Swiss pharma company Novartis has exercised an option that gives it global development and commercialization rights to a drug being developed by US biotech Conatus Pharmaceuticals to treat non-alcoholic steatohepatitis (NASH), a progressive form of fatty liver disease.

Once all required antitrust approvals have been received, Novartis will pay a $7 million fee to Conatus for emricasan, an investigational, first-in-class, oral, pan-caspase inhibitor that has shown potential in treating NASH with advanced fibrosis and cirrhosis. Novartis said the collaboration could expand treatment options for people in various stages of fatty liver disease where no approved medicines currently exist.

Under the alliance, Conatus will perform multiple Phase IIb trials. If results are successful, Novartis will conduct Phase III studies of emricasan as a single treatment as well as developing therapies in combination with its own Farnesoid X receptor (FXR) agonists.

FXR agonists have been shown to address three of the most important aspects of NASH progression by reducing fat, inflammation and fibrosis in the liver. Novartis has two non-bile acid FXR agonists in Phase II clinical trials, both of which have Fast Track designation from the US Food and Drug Administration (FDA) for NASH with liver fibrosis. The FDA has also given Fast Track status for developing emricasan in patients with NASH cirrhosis.

The move follows another NASH collaboration that Novartis announced last month. Under this agreement, a combination of Allergan’s cenicriviroc and Novartis’ lead FXR agonist will undergo Phase IIb trials.

According to Novartis, NASH is expected to be the primary cause of liver transplants in the US by 2020.