Why AbbVie Just Made a $1.8 Billion Gene Therapy Deal

AbbVie (ABBV 0.98%) recently announced a collaboration with Regenxbio (RGNX 1.66%) to develop a gene therapy targeting wet age-related macular degeneration. The deal could be worth up to nearly $1.8 billion including milestone payments. In this Motley Fool Live video recorded on Sept. 15, Motley Fool contributors Keith Speights and Brian Orelli discuss why AbbVie is teaming up with Regenxbio.

Keith Speights: All right. Let's switch from COVID-19 to a non-COVID story now. AbbVie, the ticker for AbbVie as ABBV. AbbVie recently announced a partnership with Regenxbio, that ticker for Regenxbio is RGNX.

The two companies are developing a gene therapy together targeting wet age-related macular degeneration or AMD. This deal could be worth up to nearly $1.8 billion and that includes milestone payments.

Brian, why did AbbVie team up with Regenxbio? Do you think this is a smart move for the company?

Brian Orelli: AbbVie really needs near-term growth. I mean, this gene therapy which goes by RGNX 314 is in late-stage testing. They are already in one pivotal study already. Then they're going to run us than pivotal means that that's the study that we're going to send to the FDA for approval.

Then the second pivotal trial is on track to start in the fourth quarter. They'll have data within, I guess, probably a little over a year from now. Then approval 8-12 months after that. That should help AbbVie in the near term to try to increase its revenue. Because of course, it's losing Humira to biosimilar competition.

It seems like it's a pretty good deal for Regenxbio, and the shares popped on the news of the deal. Investors definitely thought it was, it only has to give up half of the value inside the US, the companies will share the profits equally in the US. Then outside the US, it's going to get a royalty. Probably didn't really want to expand outside the US.

Anyways, there is initially I know that it's a fairly small company. I think you can probably do a deal outside the US anyway. I don't think we got what exactly the royalties are going to be. But presumably, hopefully, they get a good royalty deal to justify giving away the full rights outside the US.

Then Regenxbio also gets $374 million upfront and which will help pay for their clinical trials. Then there's potential for 1.3 billion in additional development, regulatory and commercial milestones. Presumably, a lot of that in the commercial milestone bucket, but they don't break it out.

But you can pretty much assume that a lot of it will be bonuses based on the actual sales rather than development or approval milestones. But they'll probably get some money for completing the Phase III you're completing earlier stages testing the gene therapy and other eye diseases, and then of course, approvals, it'll get some bonuses as well.

Speights: I think we'll just have to wait and see if this ends up being a really smart move for AbbVie. Obviously, if this gene therapy pans out, it's going to look like a brilliant move in hindsight.

Orelli: But $70 million is they're risking something, but they've seen in the Phase II data so they know what they're getting themselves into. I think it's a fairly good risk, but I think it's a better deal for Regenxbio and it's probably has something to do with AbbVie's need for near-term catalysts and the lack of Phase III products on the market by small companies that they want to find a partner.