In a deal that could bring the company as much as $1.04 billion, Arrowhead Pharmaceuticals Inc. will collaborate with Takeda Pharmaceutical Co. Ltd. to co-develop and co-commercialize an investigational RNAi-based liver disease treatment.

Arrowhead’s candidate, ARO-AAT, is designed to reduce mutant aplpha-1 antitrypsin protein production, which causes the disease to progress.

Arrowhead will receive a $300 million up-front payment in addition to development, regulatory and commercial milestones that could total $740 million.

The companies will co-develop and co-commercialize the therapy in the U.S. If ARO-AAT is approved, the two companies agreed to equally split the profits. Takeda is to receive an exclusive license to commercialize ARO-AAT outside the U.S., with Arrowhead eligible to receive tiered royalties of 20% to 25% on net sales.

Christopher Anzalone, Arrowhead’s president and CEO, told investors in an Oct. 8 morning call that the time was right to partner on the drug so it could decrease its reliance on capital market to fund its pipeline.

“It is clearly time to move forward with commercial planning,” he said.

Anzalone also said the Pasadena, Calif.-based company is talking with the FDA to find ways for streamlining and accelerating ARO-AAT’s remaining clinical studies.

The deal’s fulcrum is data from Arrowhead’s open-label phase II data The study of ARO-AAT for treating the rare genetic liver disease associated with alpha-1 antitrypsin deficiency (AATD) revealed evidence of a meaningful pharmacodynamic effect that led to relevant biomarker improvements. Among the data included are an up to 97% reduction in intrahepatic mutant AAT protein Z-AAT polymer, an up to 95% reduction in intrahepatic total Z-AAT burden, an up to 66% and 58% reduction, respectively, in circulating alanine aminotransferase and gamma-glutamyl transferase, both serum biomarkers of liver injury levels, and an up to 26% improvement in transient elastography Fibroscan values, with three of the cohort’s four patients exhibiting greater than 20% reductions.

The data were culled from 24 weeks of treatment in the first of a planned three cohorts. The cohort’s four patients received 200 mg of ARO-AAT injected subcutaneously at weeks one, four and 16. The multidose phase II study of about 16 adults with AATD-associated liver disease and baseline liver fibrosis began in December 2019 and has an estimated study completion date of November 2021. The primary outcome measure is the change from baseline over time in a histological liver disease activity scale.

Company stock (NASDAQ: ARWR) received a modest bump in when the market opened as shares were up 3.3%.

Arrowhead is no stranger to partnering. It currently has an RNAi targeting hepatitis B virus infection therapy in a phase II study along with Janssen Pharmaceuticals Inc.