What happened

PTC Therapeutics (NASDAQ:PTCT) shares are rallying 9.5% at 3:30 p.m. EDT on Friday after the company announced it will acquire the gene therapy biotech Agilis Biotherapeutics to get its hands on GT-AADC, a clinical-stage therapy for patients with a rare central nervous system (CNS) disorder.

So what

PTC Therapeutics already markets the Duchenne muscular dystrophy drug Translarna in Europe and recently reported intriguing data for a drug that could win a green light for use in spinal muscular atrophy (SMA) someday.

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After the closing bell on Thursday, PTC Therapeutics announced it's further expanding its product pipeline by acquiring Agilis for $50 million in upfront cash plus $150 million in stock. Agilis owners also can collect up to $60 million in development milestones over the next two years and up to $535 million in future regulatory milestones. If Agilis' drugs win the regulatory green light, PTC Therapeutics will pay tiered commercial sales milestones of $150 million, plus 2% to 6% royalties on net sales for Agilis' earlier stage therapies for Friedreich ataxia and Angelman syndrome.

The most important therapy PTC Therapeutics nets in this deal, however, is GT-AADC, a gene therapy for aromatic L-amino acid decarboxylase (AADC) deficiency. AADC deficiency is a rare CNS disorder tied to mutations in the dopa decarboxylase (DDC) gene. In severe cases, patients lose motor control that can cause breathing, feeding, and swallowing problems, as well as hospitalizations. There aren't any treatments approved specifically for this indication, and sadly, many people with AADC deficiency will pass away before their 10th birthday.

Now what

Data from two prospective clinical studies involving 18 people with severe AADC deficiency have PTC Therapeutics hopeful that it can file GT-AADC for Food and Drug Administration (FDA) approval next year. If approved, PTC Therapeutics could benefit from sales growth and the receipt of a priority review voucher it can sell or use to accelerate the review of another one of its drugs.

Clinical-stage studies for Agilis' Friedreich ataxia therapy could begin in 2019, and studies for its Angelman syndrome therapy could begin within two years, according to management.

Undeniably, this acquisition bolsters PTC Therapeutics' rare disease pipeline. However, investors might want to remember a couple of things before stepping up and buying its shares. First, while Translarna's approved in the EU, the FDA hasn't agreed to review it for approval in the United States. Second, while the company's SMA and GT-AADC therapies could make their way to the FDA, there's no guarantee regulators will sign off on them. Therefore, PTC Therapeutics is a stock that's best suited to risk-tolerant portfolios.