Amylin Pharmaceuticals Inc. (AMLN) and Eli Lilly & Co. (LLY) agreed to end a decade-long diabetes partnership to resolve litigation between the two drugmakers.
Amylin will assume global responsibility for developing the injectable drug Byetta and win rights to Bydureon, a once-weekly version that may gain U.S. approval next year, the companies said today in a statement. Amylin, based in San Diego, will pay Lilly $250 million upfront and future revenue-sharing payments of $1.2 billion plus interest.
Amylin dropped 11 percent, the most in eight months, to $9.73 at the close of New York trading. The deal increases the company’s costs for selling its diabetes drugs and leaves it with Indianapolis-based Lilly as a potential competitor. Lilly is developing its own product, linagliptin, to compete with Byetta and Bydureon.
“One can envision this being viewed as lack of confidence on Lilly’s part in the approvability of Bydureon,” Ian Somaiya, a Piper Jaffray & Co analyst in New York, said on a conference call by Amylin today.
Byetta brought in $559 million for Amylin last year, almost 85 percent of revenue, according to data compiled by Bloomberg. The therapy accounted for $151 million in sales for Lilly in 2010. Amylin sued Lilly in May to prevent the drugmaker from using the same sales force to market linagliptin, which it’s developing with German drugmaker Boehringer Ingelheim GmbH.
“Once the market digests this, they will see it’s a great value for Amylin shareholders,” Dan Bradbury, the company’s chief executive officer, said in a telephone interview today.
Seeking Partners
The drugmaker will seek partners to help sell the treatment outside the U.S., Bradbury said. While no talks have taken place yet, suitors should be plentiful, he said.
Lilly rose 1.7 percent to $38.99.
The divorce will let Lilly focus more closely on its own diabetes pipeline and simplify commercial and clinical operations, Tarra Ryker, a spokeswoman for the company, said in an e-mail. It will also boost Lilly’s cash flow the next two years, she said.
Amylin sued Lilly in federal court alleging anticompetitive activity and breach of a strategic alliance agreement, Amylin said in a statement in May.
“There’s a great opportunity with the launch of Bydureon in the United States coming up,” Bradbury said. “Resolving the lawsuit at this point enables us to focus on that and to maximize the value.
Unusual Availability
“It’s unusual in the industry for two approved assets to be available for partnership at the same time,” Bradbury said, referring to Byetta and Bydureon. “We’re very confident that there will be a lot of interest.”
Linagliptin, sold under the name Tradjenta, was approved in May by the FDA for sale in the U.S.
Byetta stimulates the pancreas cells to produce insulin when blood sugar is high. It has been approved for patients taking other diabetes medicines and on its own as a therapy with diet and exercise.
The deal will add to cash flow for Amylin by the end of 2013 and perhaps sooner, depending on partnerships outside the U.S., Bradbury said.
To contact the reporters on this story: Alex Nussbaum in New York anussbaum1@bloomberg.net; Chris Staiti at cstaiti@bloomberg.net
To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net.
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