It's no secret that Protein Design Labs (NASDAQ:PDLI) is one of my favorite biotech companies. And as such big fan, I'm absolutely thrilled with the terms of the deal that was announced with Biogen IDEC (NASDAQ:BIIB) yesterday afternoon. The market also sees this R&D partnership as a huge positive, sending PDL's stock up more than 10% in today's trading.

So why is this partnership so good?

The companies will be pairing up on three of PDL's investigational drugs: M200, daclizumab, and HuZAF. For the privilege, Biogen IDEC paid $40 million up front, will buy $100 million of PDL stock, and could pay development milestones of up to $660 million. On top of that, the two companies will fully share R&D costs and profits from sales in the U.S. and European markets.

The cash payments and shared cost of R&D is certainly nice for PDL, but that's not what I view as the best part of the deal. What I really like is that PDL will retain significant upside from these drugs through the ability to co-promote them in the large U.S. and European markets. This is a bit unusual -- typically the smaller biotech company leaves international promotion of the drug to the larger partner.

PDL will be reporting second-quarter earnings tomorrow and the impact of this deal on the company's financial guidance will be discussed then. I think we'll see an upward revision to the revenue projection and a decrease in the net loss due to pushing R&D costs onto Biogen IDEC. I'll be back with another article on Friday to go over the outcome of the earnings call.

We like Protein Design Labs so much that we've recommended it twice in the Rule Breakers service. I'm happy to say that we're up more than 30% and 50% on these two recs. If you'd like to see what else we've got cookin', come join us with a free trial.

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Charly Travers owns shares of Protein Design Labs. Protein Design Labs is a Motley Fool Rule Breakerspick; Biogen IDEC is aMotley Fool Stock Advisorselection. The Motley Fool has an ironcladdisclosure policy.