Prothena, Celgene ink neuro R&D pact potentially worth $2B+

Celgene has been making deals left and right lately, kicking off the year with its $1.1 billion acquisition of Impact Biomedicines and plunking down $9.9 billion to get its hands on Juno and its CAR-T stable. Its latest project? An R&D collaboration with Prothena to develop new drugs for neurodegenerative diseases.

The partnership centers on a trio of proteins implicated in the development of multiple neuro diseases: tau, TDP-43 and an undisclosed target, Prothena said. Tau, a well-known marker of Alzheimer’s disease, also plays a role in progressive supranuclear palsy, frontotemporal dementia (FTD), and chronic traumatic encephalopathy. TDP-43 is linked to amyotrophic lateral sclerosis and the most common subtype of FTD, behavioral variant FTD.

Prothena has identified antibodies that target tau and TDP-43, the company said. It hopes to prevent misfolded tau from binding to cells and to block the transmission of misfolded tau and TDP-43 from cell to cell, thereby staving off their toxic effects. Prothena also has three monoclonal antibodies in its pipeline, which target α-synuclein and amyloid, other proteins that are implicated in neuro diseases.

Celgene is handing over $100 million up front and making a $50 million equity investment in Prothena. In return, it will get the exclusive right to license clinical assets in the U.S. when INDs are filed. If Celgene goes through with this step, it would then have the right to expand the license to global rights at the end of phase 1.

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While the sticker price of the deal is $150 million, Prothena could potentially reap $2.1 billion in future payments. According to an 8-K filed Tuesday, Celgene will pay up to $80 million per program if it exercises the U.S. rights and $55 million per program if it exercises global rights. And there’s another $562.5 million per program up for grabs in regulatory and commercial milestones. Prothena’s stock was up 20% after hours.

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“Prothena has a legacy of innovation in neuroscience and a team with a deep understanding of biological approaches that target protein misfolding disorders. Our collaboration leverages each company’s core expertise in protein homeostasis and protein clearance to target proteins that are the underlying cause of many neurodegenerative and orphan diseases,” said Richard Hargreaves, Ph.D., Celgene’s corporate vice president of neuroscience and imaging. “The programs we have chosen to collaborate on have the potential to provide foundational assets from which we can build new therapeutic approaches to these currently untreatable neurological disorders.”

The news comes just weeks after Celgene paid $101 million to partner with Vividion Therapeutics on the discovery of small molecules to target hard-to-drug proteins, including those involved in neurodegenerative disease.

Analysts at Jefferies said in a note to clients: “This is attractive for PRTA for a few reasons and validates our long-term pipeline thesis on novel and deep science at PRTA particularly in neuro as the lead scientists were involved in original amyloid beta Alzheimer's work at Elan and developing Tysabri for MS, etc.

“1) Provides important non-dilutive financing (company now has ~ $500M+ in cash or $13+ cash per share) and provides significant runway in capital for many years, 2) further validates intriguing and elegant science at PRTA as this deal follows on the Roche deal on synuclein in Parkinson's disease, which is now in Phase 2 and one of the most attractive targets for the disease, 3) allows the company to accelerate development for internal programs including ATTR amyloidosis, which is wholly owned and entering the clinic in a few months, 4) CELG is a leader in developing therapies that target critical pathways in protein homeostasis and is an ideal partner for these disease areas.

“Bottom line this is an attractive deal and good news after a challenging past few months for the stock."

The firm adds that for Celgene, this partnership “is consistent with their distributed model of R&D and adds new and developing resources in neuroscience. We note that while some of their previous collaborations had a neuro aspect or a neuro target, this is the first full neuro partnership we are aware of.

“This is positive long-term (the PRTA tau antibody is early and not in the clinic yet and the next one is probably another year behind that), but we appreciate the market is likely to remain mixed on CELG for this because the market is somewhat skeptical of neurodegenerative diseases right now and it remains hotly debated whether these targets (especially in Alzheimer's) are worth heavily investing in as these diseases are challenging (for both Alzheimer's and ALS/Lou Gehrig disease for TDP-43).

“So deal today is not completely out of left field, but it will take time to play out.”

Prothena was up 22% afterhours on the news last night, while Celgene was flat.