What happened

Shares of Rigel Pharmaceuticals (NASDAQ:RIGL) were jumping 10.3% as of 12:30 p.m. EST. The gain came after Rigel and Eli Lilly (NYSE:LLY) announced a collaboration to develop and market Rigel's experimental drug R552.

So what

Rigel will receive an up-front payment of $125 million from Lilly under the new agreement. In addition, Rigel could be eligible for milestone payments of up to $835 million. The company will also receive tiered royalties from any future sales of R552, ranging from the mid-single digits to the high teens.

Scientist in a lab holding a test tube

Image source: Getty Images.

R552 inhibits RIPK1, a protein that's involved in several inflammatory cellular processes. Rigel has already completed phase 1 testing targeting immune diseases.

The partnership between Lilly and Rigel appears to be a good fit. Lilly currently markets a blockbuster autoimmune disease drug, Taltz. It's also developing several candidates targeting autoimmune diseases. R552 should be a great addition to the big drugmaker's pipeline. 

Now what

Rigel and Lilly plan to advance R552 into phase 2 testing this year. The next major catalyst for the biotech stock, though, could be the anticipated April release of top-line data from a phase 2 study conducted by the National Institutes of Health evaluating fostamatinib in treating COVID-19. Rigel also has a late-stage study underway of fostamatinib as a potential COVID-19 treatment.

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