Biogen will partner with AGTC to develop gene therapies for multiple eye diseases, in a collaboration that could generate more than $1 billion for AGTC. The deal will also expand Biogen into the ophthalmology space while growing the biotech giant’s presence in AGTC’s specialty of gene therapy.

The partners will work to develop AGTC gene therapies that include a clinical-stage candidate for X-linked retinoschisis (XLRS) and a preclinical candidate for X-linked retinitis pigmentosa (XLRP). Both are rare eye diseases; XLRS has an estimated patient population in the U.S. and E.U. of 35,000, and XLRP, 20,000.

Both conditions, according to Biogen and AGTC, are also examples of unmet medical needs that may be addressed by replacing the single, faulty gene causing each disease. For XLRS, a first-in-human study of an AGTC gene therapy has recently begun, with initial clinical data expected to emerge later this year.

“We expect this collaboration will further validate our novel adeno-associated virus (AAV) gene therapy platform and support the development of new therapies that may allow for transformative treatments for these rare inherited eye diseases and other clinical indications,” Sue Washer, AGTC’s president and CEO, said in a statement.

Under the companies’ collaboration and license agreement, Biogen will obtain worldwide commercialization rights for the XLRS and XLRP programs. AGTC has an option to share development costs and profits after initial clinical trial data are available, and an option to co-promote the second of these products to be approved in the U.S.

AGTC will lead the clinical development programs of XLRS through product approval and of XLRP through the completion of first-in-human trials. Biogen will support the clinical development costs, subject to conditions, following the first-in-human study for XLRS and IND-enabling studies for XLRP.

Biogen will receive an exclusive license to use AGTC’s H.A.V.E. (herpes-assisted vector expansion) manufacturing platform to make AAV vectors for up to six genes, three of which are in AGTC’s discretion, in exchange for milestones and royalties.

The collaboration builds a presence for Biogen in ophthalmology, where AGTC has no fewer than five ongoing ophthalmology development programs. In addition to XLRS and XLRP, the company has programs designed to treat achromatopsia, alpha-1 antitrypsin, and age-related macular degeneration.

Biogen’s pipeline lists no eye treatments—though in April at the American Academy of Neurology annual meeting, the company presented Phase II data showing its Anti-LINGO-1 (BIIB033), a treatment candidate for multiple sclerosis, showed statistically significant improvement in remyelinating damaged neurons, and thus could potentially treat acute optic neuritis.

Biogen has moved into gene therapy over the past year, hiring Olivier Danos, Ph.D., as svp, cell and gene therapy, and teaming up with Italy’s Fondazione Telethon and Ospedale San Raffaele to develop gene therapies for hemophilia A and B, under which the company agreed to pay $5 million upfront and undisclosed additional payments.

Biogen has agreed to pay AGTC $124 million upfront—including a $30 million equity investment at $20.63 per share, nearly 27% above AGTC’s closing share price yesterday of $16.26—as well as R&D expenses. In return, AGTC will grant Biogen a license to the XLRS and XLRP programs, and the option to license discovery programs for three additional indications at the time of clinical candidate selection.

AGTC could receive up to $472.5 million collectively for the XLRS and XLRP programs, as well as royalties in the high single digit to mid-teen percentages of annual net sales. Biogen also agreed to pay AGTC up to $592.5 million across the discovery programs, along with royalties in the mid-single digits to low-teen percentages of annual net sales.

The deal is expected to close in the third quarter of this year, subject to customary closing conditions, that include the expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 in the U.S.

“With this collaboration, we hope to advance gene therapies to open possibilities for patients who suffer from diseases that are well understood, but have no adequate treatment,” Dr. Danos stated.