Amylin Pharmaceuticals Inc. entered a global agreement with Eli Lilly and Co. to collaborate on the development and commercialization of Amylin's late-stage Type II diabetes candidate, AC2993, in a deal that could mean more than $435 million for the biotech company.

The deal, which includes up-front, equity and milestone payments, begins with an $80 million nonrefundable payment to the San Diego-based company from Lilly, which also will purchase $30 million of Amylin common stock at $18.69 per share, or about 1.6 million shares.

"This collaboration with Lilly is a significant step for Amylin and our commitment to bring innovative new medicines to the patients we serve," Amylin Chairman and CEO Joseph Cook said in a conference call.

"Our shared goal was to build a collaboration in the truest sense," Cook said, noting that both companies are committed to joint decision making, having established a steering committee with an equal number of members from each company.

Cook said Amylin had looked for the "key elements" of global marketing strength, previous experience with chronic diseases, strength in international development and a good cultural fit.

Amylin, Cook said, has "devoted a great deal of time and effort in the past months meeting with many potential partners." The deal with Lilly will allow Amylin to take advantage of that company's expertise in diabetes, also.

Amylin's stock (NASDAQ:AMLN) rose $1.50 Friday, or 12.1 percent, to close at $13.90.

George Farmer, a biotech analyst for New York-based Fortis Securities Inc., gave high marks to the deal.

"This is a fantastic deal because Lilly brings renowned expertise in the diabetes field," Farmer told BioWorld Today. "The fact that this is a profit-sharing deal rather than one based on royalties, on top of Amylin's receiving generous up-front payments and future funding and milestone payments, makes this an excellent deal for Amylin, as well, and shows what holding on to a late-stage product can truly bring for a biotech company that has been able to hold onto a product as long as Amylin has."

Amylin, which has suffered a number of setbacks over the years in its development programs for insulin products, and Lilly will share equally in development and commercialization costs in the U.S.

Going forward, Indianapolis-based Lilly will pay Amylin up to $85 million if certain development and product profile milestones are met for AC2993, a 39-amino-acid peptide that has been shown to stimulate secretion of insulin in the presence of elevated blood glucose concentrations, except during periods of low blood glucose concentrations, or hypoglycemia.

Those milestones may be convertible into Amylin equity at Lilly's option under certain circumstances, the company said. Outside the U.S., Lilly will fund 80 percent of the development costs.

Beyond that, Lilly will pay about $100 million to take the three Phase III trials, called "the amigo trials," from now through completion, which is expected next year, Cook said. Amylin began the third of three planned pivotal Phase III trials in March, and each is expected to last about eight months. The first one began in December.

Also, if the Phase III trials are completed successfully, Lilly will provide Amylin with a $110 million convertible loan to pay for the biotech company's development and commercialization costs.

Daniel Bradbury, executive vice president of Amylin, told BioWorld Today that positive results from the trials would form the basis for a new drug application, probably in 2004. Lilly also would make future payments of up to $130 million contingent on global commercialization of AC2993, which includes commercial milestones for the twice-a-day formulation and any long-acting formulation, Cook said.

The companies would co-promote the product in the U.S., and share equally the operating profits from sales inside the U.S. Lilly would market the product exclusively outside the U.S., receiving 80 percent of operating profits compared to Amylin's 20 percent.

"All commercialization costs outside the U.S. will be borne by Lilly," Cook said. "We will equally co-promote the product in the U.S., and Amylin will book all revenues."

During the conference call, Cook noted that he had been permitted by Lilly to announce that a Phase II trial of LY307161SR, a product candidate similar to AC2993, was completed in July.

"The results of that study did not meet their expectations," Cook said, noting that Lilly decided not to take that product forward.

That could have been a factor in Lilly deciding to partner with Amylin.

A second part of the deal will allow Amylin to co-promote Humatrope, Lilly's recombinant human growth hormone product, in the U.S., probably prior to the approval of AC2993. Cook said that will be an advantage because Amylin's sales people will be calling on physicians who are "the population most likely to prescribe our drug Symlin if it is approved in the U.S."

"If Symlin is approved, it will give us the early establishment of a sales force, and that will be an extreme advantage to us," said Amylin Executive Vice President Daniel Bradbury.

Amylin already is advertising for sales agents on its website, and hopes to have hired most of them by year's end to prepare for a launch in early 2004, Bradbury said.

Bradbury said the target for the number of sale agents for Symlin would be about 150.

The cost of the co-promotion "will be partially reimbursed" by Lilly, Cook said.

Symlin (pramlintide acetate) is a synthetic analogue of the human hormone amylin. Amylin said the primary patient population focus for Symlin is people with diabetes whose therapy includes at least one daily insulin injection.

Bradbury said "the plan is to incrementally increase the sales force," starting out with "a fraction" of the approximately 150 for Symlin when Humatrope is sold, and increasing that number again when AC2993 is approved.

"It's very important strategically for the company," Bradbury said. "Commercializing a product is not like flipping a switch; it takes a lot of planning and effort, and it takes a lot of systems."

Bradbury also estimated the value of the deal to be much greater than $400 million-plus due to the development and commercialization costs Lilly will be handling.

"It's very difficult to put a number on it," he said.