By Jim Shrine

AutoImmune Inc. regained rights to its oral diabetes product, AI-401, while Eli Lilly and Co. got out of any commitments for milestone payments under their 1994 agreement.

Under the original partnership, Lilly was to have decided by the end of last year ¿ after Phase II studies ¿ whether it wanted to continue development, but fell behind schedule and did not have enough data to warrant continuation, said Robert Bishop, president and CEO of Lexington, Mass.-based AutoImmune.

So, the companies terminated the deal that would have provided up to $20 million in milestones to AutoImmune, while giving Lilly manufacturing and marketing rights.

Bishop said a portion of the milestone payments would have been made if Lilly had exercised its option to move into Phase III trials. But completion of four Phase II studies is 18 months away, he said, and ¿they don¿t have enough data to justify making a milestone payment.

¿We¿re happy Lilly is continuing the trials, and will provide us with the data,¿ Bishop told BioWorld Today. ¿We feel comfortable that if the data are good we¿ll talk again, but we don¿t have an obligation to deal exclusively with Lilly.¿

The December 1994 agreement had a Jan. 1, 1999, deadline on Lilly¿s decision to move forward, Bishop said, but the trials took longer than expected.

AI-401 is an oral form of recombinant human insulin, based on the company¿s oral-tolerance technology, which is designed to provide tissue-specific immunosuppression to control disease without toxicity or significant side effects. The deal also had given Lilly, of Indianapolis, rights to future generations of oral-tolerance products for autoimmune-mediated diabetes.

Bishop said the drug is given at low doses and doesn¿t change blood glucose levels. It is designed to slow or halt the progression of Type I diabetes, and be used as a preventive measure or early after diagnosis.

¿If you can arrest the disease process when they are first diagnosed, they will have better control over glucose levels,¿ he said.

When the Lilly deal was signed, AutoImmune officials said the diabetes drug was outside the company¿s focus on multiple sclerosis (MS) and rheumatoid arthritis. They said they had taken it through Phase I studies, and could not commit additional resources to the product. (See BioWorld Today, Dec. 5, 1994, p. 1.)

¿At this point in time, AutoImmune has all the rights to do whatever it wants with this product, when the data are available,¿ Bishop said. ¿Right now, [Lilly has] very limited data ¿ only one interim report on a small number of patients. While encouraging, it isn¿t sufficient to make a substantial milestone payment.

We figured out a way to make it amicable and continue moving forward,¿ he said.

AutoImmune said patient enrollment is complete in each of three new-disease onset trials, and enrollment is more than 40 percent complete in the prevention study.

Meanwhile, the company¿s main focus in on the rheumatoid arthritis product Colloral, which is in pivotal studies. The last patient visit in the 772-patient trial is expected late in July, with initial results expected four to six weeks later and a biologics license application (BLA) anticipated in the first quarter of 2000. Its MS product, Myloral, failed last year in a Phase III trial.

AutoImmune had about $17.5 million in cash at the end of 1998, with a net loss of $13.2 million for the year. Bishop said current resources are sufficient to get through the BLA filing.

AutoImmune¿s stock (NASDAQ:AIMM) fell 6.25 cents per share Monday, closing at $2.187.