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What happened

Akebia Therapeutics (NASDAQ:AKBA) stock is up 24% at 2:10 p.m. EST after signing a deal with Japanese drugmaker Otsuka Pharmaceutical to develop and sell vadadustat, Akebia's oral hypoxia-inducible factor-prolyl hydroxylase (HIF-PH) inhibitor to treat anemia associated with chronic kidney disease.

So what

The deal calls for Otsuka to pay $125 million upfront and $35 million in the first quarter of next year. The companies will split the cost of development, of which Otsuka has committed to pay at least $105 million. And Akebia Therapeutics has the potential to make up to $765 million more if undisclosed development and commercial milestones are met.

Akebia will continue to take the lead developing vadadustat, which is being tested in two phase 3 clinical trials. Assuming those are successful and the drug gains FDA approval, the companies will split costs and revenue from U.S. sales equally.

Shares of FibroGen (NASDAQ:FGEN), which is developing a treatment called roxadustat  that works by targeting the same protein, are up 2.2% today. Normally you'd expect a company to trade down when its smaller competitor got a helping hand from a large pharma, but FibroGen is ahead of Akebia with phase 3 results expected in 2018 and already has marketing deals with Astellas and AstraZeneca. FibroGen's investors clearly see Otsuka's backing of Akebia as further evidence that there's potential in developing HIF-PH inhibitors, which seems reasonable given FibroGen's lead position.

Now what

The deal is certainly good news for Akebia, but now it's back to waiting for investors, as it'll be awhile before the phase 3 trials are fully enrolled and the last patient is treated for 36 weeks.

Akebia does have another HIF-PH inhibitor -- AKB-6899 -- that it's planning on testing as a potential cancer treatment because it lowers the expression of VEGF, which stimulates tumor growth. VEGF is also involved in age-related macular degeneration, so the drug could be used as a treatment there, too. Unfortunately AKB-6899 is still in preclinical development, so it'll be awhile before Akebia has proof-of-concept data for its second compound.

At least Akebia won't have to worry about funding for awhile.