Biotest shares were up more than 20 percent in Frankfurt after the announcement on Tuesday.

Under the agreement, Abbott will pay Biotest a fee of $85 million for rights to BT-061, which is currently in Phase II clinical trials for rheumatoid arthritis and psoriasis. Biotest is also eligible for payments of up to $395 million should the drug achieve milestones, as well as royalties.

Abbott and Biotest will co-promote BT-061 in five major European markets -- Germany, France, the United Kingdom, Italy and Spain -- and Abbott will have exclusive global rights to commercialize the drug outside those countries.

Known as an anti-CD4 antibody, BT-061 is designed to work by activating the body's T-regulatory cells, strengthening a natural function of the body that prevents excessive immune reactions.

Humira ranked as the ninth-biggest-selling drug in the world last year with nearly $6 billion in sales, according to pharmaceutical information company IMS Health. However, Wall Street is concerned about looming competition, including from an oral drug in development by Pfizer Inc.

Abbott shares were up 0.4 percent in morning trading on the New York Stock Exchange.

(Reporting by Lewis Krauskopf, additional reporting by Sue Kelly in Chicago)