By Steve Sternberg

Special To BioWorld Today

No one likes being poked with a hypodermic needle. Yet such proteins as insulin and human growth hormone can only be administered by injection. Indeed, students have been taught for decades that oral protein delivery is impossible because proteins cannot exit the gut.

Emisphere Technologies Inc., of Hawthorne, N.Y., set out to change that * and now has recruited drug titan Eli Lilly and Co., of Indianapolis, as a powerful ally.

The two companies said on Thursday that Lilly will pay Emisphere up to $60 million to develop oral forms of two as-yet-undisclosed endocrine proteins, one of which is aimed at growth disorders. Most of the money will be paid out in increments as Emisphere achieves agreed-upon milestones.

Lilly also will pay Emisphere's research and development costs, and may pay the company more for other delivery applications or if additional proteins are licensed. In return, Lilly will receive "exclusive worldwide commercialization rights to products that result from this collaboration," the two companies said.

The companies would not disclose further details either of the deal or of the protein delivery systems under development, except to cite "growth disorders" as one focus of the joint development effort.

"This transaction represents a major commitment to the oral delivery of proteins by a world leader in therapeutic proteins," said Michael Goldberg, Emisphere's chairman and CEO.

"Based on experiments in our laboratories, we believe Emisphere's technology represents the most promising oral protein delivery technology that we have evaluated to date," said Richard DiMarchi, Lilly's vice president of research technologies and proteins.

Goldberg said that Lilly had conducted a prior feasibility study that demonstrated Emisphere's approach was worth pursuing. Analysts said Lilly's evaluation lasted several years and involved multiple animal trials.

Lilly's skepticism was understandable, Goldberg said. Since the discovery of heparin and insulin in the 1920's, numerous researchers have unsuccessfully tried to develop versions of the drugs that would retain their therapeutic activity once they've exited the gut.

Emisphere had encountered its own difficulties in 1992, with a low-molecular-weight oral heparin preparation that achieved only marginal bioavailability.

"Since many people have tried and failed, people have had a preconceived notion that this was impossible," Goldberg said. "It took us an awfully long time to get these molecules to meet the performance requirements of interested companies.

Kenneth Nover, an analyst who follows Lilly for A.G. Edwards and Sons, of St. Louis, said that the Lilly deal is "clearly a plus" for Emisphere. "Lilly is betting money that that the technology will be successful," he said, noting that injectible proteins would generate billions of dollars in additional revenue if they could be produced in a more easily administered form.

Wole Fayami, who follows Emisphere for Genesis Merchant Group, in San Francisco, said Emisphere's technology, if it succeeds in obtaining government approval, could enable Lilly to virtually capture the markets for the oral proteins under development * and perhaps others * because Emisphere has such a commanding technological lead.

"We don't think there are any other companies that are even close," Fayami said.

The question is: Will Emisphere's technology work? Despite the deal with Lilly, investors so far have exercised caution, he said. The stock (NASDAQ:EMIS) price closed down $0.50 Thursday to $23.75. *