Abbott to spend $400 million on new drugs

December 12, 2011

By The Associated Press and Alex Keefe

North Chicago-based drug and medical device maker Abbott Laboratories said Monday it spent $400 million to collaborate with Reata Pharmaceuticals on the development of the privately held company's class of oral anti-inflammatory drugs.

Abbott, based in North Chicago, Ill., said Reata is developing a portfolio of antioxidant inflammation modulators, which help boost the production of antioxidant, detoxification and anti-inflammatory genes. The potential drugs cover a range of therapeutic areas, and could be used to treat several conditions, including arthritis, chronic kidney disease and multiple sclerosis.

Abbott made a one-time license payment of $400 million to the Irving, Texas, company.

But the deal could be risky for Abbott because the drugs it is buying are still in the early testing stages, said Morningstar analyst Damien Conover.

"There's a high degree of risk whether or not these products will actually make it to the market," Conover said Monday. "And $400 milllion is a lot of money to be spending on this very early-stage products."

But if it succeeds, Conover said the new class of drugs could be a boon to Abbott's pharmaceutical arm, which is set to split off into its own company some time during 2012.

The companies said the agreement is in addition to one they entered into last year in which Abbott received exclusive rights to develop and sell Reata's lead compound, bardoxolone methyl, outside the United States except in some Asian markets. Bardoxolone methyl is being studied in a late-stage clinical trial of patients with chronic kidney disease and type 2 diabetes.

Abbott and Reata expect the first compound from their new collaboration to start human clinical trials next year.