Roche Ties Up with Prothena

Zacks Equity Research

Roche (RHHBY) is a leader in the oncology market with several leading drugs in its portfolio.

In particular, Roche is well placed in breast cancer market fueled by its HER2 franchise which includes Herceptin and recently launched drugs like Perjeta and Kadcyla.

Meanwhile, Roche is also making efforts to develop drugs for other indications. The company recently entered into a worldwide collaboration agreement with Prothena Corp. (PRTA).

As per the agreement, both the companies will collaborate to develop and commercialize antibodies that target alpha-synuclein, including Prothena's monoclonal antibody, PRX002 developed for the treatment of Parkinson's disease. PRX002 is currently in preclinical development and is expected to enter phase I clinical trials in 2014.

Roche will make an upfront and clinical milestone payment of $45 million to Prothena. In addition, Prothena is also entitled for additional payments of up to $380 million upon the achievement of development, regulatory and sales milestones along with an additional $175 million in milestone payments for sales outside the U.S. The total payments, both upfront and milestones, may amount up to $600 million on a global basis.

Per the terms of the agreement, Roche and Prothena will collaborate primarily for the development of PRX002 for Parkinson's disease and potentially other synucleinopathies.

The agreement also provides Prothena with an option to co-promote PRX002 in the U.S. Both the companies have agreed to share all development and commercialization costs on a 70/30 basis (70% Roche and 30% Prothena) in the U.S. However, outside the U.S., Roche will be solely responsible for developing and commercializing PRX002 and pay Prothena up to double-digit royalties on net sales.

Moreover, Roche and Prothena will initiate a research collaboration focused on optimizing early stage antibodies targeting alpha-synuclein. This research collaboration will include incorporation of Roche's proprietary Brain Shuttle(TM) technology to increase delivery of therapeutic antibodies to the brain.

Roche currently carries a Zacks Rank #3 (Hold). Right now, stocks that look attractive include Shire (SHPG) and Bayer (BAYRY). Both carry a Zacks Rank #2 (Buy).

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