With the Nasdaq Biotechnology Index up 65% since the start of the year, it's clear that the biotech sector performed extraordinarily well in 2013 - but which stocks were the biggest winners? Several small-cap and mid-cap biotech companies posted returns of 200% or more through the middle of December this year, and, in this series, I'll review the 15 biggest movers of 2013. Let's continue this review with number 8 on the list, Prothena Corporation PLC (PRTA -3.43%).

Immunotherapies are among the most promising -- and potentially profitable -- trends in biotechnology this year. That promise has helped drive Prothena, which was spun-off by Elan in late 2012. In fact, Prothena is up 268% since the start of the year.

Roche (RHHBY 1.07%) partnered with Prothena in December, for the rights to Prothena's Parkinson's disease program. It also agreed to pay up to $600 million in milestones, as well as 30% royalties on U.S. sales, and double digit royalties on non-U.S. sales. The deal includes Prothena's PRX-002, a pre-clinical drug expected to enter phase 1 in 2014.

The deal locks up Prothena's antibodies targeting a critical neural protein, alpha-synuclein, which is associated with neurological disease. Those antibodies have shown potential in pre-clinical animal trials, suggesting they may be able to slow neurodegeneration in Parkinson's patients.

That would be welcome news because there are currently no treatments that change the course of Parkinson's disease - the second most common neurological disease behind Alzheimer's. Up to an estimated 10 million people have Parkinson's worldwide and those patients are often treated with levodopa, a drug that loses its effectiveness over time.

While the deal gives Roche a nice call option on Prothena's technology, Roche isn't alone in inking deals to gain access to promising Parkinson's treatments. Biogen Idec (BIIB -0.48%) has been on the hunt, announcing a deal in December to pay up to $200 million in milestones to privately held Proteostasis, which is also targeting alpha-synuclein. Biogen also linked up with Amicus Therapeutics in September.  Amicus is working on a therapy that bulks up production of an enzyme that's under-produced in Parkinson's patients. 

Outside of Parkinson's, Prothena is studying NEOD001 in AL amyloidosis, an ultra rare disease with only 1,200 to 3,200 new cases diagnosed in the U.S. annually. That drug is in phase 1 and the company expects to release data on the trial in 2014. The company also hopes to bring its oncology candidate, PRX-003, into phase 1 trials in 2015.

Diluting, but debt free
Bringing new therapies through trials is expensive, which presents challenges for emerging biotech companies like Prothena. As a result, Prothena is tapping equity markets for financing and stockpiling cash for their development.

After completing a 4.2 million share offering in October, generating nearly $85 million, Prothena's war chest totals roughly $185 million. That's good news given Prothena posted a loss of nearly $30 million in the first nine months of 2013, and is guiding for cash burn of $34 million to $40 million this year.

Fool-worthy final thoughts
Hopefully, that capital raise, combined with the new deal with Roche, will provide enough cash to avoid future dilution as it moves its Parkinson's drug through trials.

There's clearly a significant need for new Parkinson's treatments, but it's a tough to treat an indication that has littered the street with many failed previous attempts. Investors can hope the company's management, which helped commercialize the MS blockbuster treatment Tysabri, gives it the necessary experience for success. But even so, you should approach Prothena with caution, recognizing any number of stumbles, including advances by competitors like Biogen, could de-rail it over the next few years.

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