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Sarepta Therapeutics, Inc. (SRPT - Free Report) announced that it has entered into an exclusive license and collaboration agreement with Summit Therapeutics plc (SMMT - Free Report) for the rights to the latter’s utrophin modulator pipeline for the treatment of Duchenne muscular dystrophy (DMD).

Although Sarepta’s shares remained mostly stable, having gained a mere 0.9%, Summit’s stock price surged 65.9% on the news. With this spike, Summit’s shares touched a new 52-week high of $19.75 on Oct 4, eventually closing a little lower at $14.35.

Terms of the Deal

Summit received an upfront payment of $40 million from Sarepta. In addition, the company is eligible to receive $522 million in milestone payments. Moreover, Summit is eligible to receive development and regulatory milestones related to its next-generation utrophin modulators. The company is also entitled to additional fees, milestones, and royalties if Sarepta exercises its option for Latin American rights.

Meanwhile, research and development costs will be shared between Sarepta and Summit on a 45-55 basis starting 2018.

Benefits for Sarepta

Sarepta acquired the rights to Summit’s utrophin modulator pipeline, including its lead candidate, ezutromid, in Europe, in Turkey and the Commonwealth of Independent States.

Ezutromid is currently being evaluated in a phase II study – PhaseOut DMD – with 24-week biopsy data from the initial group of patients anticipated in the second quarter or third quarter of 2017.

The candidate enjoys Orphan Drug status for DMD in both the U.S and the EU, which will make it eligible for additional regulatory support and market exclusivity upon approval. In the U.S., ezutromid also has Fast Track and Rare Pediatric Disease designation.

Benefits for Summit

Through this partnership, Summit will gain access to Sarepta’s research and development capabilities in the development of disease-modifying therapies for DMD.

Summit believes that the receipt of payments under the collaboration will be sufficient for the company’s operating expenses and capital expenditure requirements through Dec 31, 2018.

Our Take

Ever since Sarepta gained approval for its DMD drug, EXONDYS 51, the company has been pursuing strategic collaborations for the development of its disease-modifying DMD pipeline.

We remind investors that last week, Sarepta entered into a joint research collaboration with Catabasis Pharmaceuticals, Inc. (CATB - Free Report) to explore a combination-drug treatment approach for DMD.

Sarepta currently carries a Zacks Rank #3 (Hold), while Summit is a Zacks Rank #2 (Buy) stock.

A Stock to Consider

Achillion Pharmaceuticals, Inc. (ACHN - Free Report) is a favorably placed stock in the health care sector, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The company has posted a positive earnings surprise in each of the last four quarters, with an average beat of 364.79%.

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