With its blockbuster rheumatoid arthritis drug Humira set to lose patent protection at the end of 2016, Abbott is banking on an investigational compound from Galapagos as a potential replacement. The Big Pharma will pay the Belgian biotech $150 million upfront for the global right to develop and commercialize its oral, next-generation JAK1 inhibitor in mid-stage development with the potential to treat multiple autoimmune diseases.

Abbott is preparing to split itself into two public companies—a pharmaceutical company and a medical products company—with Humira the cornerstone of the new drug company. Global sales of the biologic were almost $8 billion in 2011 and with Lipitor now off-patent, Humira is expected to be the best selling biotech drug in 2012. In 2010 Humira accounted for one third of its prescription drug revenue.

Abbott has been spending heavily to beef up its autoimmune franchise ahead of the split. In 2011 it paid German biotech Biotest $85 million upfront for an investigational antibody in mid-stage development as a treatment for autoimmune diseases. It also bought a preclinical program focused in inflammatory diseases from partner Reata Pharmaceuticals for $400 million. In 2010 Abbott paid Reata $450 million for ex-U.S. rights to its late stage investigational chronic kidney disease treatment bardoxolone.

Galapagos’ GLPG0634 is a JAK1 inhibitor that comes from a family of enzymes that play a key role in the signaling mechanism used by a number of cytokines that are involved in autoimmune diseases. In recent mid-stage studies, it demonstrated efficacy measures among the best reported in rheumatoid arthritis. All patients completed the study, and few experienced any side effects such as anemia or change in blood pressure or lipid levels. A dose-range finding study is expected to begin shortly.

“The addition of this novel, oral compound offers patients the potential for advanced treatment options and an improved patient experience to address RA and other autoimmune diseases,” says John Leonard, Abbott’s senior vice president of global research and development. “Abbott’s expertise in immunology, combined with a robust portfolio of investigational treatments represents promising innovation across several areas of medical need.

Under the terms of their agreement, Abbott is making an initial upfront payment of $150 million for rights related to the global collaboration. If mid-stage studies are successfully completed, which Galapagos expects to happen in 2014, Abbott will license the program for a one-time fee of $200 million, based on the studies meeting certain pre-agreed criteria. It will assume sole responsibility for all further development. Galapagos could receive up to an additional $1 billion in milestone payments based on successful development and commercialization, in addition to tiered double-digit royalties on net sales. Galapagos retained co-promotion rights in Belgium, the Netherlands, and Luxembourg.

“With GLPG0634 we have proven that we can deliver from target to clinical proof-of-concept, and we aim to do the same on many novel target programs in our pipeline,” says Onno van de Stolpe, CEO of Galapagos. “This collaboration is transformational for Galapagos, providing the means to progress these innovative products into the clinic.”