Amylin CEO Sees Break With Lilly On Diabetes Drug As A Plus For Shareholders

Includes: BMY, LLY, NVO
by: The Burrill Report

By Marie Daghlian

Amylin Pharmaceuticals (AMLN) and Eli Lilly (NYSE:LLY) are ending a ten year partnership that resulted in the development and commercialization of Byetta (exenatide), the first in a new class of type 2 diabetes, when it was first approved in 2005.

The termination of the alliance also puts to rest a legal dispute brought by Amylin in May alleging Lilly had violated their agreement when it entered into a partnership with Boehringer Ingelheim to commercialize Tradjenta, a competing diabetes drug.

The termination also comes just ahead of the U.S. Food and Drug Administration’s expected decision date for Bydureon, a long-lasting version of exenatide, at the end of January 2012. The drug has received European approval but was rejected by the FDA last year over concern about its effect on patients with irregular heartbeat. The companies addressed the FDA’s concerns and resubmitted their application in July.

Under the old agreement, Amylin and Lilly shared expenses and profits in the United States, and Lilly was responsible for global development and commercialization activities with Amylin entitled to tiered royalties from foreign sales. Under the new agreement, Amylin will take over full global control of exenatide, starting in the United States on November 30 and gradually extending to all markets by the end of 2013. The companies plan to make the transition as seamless as possible.

“Amylin is excited to assume full responsibility for developing and commercializing exenatide,” says Dan Bradbury, president and CEO of Amylin. He plans to partner the drug in foreign markets before the end of 2013, when Lilly will no longer be involved.

We anticipate working with one or more partners outside the U.S. in order to maximize the global potential of this innovative molecule and achieve greater operational flexibility and efficiency.

In exchange for full rights, Amylin is paying Lilly a one-time fee of $250 million by November 22. It will also pay Lilly 15 percent of global net sales until it has made aggregate payments of $1.2 billion plus accrued interest. However, if it fails to win U.S. regulatory approval for Bydureon by the end of June 2014, its revenue sharing obligations with Lilly will end and revert to 8 percent of global net sales of exenatide products. Amylin will also pay Lilly $150 million if the FDA approves a once monthly suspension of exenatide that is currently in mid-stage development. Lilly has also extended the maturity date for a $165 million credit facility by two years to the second quarter of 2016.

Bradbury feels confident the deal will be a plus for Amylin’s shareholders, even with an eventual payout that could reach $1.4 billion. Exenatide faces stiff competition from newer diabetes drugs coming to market, including two that were approved recently - Tradjenta and Novo Nordisk’s (NYSE:NVO) Victoza.