Shares in NeuroSearch are on the rise this morning after the Danish biotechnology company announced that it has entered into a three-year drug discovery and development alliance with Eli Lilly.

Under the terms of the deal, which covers “a defined number of undisclosed ion channel targets for their potential in treating various central nervous system disorders”, NeuroSearch could receive up to $13 in fees and research funding over the next three years, of which $5 will be paid upfront. Lilly will also make a $17 million equity investment in NeuroSearch.

Lilly will have “various options” to exercise license rights to compounds covered by the agreement and will then be responsible for all subsequent development and commercialisation activities. NeuroSearch may be entitled to milestone payments of up to $320 million, plus royalties, depending on how successful the potential products prove to be.

Flemming Pedersen, chief executive of the Ballerup-based firm, said that ion channel modulation is one of NeuroSearch’s core areas of expertise, and this collaboration is structured “to secure both a balanced risk-sharing and very attractive long-term revenue…as well as significant near-term financing.” William Chin, Lilly vice president for discovery research and clinical investigation, added that the equity investment, which gives the firm over a 3 % staken in NeuroSearch, is “an excellent example of our corporate strategy as a fully integrated pharmaceutical network, where we are collaborating with researchers beyond our walls".

Investors like the look of the deal and shares in NeuroSearch, which also has alliances in place with GlaxoSmithKline, Abbott and Astellas, were up 5.6% at 9.15 UK time to 169 Danish crowns.