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Biopharma company AbbVie (ABBV - Analyst Report) has signed a worldwide license agreement with Belgian company Ablynx for the development and commercialization of the latter’s autoimmune disease candidate, ALX-0061.

The deal, worth more than $840 million, includes an upfront payment of $175 million. AbbVie could make additional payments of up to $665 million on the achievement of development, regulatory, commercial and sales-based milestones. Ablynx is also entitled to double-digit tiered royalties on net sales upon commercialization.

ALX-0061, an anti-IL-6R Nanobody, is being evaluated for the treatment of inflammatory diseases. Results from a phase IIa study showed strong efficacy and safety in patients with moderately to severely active rheumatoid arthritis (RA) on a stable background of methotrexate.

Phase II development for RA and systemic lupus erythematosus (SLE) will be handled by Ablynx. Ablynx will use a part of the $175 million upfront payment for the same. AbbVie will exercise its right to in-license ALX-0061 depending on the achievement of certain pre-defined success criteria.

Once AbbVie in-licenses the candidate, it will be responsible for phase III development and commercialization. Co-promotion rights in Belgium, the Netherlands and Luxembourg will be retained by Ablynx.

Our Take

AbbVie, which has a strong presence in the autoimmune disease market thanks to its blockbuster drug, Humira, should make a strong development and commercialization partner for Ablynx.

Meanwhile, this deal is in line with AbbVie’s efforts to expand and strengthen its autoimmune disorder pipeline. Earlier this year, the company had extended its agreement with biotech company, Galapagos NV, for the development of autoimmune disease candidate, GLP0634, for Crohn’s disease in addition to RA. AbbVie also signed a deal with Alvine Pharmaceuticals for the global development of a novel oral treatment for patients with celiac disease, an autoimmune disease.

AbbVie currently carries a Zacks Rank #3 (Hold). While we are positive on AbbVie’s strong late-stage pipeline, dividend yield and growth strategy, we remain concerned about its dependence on Humira. We believe AbbVie will continue pursuing in-licensing deals and collaborations to boost its pipeline.

At present, large-cap pharma companies like Roche (RHHBY - Analyst Report), Novo Nordisk (NVO - Analyst Report) and Bayer (BAYRY - Analyst Report) look well-positioned. While Roche is a Zacks Rank #1 (Strong Buy) stock, Novo Nordisk and Bayer are Zacks Rank #2 (Buy) stocks.

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