Rigel Pharmaceuticals Inc. cut the biggest deal of the company’s life with its new collaboration with Eli Lilly and Co. that could be worth $960 million.

The two will co-develop and commercialize Rigel’s R-552, a receptor-interacting serine/threonine-protein kinase 1 (RIPK1) inhibitor, for all indications including autoimmune and inflammatory diseases.

Rigel will receive an up-front cash payment of $125 million and could earn up to an additional $835 million in future development, regulatory and commercial milestones. Rigel is also eligible for tiered royalties ranging from the mid-single-digit to the high teens.

The collaboration resembles the November 2018 agreement struck by Sanofi SA’s Genzyme Corp. and Denali Therapeutics Inc. to develop multiple RIPK1 inhibitors to cross, like Rigel’s, the blood-brain barrier. Denali received $125 million up front and was eligible to earn nearly $1.1 billion in milestone payments from Sanofi. However, in June, Denali said it was pausing development of DNL-747 but remained focused on DNL-758 and began dosing in late July in a phase Ib study in hospitalized adults with severe COVID-19 lung disease.

In its deal with Lilly, the big pharma is paying all costs for R-552’s global commercialization, while Rigel retains the rights to co-commercialize the RIPK1 inhibitor in the U.S. Lilly is responsible for all clinical development and commercialization of the RIPK1 inhibitors in CNS indications.

Raul Rodriguez, president and CEO, Rigel

“We were looking for a partner that had a commitment and knowledge in CNS,” Rigel CEO Raul Rodriguez told BioWorld. “You can’t find a better partner than Lilly. They see this as an area of tremendous opportunity.”

Rodriguez said the company already knew the Lilly people well. Indeed, Rigel’s executive vice president and chief commercial officer, Dave Santos, once held a sales role at Lilly Oncology. Previous knowledge of the people and company helped the deal along, Rodriguez said, adding that “it’s still a struggle. Negotiating deals without meeting the other person is challenging. Usually you’re locked in a room and you haggle it out for a week.”

Rigel already has R-552 in the clinic, having completed a phase I trial and prepping a phase II trial to begin later in 2021.

H.C. Wainwright analysts, on Feb. 18, wrote that they were impressed with the overall terms of the Rigel-Lilly global deal.

“If translated into the clinic and should safety be favorable, R-552 could be a novel targeted approach to decrease pathological exacerbation of inflammatory signals across several inflammatory and autoimmune-based disorders,” the analysts added.

Piper Sandler analysts wrote Feb. 18 that the collaboration did not come as a surprise and that they expect the drug’s development path will come into better focus in 2021 when the deal closes and as R-552 enters the phase II study. The analysts also said they were factoring in Rigel’s ongoing development of fostamatinib in hospitalized COVID-19 patients, with a phase II readout expected in April that could potentially facilitate an emergency use authorization filing in the U.S.

In late January, Rigel was awarded $16.5 million by the U.S. Department of Defense’s Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense to support the ongoing phase III trial to evaluate the safety and efficacy of fostamatinib in hospitalized COVID-19 patients.

Fostamatinib is marketed in the U.S. as Tavalisse (fostamatinib disodium hexahydrate) tablets, and it is approved in the U.S., Europe and Canada for treating adult chronic immune thrombocytopenia.

Rigel is no stranger to collaborating as it is in the clinic with three partners. In June 2011, Rigel entered an exclusive, worldwide research, development and commercialization agreement with Bergenbio ASA, of Bergen, Norway, for investigational AXL receptor tyrosine kinase inhibitor R-428 (bemcentinib). Rigel is also collaborating with Daiichi-Sankyo develop murine double minute 2 protein inhibitors to treat cancer. Its third partner is Astrazeneca plc, which has exclusive worldwide rights to develop and commercialize Rigel’s inhaled JAK inhibitor for treating patients with chronic asthma.

Rigel’s stock (NASDAQ:RIGL) popped over its previous five-year high in March 2018 of $4.50 per share at midday to rise 11.8% at $5.06 per share. However, by the end of trading on Feb. 18, shares settled to a 5.08% increase to close at $4.76.