Lilly Prepares for Patent Loss in Psychosis Drug, Moves into Arthritis Market

Includes: INCY, LLY
by: The Burrill Report
Eli Lilly (NYSE:LLY) has acquired global rights to Incyte's (NASDAQ:INCY) lead mid-stage therapy for inflammatory and autoimmune diseases for $755 million. The move charts a course for Lilly's expansion into the multi-billion-dollar oral rheumatoid arthritis market, potentially helping quell investor concern about how the company will sustain its revenues once its $5 billion blockbuster Zyprexa loses patent protection in 2011.
Revenue from therapies targeting autoimmune diseases, including rheumatoid arthritis, accounted for $16 billion of sales during 2008 according to IMS Health, making them the tenth largest therapeutic class globally. The Lilly agreement makes the perfect tree-topper to Incyte, which got an early gift November 25 when it struck what could turn out to be a $1 billion deal with Novartis (NYSE:NVS), which licensed ex-U.S. rights for two of its investigational hematology-oncology therapies: INCB18424 for myelofibrosis and INCB28060, a potential treatment for multiple cancers.
“This new alliance with Incyte reinforces Lilly's commitment to expand our presence in inflammation and autoimmunity through the development of a new class of oral anti-inflammatory therapies,” says Eiry Roberts, Lilly's vice president for autoimmune product development.
For its part, Lilly will pay Incyte $90 million upfront and as much as $665 million in additional milestones and royalty payments on future sales of the drug, INCB28050 if it is successfully commercialized. It is currently being studied in a mid-stage clinical trial for rheumatoid arthritis.
Incyte retains an option to co-develop its JAK1/JAK2 inhibitors with Lilly on a compound-by-compound and indication-by-indication basis, an option Incyte said it would consider exercising in the second half of 2010 at the earliest.