Teva Pharmaceutical Industries Ltd. (TEVA) has recently announced a collaboration with Sanofi (SNY) on the development of an innovative treatment for inflammatory bowel disease (IBD). According to Evercore ISI analysts, this partnership is expected to be highly lucrative from a commercial perspective, given the growing interest in this therapy among investors.

The joint venture aims to develop and commercialize TEV ‘574, an anti-TL1A therapy specifically designed to treat ulcerative colitis and Crohn’s disease. Analysts from TD Cowen suggest that TL1A inhibitors like TEV ‘574 hold significant promise and are projected to capture 10% to 15% of the moderate to severe ulcerative colitis market within three years of its launch.

Earlier this year, Merck & Co. Inc. acquired Prometheus Biosciences, a leading company in the field of anti-TL1A therapy, for a staggering $10.8 billion. This acquisition further highlights the industry’s interest in these types of therapies.

As part of their agreement, Teva will receive an upfront payment of $500 million, along with potential milestone payments of up to $1 billion for development and launch. Additionally, both companies will equally share global development costs and net profits and losses in major markets.

Despite speculation from Evercore ISI analyst Umer Raffat about whether Teva received a fair price compared to the Prometheus deal, it should be noted that Prometheus had phase 2 data on its asset while Teva does not. However, as Teva secures Sanofi as its partner, it gains the advantage of collaborating with the leading player in immunology. This partnership could potentially generate impressive sales of $4 to $5 billion.

In response to this news, Teva’s American depositary receipts (ADRs) experienced a premarket increase of 1.3% and have gained 5.3% year-to-date. Similarly, Sanofi’s ADRs gained 0.8% premarket and have risen by 10.6% so far this year.

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