Here’s Why Alder BioPharmaceuticals And Prothena Corporation Are Moving Today

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Alder BioPharmaceuticals, Inc. (NASDAQ:ALDR) has taken a hit during the early part of this week on the back of news that one of the company’s leading executives, Randall C. Schatzman, who serves as the current CEO of Alder, will be stepping down to make way for Paul B. Cleveland, a member of the Board of Directors.

Cleveland will only serve as interim CEO, meaning the company will have to hunt for a fresh entry for the position going forward, and markets are interpreting this development is negative near term.

It’s not unusual for company CEOs to step down, but the reason that markets are responding negatively to this one is that the timing is potentially concerning for the company.

Why?

Because Alder has plans to file a Biologics License Application (BLA) with the FDA at some point during the second half of this year relating to its lead development asset, a drug called eptinezumab. It’s a drug that the company is trying to get approved as a treatment for patients with migraines and the late stage trials on which the application will rest came in as what looked like pretty strong, with markets generally holding positive sentiment regarding the applications potential for approval as and when it is submitted.

As such, for the CEO of a biotechnology company (especially one of Alder’s size and with Alder’s position in this market) to step down and turn it over to another person, and again, especially given that this other person is only going to be serving as interim CEO, meaning the company hasn’t found anybody to run it long term, suggests that all might not be as strong as first perceived with regards to the application.

To add further uncertainty to the situation, the release detailing the development didn’t really offer too much insight into exactly what is behind the move and what has caused Schatzman to come to a decision to step down.

And it is this widespread uncertainty that is pushing the company down right now.

At the close of play on Wednesday, Alder was trading for a 15% discount to its price before this announcement hit press and premarket activity on Thursday has failed to induce any degree of recovery heading into the end of the week’s action.

Prothena Corporation plc (NASDAQ:PRTA) was another big mover during the middle of this week in the sector, but this time the action is rooted in a positive development as opposed to any uncertainty as is the case with Alder above.

Specifically, Prothena announced on Wednesday that it has scored a partnership deal with biotechnology and healthcare behemoth Celgene Corporation (NASDAQ:CELG). The deal will see the two companies work together as part of a global collaboration rooted in the manufacture and development of drugs designed to focus on several neurodegenerative diseases.

While we haven’t got too much information on the specific target indications and the specific drug types that this collaboration will focus on, we do know what numbers are involved and it looks like Prothena has come out on top with the deal in place.

As per the release outlining the news, Prothena will receive a $100m upfront payment and a $50m equity investment by Celgene, plus future milestone payments and royalties on net sales of any resulting marketed products.

This is a great injection and a nice alignment of interests based on the equity involved.

For a company with a valuation at the level of Prothena’s (around $1.4 billion at latest count) a $100 million cash injection is a real bonus as far as sustainable cash burn is concerned and the potential for longer-term milestones is a nice kicker to the deal for the company and its shareholders.

In terms of quantitative response, Prothena has picked up a close to 50% appreciation on the announcement, with the company closing out on March 21 at $38.72 a share, for a market capitalization of the above-mentioned $1.489 billion.

Chances are we will see a continuation of the strength heading into standard participation on Thursday, as the markets open in the US for the day’s trading.

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