AutoImmune Inc. and Eli Lilly and Co. will collaborateon the development of AutoImmune's oral tolerancedrugs to treat juvenile-onset, or Type I, diabetes.

Lilly, of Indianapolis, will take over funding clinicaldevelopment of AI-401, an oral form of recombinanthuman insulin, which already has completed Phase Itrials. AutoImmune, of Lexington, Mass., will receivemilestone payments of up to $20 million and single-digitroyalties on sales, Thomas Hennessey Jr., the company'svice president, chief financial officer and treasurer, toldBioWorld.

"This is something that has taken a while to puttogether," Hennessey said. "Certainly [Lilly] is worldleader in diabetes. We've been focused on multiplesclerosis and rheumatoid arthritis. We had brought thisone along as far as we could, given the limited resourceswe could commit to it."

Schering-Plough Corp., a previous partner, ended acollaboration in August 1993 that focused onAutoImmune's product for treating rheumatoid arthritis.The product, Colloral, now is in a Phase II dosing studywith about 280 patients that is expected to be completedin mid-1995.

Timothy Wilson, a senior analyst with New York-basedHambrecht & Quist Inc., stuck by AutoImmune'stechnology when many others abandoned it. Thecompany's approach is based on the principle of oraltolerance _ the body's ability to suppress an immunereaction to foreign proteins absorbed in the gut _ todeliver naturally occurring proteins to sites ofautoimmune diseases.

"AutoImmune has had a rough time of it stockwise sinceSchering-Plough left them," Wilson told BioWorld. "Alot of people thought that said something bad about thescience.

"People have not felt that comfortable about thetechnology," Wilson said. "They said it seemed too goodto be true, but it's not. There are a number of [human]studies which point to the fact that this has a realbiological effect in man. It's surprising, but it's there."

Wilson said two keys to the deal, from AutoImmune'sperspective, are that it "revalidates oral tolerance in theeyes of Wall Street and testifies to the strength ofAutoImmune's patent position." Plus, he said, it saves thecompany $20 million to $30 million in developmentcosts.

Lilly and AutoImmune already are involved in a separatediabetes study that is being co-sponsored by the NationalInstitutes of Health, the Juvenile Diabetes Foundation andthe American Diabetes Association. Lilly owns therecombinant insulin.

Hennessey said the companies jointly will develop aPhase II protocol for a study of AI-401.

"Oral tolerance technology is a particularly innovativeapproach to inhibit autoimmune-mediated diabetes thatpotentially offers the advantages of oral administrationand a high degree of safety," Richard DiMarchi, vicepresident of endocrine research and clinical investigationsat Lilly, said in a news release. "There is emergingevidence that auto-immune-mediated diabetes includesmore than the traditionally accepted juvenile-onsetdiabetes."

Lilly gets worldwide rights to manufacture and marketAI-401, as well as future generations of oral toleranceproducts for auto-immune mediated diabetes. Lilly alsohas the right to back out of the agreement at any time. Inthat case all rights would return to AutoImmune.

AutoImmune's product that's furthest along in the clinicis Myloral, a myelin formulation made from bovinebrains, for treatment of multiple sclerosis. More than 450of an expected 500 patients have been enrolled.Hennessey said the final patients are expected to beenrolled in the first quarter of 1995, and the trial shouldend two years later.

The Colloral product comes from chicken-bone collagen.That Phase II trial involves four dosing groups andplacebo. AutoImmune expects to have data from thePhase II trial of its uveitis product in the third quarter of1995.

AutoImmune stock (NASDAQ:AIMM) gained 13 percenton the news Friday. It was up 69 cents to close at $5.94 intrading of 820,000 shares. Lilly (NYSE:LLY) closed at$61.75, down 50 cents. n

-- Jim Shrine

(c) 1997 American Health Consultants. All rights reserved.

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