In an expansion of their deal to develop inhaled insulin, Eli Lilly and Co. is buying $30 million in newly issued convertible preferred stock from Alkermes Inc., which will use the money to pay for the joint development program for 2003 and 2004.
"It's a vehicle for funding," said Rebecca Peterson, director of corporate communications for Cambridge, Mass.-based Alkermes, who called Lilly "the partner of choice for diabetes."
Alkermes also gets an increase in the royalty rate payable for the potential product, although Lilly, of Indianapolis, has the right to exchange the preferred shares for a reduction in the rate back to the original level, which was not disclosed.
The preferred stock is convertible into Alkermes common shares at market price at Alkermes' option, upon filing of the new drug application for the insulin product. Unlike many deals, this one lacks the walk-away provision often sought by partners and cannot be terminated without cause until January 2005.
"It's an unusual circumstance to see a large pharma company making a commitment for that period of time," Peterson told BioWorld Today.
Upon conversion of the preferred stock, Alkermes will register for resale all shares. How many shares the company has outstanding at that point "depends on the price and time of conversion," Peterson noted. Alkermes had about 64.4 million shares outstanding.
Last spring, the company entered the deal with Lilly, which is focused on Alkermes' Advanced Inhalation Research pulmonary drug delivery system. It was the second AIR collaboration between them, and includes short-acting and long-acting insulin as well as other potential products for the treatment of diabetes. About a year earlier, they had agreed to work together on an inhaled delivery method for human growth hormone.
AIR delivers a range of dosages of low-density drug particles into the lungs through a small inhaler device. (See BioWorld Today, April 3, 2001, and Feb. 9, 2000.)
The Lilly news is a bright spot for Alkermes, which lately has met with troubles, letting go 23 percent of its work force in August after an FDA non-approvable letter for the anti-psychotic drug Risperdal Consta, which is partnered with Janssen Pharmaceutica Products LP, of Beerse, Belgium, a wholly owned subsidiary of New Brunswick, N.J.-based Johnson & Johnson. (See BioWorld Today, July 2, 2002.)
"J&J is working to get this product approved," Peterson said.
Risperdal Consta (a formulation of risperidone) uses Medisorb, Alkermes' injectable, extended-release drug delivery technology that encapsulates drugs into small polymeric microspheres that degrade slowly and release the medication at a controlled rate following injection.
Things got worse when market conditions caused Alkermes to back out of a proposed $934 million merger in which Alkermes would have bought the 81 percent that it didn't already own of Liberty Corner, N.J.-based Reliant Pharmaceuticals LLC. (See BioWorld Today, March 22, 2002, and Aug. 15, 2002.)
In good-for-Alkermes news, at the recent annual meeting of the American College of Neuropsychopharmacology in Puerto Rico, a year-long follow-up study of chronically psychotic patients treated with Risperdal Consta offered positive data. Peterson noted the drug is especially important in those cases where compliance with oral dosing might be a problem.
Alkermes' stock (NASDAQ:ALKS) closed Friday at $6.80, down 40 cents.