA) soared 14.4% on Wednesday.

So what

Prothena, which was spun out of Elan plc back in 2012, is heavily focused on developing treatments for orphan and neurodegenerative diseases. For example, one of its lead products is PRX002, an antibody that it is co-developing with Roche Holdings for use in Parkinson's disease, a neurodegenerative disease affecting up to 10 million people worldwide.

A person arranges cut-up pieces of construction paper into an ascending arrow.


After the bell on Tuesday, Celgene announced it has also decided to partner with Prothena on the development of drugs for neurodegenerative diseases. Specifically, Celgene has secured options to rights for drugs targeting three proteins implicated in the pathogenesis of several neurodegenerative diseases, including tau, TDP-43, and an undisclosed target. Tau is implicated in Alzheimer's disease, and TDP-43 is implicated in amyotrophic lateral sclerosis (ALS).

In exchange, Celgene will pay Prothena $100 million upfront. It will also invest $50 million in Prothena to acquire approximately 1.2 million shares at a price of $42.57 per share. Prothena has an opportunity to receive option exercise payments, regulatory and commercial milestones for each licensed program, and royalties on net sales if these programs eventually reach the market, too.

Now what

In addition to this deal being interesting because Celgene's got deep pockets and a reputation for cozying up with successful clinical-stage companies, it's important because it shows Celgene's plans to diversify itself away from its reliance on multiple myeloma therapies. These include programs for Alzheimer's disease and ALS, two potential multibillion indications for which there aren't any approved therapies yet.

The relationship between the two companies is in its earliest stages, so investors shouldn't expect to hear much from the companies anytime soon. Nevertheless, Celgene's willingness to collaborate and take a stake in Prothena is a validation of Prothena's approach that probably shouldn't be ignored.

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