Abbott (NYSE: ABT ) has essentially doubled down on its high-stakes gamble that Reata Pharmaceuticals has the inside track on improving renal function in patients with chronic kidney disease, agreeing to plunk down $400 million in cash to gain an equal stake in the worldwide rights to a portfolio of promising second-generation compounds now in preclinical development for a range of conditions.
Texas-based Reata, a 2011 Fierce 15 company, snagged a $450 million quick-cash deal with Abbott on the ex-U.S. rights to bardoxolone, which is the focus of a big pivotal study. Now Abbott, which is spinning out its biopharma operations, is committing itself to a long-term future with Reata in what amounts to an unusually large cash commitment to a preclinical venture.
In the deal, Abbott and Reata have agreed to share the costs and profits on the biotech's antioxidant inflammation modulators, with Abbott taking a 70% stake for rheumatoid arthritis and certain other conditions. The two companies also agreed to collaborate on discovery work related to other drugs that can be derived from the AIM program. The first human study of a preclinical drug covered by the partnership is slated to begin in 2012.
So with so much money at stake, why didn't Abbott just buy the company? That may have something to do with Reata CEO Warren Huff's outspoken belief that the biotech is on a short track to proving that it has a mega-blockbuster on its hands able to deliver several billion dollars a year in revenue. That's why Reata has kept a firm grasp on bardoxolone's U.S. rights, where Huff plans to add a significant commercial operation.
This article originally published here. Get your free daily biotech briefing here.
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