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Amylin, Lilly Break Up; New Suitor Waiting in the Wings?

By Jennifer Boggs

BioWorld Today Managing Editor 

Amylin Pharmaceuticals Inc. and Eli Lilly and Co. are calling it quits after a nearly decade-long collaboration on diabetes drug exenatide, a move that leaves Amylin positioned as a potentially hot takeover candidate, especially if the once-weekly version of the glucagon-like peptide-1 receptor agonist, Bydureon, finally clears FDA hurdles early next year.

The transfer of full exenatide rights back to the San Diego-based biotech had been considered a likely possibility for resolving the companies' outstanding litigation – Amylin just last week lost a preliminary bid to block Lilly from promoting Tradjenta (linagliptin), a diabetes drug recently partnered with Boehringer Ingelheim GmbH, with the same sales force that markets exenatide drugs Byetta and Bydureon. Plus, there had been rumblings about Lilly hitting the market as early as 2013 with its internal GLP-1 agonist, LY2189265. (See BioWorld Today, Nov. 3, 2011.)

Still, news of the termination was "obviously a surprise and a curve ball to investors," noted Leerink Swann analyst Joshua Schimmer. Shares of Amylin (NASDAQ:AMLN) tumbled $1.20, or 11 percent, to close Tuesday at $9.73.

Terms of the termination call for Lilly to hand over control for all U.S. sales to Amylin by the end of this year. Outside the U.S., Lilly will continue selling the drug for a transition period – to expire Dec. 31, 2013 – during which Amylin will work to secure a new ex-U.S. partner. "I expect we'll be in discussions in very short order now," Amylin's president and CEO, Daniel M. Bradbury, told investors on the Tuesday morning conference call.

But, with its largest product no longer encumbered by a partnership, Amylin could make a solid strategic buy for more than one big pharma firm. Leerink's Schimmer said the number of suitable acquirers has just grown from one to "almost any large pharma with a primary care sales force and endocrine interest."

Firms with diabetes drugs other than GLP-1 agonists in their portfolios would be the likely bidders, according to Deutsche Bank analyst Robyn Karnauskas, who named Merck & Co. Inc., AstraZeneca plc, Takeda Pharmaceutical Co. Ltd. and Roche AG in a research note.

Whitehouse Station, N.J.-based Merck markets DPP-4 inhibitor Januvia (sitagliptin), while AstraZeneca, of London, sells Onglyza (saxagliptin) in a joint venture with Bristol-Myers Squibb Co. Osaka, Japan-based Takeda, meanwhile, could be looking for ways to beef up its diabetes franchise before mid-2012 when Actos (pioglitazone) is set to go generic. And Swiss pharma Roche had its plans to enter the diabetes space derailed after safety issues cropped up in late-stage studies of taspoglutide, a GLP-1 drug partnered with Ipsen SA. (See BioWorld Today, Sept. 14, 2010.)

Amylin had been working with Lilly on exenatide since 2002, first creating twice-daily GLP-1 drug Byetta, which managed to pull in 2010 sales of $710 million despite increasing competition in the diabetes space, particularly with the January 2010 approval of Victoza (liraglutide), a once-daily GLP-1 product from Novo Nordisk. The once-weekly version, Bydureon, hit a few snags before gaining approval earlier this year in Europe.

The companies completed an FDA-required qTC study and resubmitted a new drug application. Bydureon is under review at the FDA, with a January PDUFA date.

Amylin's Bradbury said his firm wanted to resolve the litigation and regain rights now, so the biotech has enough time to focus on pre-launch activities for Bydureon in the U.S. But less optimistic analysts couldn't help wondering whether the Indianapolis-based big pharma firm might be having doubts going into the FDA review. "Why would they walk away now?" asked J.P. Morgan analyst Cory Kasimov.

Bradbury and other company execs, however, pointed to the financial terms, which call for Amylin to make a one-time up-front cash payment of $250 million – that hefty chunk will reduce the company's cash position to about $210 million – plus future revenue-sharing payments equal to 15 percent of global net sales of exenatide products capped at $1.2 billion plus accrued interest. But that total is linked to Bydureon's approval in the U.S.

Should the once-weekly exenatide fail to gain approval by June 30, 2014, Amylin's payments to Lilly drop to 8 percent of global exenatide sales. "So it actually changes the economics of the deal if Bydureon is not approved," Bradbury said.

The revenue-sharing payments don't start until late 2012. In the meantime, Amylin would not pay Lilly its 50-percent share of royalties from Byetta – and Bydureon, if it's approved – a cost savings that should help offset increased infrastructure expenses as Amylin adds to its specialty diabetes sales force, going from 325 reps to 650 reps ahead of the Bydureon launch.

But Amylin's biggest challenge could be its competitors in the GLP-1 arena. The biotech will go "toe-to-toe with Novo Nordisk's commercial prowess," noted JPM's Kasimov. And coming down the pipeline is Lyxumia (lixisenatide), developed by Zealand Pharma A/S and partnered with Sanofi SA.

So a potential big pharma acquisition could look good to Amylin, too. The company was considered a buyout prospect in 2009, when activist investor Carl Icahn took an interest. Icahn is known for pushing biotech sales – he successfully lobbied for the sale of ImClone Systems Inc. to Lilly in 2008 – but he failed to gain an influential number of board seats during a contentious shareholder vote. (See BioWorld Today, May 29, 2009.)

While Amylin's partnership with Lilly has been profitable, it has not been without its troubles. The most recent battle involved a lawsuit filed by Amylin after Lilly entered a exenatide-like agreement with German pharma Boehringer for to market the DPP-4 drug Tradjenta. Lilly refused to use a separate sales force to market both diabetes drugs, so Amylin claimed "anticompetitive behavior," stating that the sales force would focus its marketing efforts on the new drug instead of maximizing Byetta sales.

With Amylin holding all rights, the sales force will be able to deliver "a single, consistent message, which is not confused with having additional diabetes products," Bradbury told investors.

Under the companies' Byetta deal, Amylin and Lilly had a 50-50 profit-sharing arrangement in the U.S., while Amylin got a royalty on sales outside the U.S. The Bydureon deal is structured similarly, except that Waltham, Mass.-based Alkermes, which contributed its Medisorb technology to develop the long-acting version, is entitled to an 8 percent royalty on worldwide Bydureon revenue.

Under the termination, Amylin also will owe Lilly a $150 million milestone connected to approval of a once-monthly suspension version of exenatide that is in Phase II development. Bradbury said the firm is seeking an end-of-Phase II meeting with the FDA later this year, with plans to launch Phase III programs with both weekly and monthly suspension versions next year.