Good Deal? Bad Deal? Hard to Tell.

The problem with large pharmaceutical companies licensing drugs from privately held companies is that neither has the requirement to share details of the deal. For the large company, the details aren't material, and privately held companies aren't required to share information publicly with shareholders. That leaves investors in the dark.

Take Abbott Labs' (NYSE: ABT) license of Reata Pharmaceuticals' kidney failure drug bardoxolone yesterday for $450 million up front. That's an awful lot of money for the rights to one drug that hasn't even started phase 3 trials yet. (Abbott also gets rights to "certain other Reata compounds," but let's not hold out hope if they're not even named yet.) And Abbott is only getting the outside-the-U.S. rights to the drug, even excluding "certain Asian markets." The U.S. often makes up half or more of sales for a drug, so Abbott isn't getting that much in the deal.

By comparison, check out how much other companies have paid up-front recently:

Source: Company releases. *Includes $60 million stock investment.

But the $450 million is destined for "licensing rights to bardoxolone and a minority equity investment in the company." The companies didn't break down the split, but clearly the equity investment portion has upside potential, while the up-front fee is just the cost of doing business.

The companies also said there are milestone and royalty payments associated with the drug, but didn't break them down. It's possible Abbott made a large payment up-front in exchange for getting out of payments later on. It wouldn't be the first time that Abbott has taken on a majority of the risk for developing a drug.

Finally, the press release doesn't say who will pay for the clinical trials required to get the drug approved. Typically when a company licenses a drug in certain territories, it's responsible for paying any costs associated with gaining approval in that area. But everything is up for negotiation in a licensing deal. Abbott may be banking on Reata performing international trials that are good enough to gain approval in the EU, as well as the U.S. where Reata has retained its rights.

Investors are in the dark on this one for sure.