Sanofi SA (SNY) is betting big on autoimmune diseases, and it's doing so by deepening its relationship with Dren Bio, a privately held clinical-stage biotech company that's caught the pharma giant's attention.

The two companies announced an expanded collaboration focused on discovering and developing a next-generation B-cell depleting therapy for various autoimmune conditions. This isn't their first rodeo together. Earlier this year, Sanofi acquired Dren Bio's DR-0201 program, which targets deep B-cell depletion—a promising approach for treating autoimmune diseases.

That acquired program, now rebranded as SAR448501, is currently being tested in two phase one studies. Early results show the therapy can deplete B-cells and potentially induce sustained treatment-free remission in patients with autoimmune diseases. That's the kind of outcome that gets pharmaceutical executives excited, because "treatment-free remission" is basically the holy grail of chronic disease management.

So what's the price tag for this expanded partnership? Dren Bio pockets $100 million upfront and could receive up to $1.7 billion more through development, regulatory, and commercial milestone payments. That's serious money, even by big pharma standards.

Here's how the collaboration will work: both companies will team up on discovery and preclinical development, tapping into Dren Bio's proprietary platform. Once they select a development candidate, Sanofi takes the wheel, handling everything from manufacturing to regulatory approval to commercialization.

But Dren Bio isn't just cashing a check and walking away. The biotech has an interesting option to enter a U.S. profit and loss sharing arrangement with Sanofi. If Dren Bio exercises this option, it would co-fund 40% of global development costs. In return, it gets U.S. co-promotion rights and a 50/50 split of U.S. profits and losses. Outside the United States, Dren Bio would still receive milestone payments and tiered royalties on net sales.

It's a structure that gives the smaller company meaningful upside if the therapy succeeds, while allowing it to participate more actively in the U.S. market if it wants to put skin in the game.

SNY Price Action: Sanofi stock declined 2.87% to $47.29 on Monday.