Amylin Pharmaceuticals Inc. and Eli Lilly & Co. will unwind their partnership around the diabetes drug exenatide, marketed as Byetta and Bydureon, and end a long-fruitful agreement that became uneasy due to a legal battle concerning Tradjenta (linagliptin), a competing drug marketed by Lilly.

The companies said Nov. 8 that San Diego-based Amylin will receive full control of the exenatide franchise, and all litigation between the two would be dismissed under the new deal. [See Deal] Although it will increase Amylin’s costs in the short term, it once again has a potentially lucrative partnering opportunity for the franchise. Amylin is expected to seek a deal for exenatide’s rights outside the U.S. within two years.

Although it represents the ending of a partnership, the resolution includes ongoing payments that could add up to more than $1.6 billion to Lilly. Amylin will pay Lilly $250 million up-front, as well as 15% of global net sales – worth up to $1.2 billion plus interest – from ongoing marketing of exenatide-related products, for full global rights to the drug. If a suspension formulation of exenatide, currently in Phase II and designed to be administered monthly, is approved, Amylin would award Lilly a $150 million milestone payment. Such a drug could cannibalize Bydureon sales, just as Bydureon is expected to replace Byetta for many patients.

The new agreement will terminate a compact into which Amylin and Lilly entered in 2002, [See Deal] giving them shared rights to the first-in-class glucagon-like peptide-1 agonist Byetta. Approved in 2005, Byetta brought in nearly $800 million worldwide in 2009, but sales have since slipped due to competitive pressures from other GLP-1 drugs as well as novel diabetes therapies from different classes. Byetta’s twice-daily injection, administered via an autoinjector pen, stimulates insulin production as a response to consuming a meal.

Amylin is still awaiting U.S. approval of Bydureon, a form of exenatide that can be administered once weekly via subcutaneous injection rather than twice daily. Bydureon was approved in Europe June 21, but is still under review Stateside, with a PDUFA date of January 28, 2012. A “Complete Response” letter issued in October 2010 required additional assessment of the drug’s effect on electrical QT intervals in the heart, which can lead to arrhythmias, but Amylin CEO Daniel Bradbury said during a Nov. 8 conference call announcing the settlement that the data “came out clean,” and expressed confidence that Bydureon will be approved in the U.S.Also see "Amylin's Once-Weekly Bydureon Clears Major Cardiac Safety Hurdle" - Pink Sheet, 7 July, 2011..

With Lawsuit Dangling, A Deal Unwinds

Relations between the longtime partners became frostier in May, when Amylin filed suit to block Lilly from marketing newly-approved Tradjenta with the same sales force it uses to sell Byetta. Orally administered Tradjenta blocks the dipeptidyl peptidase-4 protein, which plays a role in glucose metabolism, in part by degrading GLP-1, the same incretin exenatide acts upon. Lilly and Boehringer Ingelheim GMBH have an agreement to co-promote Tradjenta, approved May 2 Also see "Caught Between Two Partners: Amylin Seeks To Block Lilly's Byetta Sales Force From Marketing Tradjenta" - Pink Sheet, 16 May, 2011..

Although the drugs do not have the same mechanism of action, Amylin saw Lilly’s actions as anti-competitive, and as a breach of their original 2002 agreement, since using a shared sales force would violate the confidentiality of their union. A judge briefly halted sales of Tradjenta via a temporary restraining order, but ultimately ruled that Amylin would not suffer irreparable harm, and noted that FDA regulations prohibit Lilly sales representatives from falsely describing Byetta. Tradjenta returned to the market in June Also see "Lilly Sales Reps Resume Launch Of BI's Tradjenta; Judge Says FDA Regs Protect Byetta" - Pink Sheet, 9 June, 2011..

During the conference call, Bradbury said the lawsuit “absolutely” was related to the companies’ decision to end their association. Separately, he deflected suggestions that Lilly had other reasons for unwinding the deal, such as a lack of confidence that Bydureon would be approved early next year.

In fact, much of the revised agreement hinges on Bydureon’s green-lighting by FDA. If the drug isn’t approved by 2014, Amylin would pay 8% rather than 15% of global net sales of exenatide.

Once Again, A Candidate For A Partnership

Amylin will receive full control of exenatide in the U.S. at the end of November, while Lilly will continue to commercialize the drug outside the U.S. for a time. Its obligation officially expires at the end of 2013, but Amylin is aiming to forge a new partnership outside the U.S. by that point, while keeping rights inside the U.S.. Amylin has no international commercial infrastructure of its own.

Negotiations with alternate partners have not yet begun. “We weren’t able to initiate any discussions prior to announcing this settlement, but I expect that we’ll be in discussions in very short order,” said Bradbury in a conference call announcing the settlement. He added that the company will not seek a co-promotion agreement overseas.

While the clinical and regulatory path for new diabetes drugs is widely considered rocky, a late-stage candidate with a strong market precedent could command big money in a partnership with any of several big pharmas. Deutsche Bank Equity Research analyst Robyn Karnauskas pointed out in a Nov. 8 research note that Sanofi, GlaxoSmithKline PLC, and Novo Nordisk AS currently have competing GLP-1 drugs on the market, but several others, such as Merck & Co. Inc., AstraZeneca PLC, Roche and Takeda Pharmaceutical Co. Ltd. are potential partnership candidates.

Roche endured the failure of taspoglutide, another long-acting GLP-1 candidate, in 2010 Also see "Roche/Ipsen's Suspended Taspoglutide Could Become Another Diabetes Casualty" - Pink Sheet, 10 September, 2010.. Merck and AstraZeneca have DPP-4 drugs – Januvia (sitagliptin) and Onglyza (saxagliptin) – on the market.

Moreover, any potential partner could also become a buyer for Amylin as well. The company has another diabetes drug, Symlin (pramlintide), as well as some preclinical candidates in its pipeline.

“We believe that the number of suitable potential acquirers who could recognize massive synergies with Amylin has just grown from one, Lilly, to almost any large pharma with a primary care salesforce and an endocrine interest,” wrote Leerink Swann analyst Joshua Schimmer in a Nov. 8 research note.

During the call, Bradbury said exenatide sales outside the U.S. were about $42 million during the third quarter of 2010, indicating an annual run rate of $170 million, but are expected to increase with a boost from Bydureon.

Amylin is expected to have about $210 million in cash after the up-front payment to Lilly. While it will incur increased expenses as it hires new sales staff in the U.S., it will also retain more of the profits from exenatide sales, company executives pointed out.

Amylin, Lilly End Exenatide Tie-Up, Marking End To Litigation

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