(Bloomberg) -- Sanofi agreed to pay Teva Pharmaceutical Industries Inc. as much as $1.5 billion to help develop and sell a medicine for inflammatory bowel disease, its second deal to gain a new experimental treatment this week.
Teva will get an upfront payment of €469 million ($490 million) and the rest as the medicine passes certain milestones, the companies said in a statement Wednesday. Teva American depositary receipts were down 4.5% at 2:19 p.m. in New York, and Sanofi was up less than 1%.
The drug, known as TEV’574, is in mid-stage tests and Sanofi will lead its late-stage development. The treatment belongs to a class of monoclonal antibodies called anti-TL1As because they target that protein, which is believed to play a role in bowel inflammation as well as asthma. Other companies developing compounds from this class include the US biotech Prometheus BioSciences, which is being bought by Merck & Co., and Pfizer.
The medicine is a good fit for Sanofi and is a short-term positive for Teva, which will save on development costs and gain a partner focused on immunology, according to analysts at Morgan Stanley.
“We believe that TEV’574 could emerge as a best-in-class option for people living with serious gastrointestinal diseases,” said Paul Hudson, Sanofi’s chief executive officer.
Inflammatory bowel disease refers to two conditions, Crohn’s disease and ulcerative colitis, whose symptoms include persistent diarrhea, abdominal pain, fatigue and weight loss. An estimated 10 million people worldwide live with IBD, the companies said.
Teva was originally planning on bringing the drug to market solo, but changed course after multiple companies expressed interest in the medicine, Teva CEO Richard Francis said in an interview. Francis said he didn’t remember if Sanofi was an original suitor or if Teva reached out to the company later.
The partnership “will generate higher peak sales and a broader market than we would get on our own,” Francis said.
Bloomberg News reported in May that Teva was exploring options for the treatment. The company, one of the world’s largest makers of generic drugs, unveiled a strategy shift earlier this year that will see it focus more on developing innovative products as well as biosimilars — cheaper versions of complex biological medicines.
--With assistance from Lisa Pham.
(Updates shares and with Teva CEO comments in seventh and eighth paragraphs.)
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