What happened

Shares of ProQR Inc. (PRQR -3.41%), a clinical-stage biopharmaceutical company, soared 28% Thursday morning after announcing a new collaboration deal with Eli Lilly (LLY 0.75%). Excitement for the deal cooled off in the afternoon, and the stock finished the day 12.5% higher.

So what 

Eli Lilly agreed to pay ProQR up to $1.3 billion to develop RNA editing drugs aimed at up to five separate therapeutic targets. The deal is heavily backloaded with just $50 million upfront and approximately $1.25 billion in potential milestone payments.

Excited stock market trader holding a phone in one hand and pointing upward with the other.

Image source: Getty Images.

Specifically, Eli Lilly is interested in ProQR's RNA editing platform. ProQR will come up with strands of RNA that engage an enzyme called ADAR. This is a naturally existing enzyme that can knock out adenosine at specific sites and replace it with inosine, a nucleoside recognized as guanosine. 

Now what

In theory, RNA editing offers many of the benefits of gene therapy but without the long-term uncertainty that comes with editing a patient's DNA. Before biotech investors get too excited about future milestone payments and royalties from Eli Lilly, it's important to realize ProQR has been developing RNA antisense drugs that recruit the body's own ADAR for RNA editing since 2014.

The lack of RNA-editing drugs in the company's late-clinical stage pipeline could be due to a lack of resources soon to be remedied by this new collaboration with Eli Lilly. While we wait for the new partners to make progress with RNA editing, we'll get to see top-line data from an ongoing pivotal trial with ProQR's lead candidate, sepofarsen. In the first half of 2022, ProQR expects to present results that will let us know if it works as a treatment for LCA10, a rare genetic cause of blindness.