Elan's (NYSE: ELN) new partnership with Proteostasis Therapeutics is intriguing, even potentially lucrative. But worthy of the 7.7% increase the shares shot up yesterday? I don't think so.

After pawning off Elan Drug Technologies on Alkermes (Nasdaq: ALKS), Elan looks like it's feeling a little more confident in its cash-debt situation. The drugmaker is putting down $20 million up-front for a 24% stake in the start-up. Elan will also contribute $30 million in research support over the next five years. In exchange, Elan gets first shot at licensing compounds that emerge from the combined initiative.

The deal seems less than ideal; I'd rather see the terms spelled out in advance with Elan having a guaranteed option to license the drugs after phase 2, for instance. But I guess the 24% stake serves as a backup plan. If Proteostasis can top Elan's offer for drugs down the road, Elan's equity stake stands to gain from the more lucrative licensing deal.

And there's no doubt that Proteostasis is a good fit. The start-up is studying protein homeostasis, a pathway of processes involved in making sure that proteins in a cell are folded correctly.

The most obvious connection with Elan is in Alzheimer's disease, where amyloid plaques -- which may be the cause of the disease -- form because of misfolded amyloid protein. Elan has a phase 3 compound bapineuzumab, which is partnered with Johnson & Johnson (NYSE: JNJ) and Pfizer (NYSE: PFE), but earlier stage compounds, especially ones with a biological justification, would be a welcome addition.

The systems biology approach could go after other neurodegenerative disorders such as Parkinson’s, Huntington’s, multiple sclerosis, and amyotrophic lateral sclerosis, as well.

So what's the deal with the 7.7% increase yesterday? One has to guess that it's more a function of the wild swings we see with Elan's shares -- five other positive daily jumps of more than 5% since the beginning of the year -- than an endorsement of the Proteostasis deal. Investors intrigued by the deal would be wise to look for a pullback before investing. The partnership could turn Elan's initial investment into billions, but it'll be years before anything fruitful comes from yesterday's announcement.

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