Original Article posted at bizjournals.com

KalVista Pharmaceuticals, a small Cambridge biotech with a pair of rare disease treatments in early-stage studies, saw its market value soar on Tuesday after announcing that drug giant Merck has taken a 10 percent stake in the company.

KalVista (Nasdaq: KALV) said it had struck a deal with Merck (NYSE: MRK) under which the companies will collaborate to develop treatments for diabetic macular edema, or DME, a complication of diabetes in which fluid builds up in the retina. Under the agreement, KalVista will get a $37 million upfront fee, and is also eligible to receive up to $715 million in milestone payments. In exchange, Merck will have an option to acquire the experimental drugs.

Separately, KalVista said it had sold $9.1 million worth of its…

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