(Reuters) - Biogen Inc struck a $1 billion neurology drug development deal with Ionis Pharmaceuticals on Friday, expanding a partnership that developed the company’s potential blockbuster drug for spinal muscular atrophy.

A sign marks a Biogen facility in Cambridge, Massachusetts, U.S. January 26, 2017. REUTERS/Brian Snyder

Biogen’s shares, however, fell about 2 percent as investors were looking for a larger deal, especially after rival Novartis AG last week said it would buy AveXis Inc for $8.7 billion to gain access to its gene therapy for spinal muscular atrophy.

“Given the fact that just happened and ...here they are a week later not buying that company and doing a $1 billion pre-clinical deal, I think the Street remains very nervous and uncertain,” Jefferies analyst Michael Yee told Reuters.

Biogen, which has a $37 billion war chest, licensed the spinal muscular atrophy treatment Spinraza from Ionis as part of an earlier agreement.

The company is now banking on Spinraza, with a list price of $750,000 for the first year, to offset slowing growth of its top-selling drug Tecfidera, a treatment for multiple sclerosis.

Biogen’s new 10-year agreement with Ionis gives the company the option to license and commercialize a range of neurological therapies for conditions including Alzheimer’s and dementia.

“We anticipate advancing up to seven new high potential drug candidates from these collaborations into the clinic in the next two years,” Biogen executives said on a conference call.

The executives also highlighted strong safety data for treatments Ionis is working on, including a class of medicines called antisense oligonucleotides over gene therapies.

“Opportunities for antisense technology are by far broader and larger (than gene therapy), and technology is far more validated,” Ionis executives said on a conference call.

California-based Ionis is also eligible to receive milestone-based payments, license fees and royalties on net sales of the drugs as per the deal.

The agreement, which comes ahead of Biogen’s first-quarter earnings report on Tuesday, includes a $625 million equity investment in Ionis and a $375 million upfront payment.

Ionis’ shares rose 4.7 percent in early trading on Friday.