In November 2011, Amylin and Lilly announced that they were to end their diabetes pact that spawned the emergence of the exciting GLP-1 market. Although this news was unexpected, it does not come as a complete surprise given the ongoing litigation between the two companies; Lilly's global agreement with Boehringer Ingelheim, which includes two oral diabetes treatments, sparked Amylin to initiate legal proceedings as a result of a perceived conflict of interest with their GLP-1 agreement.
The disbanding of this collaboration will see Lilly absolve itself from any marketing responsibilities for both Byetta (launched) and Bydureon (awaiting approval) in the US as of November 2011. Outside the US, Lilly will continue to market Bydureon in Europe (launched in mid-2011) until Amylin secures a new commercialization partner for this region, or until 2013, at which point Lilly's marketing obligations cease. The deal also puts an end to any ongoing litigation and the release of all Amylin's claims against Lilly.
The following key financial terms and conditions were agreed:
- Amylin will pay Lilly and upfront fee of $250m
- Amylin will pay Lilly 15% of global net sales of Byetta / Bydureon up to $1.2b (plus interest)
- If Bydureon has not received approval by June 30, 2014, Amylin's liability will fall to 8% of total global net sales of Byetta / Bydureon
- Amylin will pay Lilly a $150m milestone should a once-monthly suspension of Bydureon secure approval (currently Phase II)
The termination of its agreement with Eli Lilly will provide Amylin with full control of the Byetta / Bydureon (exenatide) franchise in the US, with the company anticipating this decision to become accretive to cash flow by the end of 2013. Although Amylin has lost the partnership of a major diabetes player, this is not expected to have a dramatic impact on the performance of the Byetta / Bydureon franchise in the US; in this region, Amylin has been the primary driver of the commercialization effort. Previously, Amylin had prepared 325 sales representatives to detail Bydureon first and Byetta second. With Lilly no longer contributing to the US marketing arrangement, however, Amylin has increased its exenatide franchise sales force to 650 reps, who will focus their marketing efforts primarily on Bydureon. Amylin reports that as a result, Bydureon will now actually receive more first and second details than would have been the case with the prior marketing arrangement with Lilly.
Outside the US, where Lilly will continue to market Bydureon until December 2013 (or until Amylin secures an additional partner), Amylin had, and still has, no part to play (outside contributing to the marketing method and message). We currently believe that Amylin will succeed in securing a new partner for ex-US commercialization, given that the drug is already on the market in some EU countries. Despite fierce competition from Novo Nordisk's Victoza, Bydureon could prove a useful acquisition for any player seeking to either bolster a current diabetes presence or to secure entry into the hugely lucrative and fast-growing diabetes market. Until such a deal is secured, however, Lilly will maintain its revenue stream in ex-US markets until 2013, at which point it will cease its marketing activities altogether (although it will continue to receive royalties on global net sales up to the $1.2b threshold).
In terms of potential ex-US partners for Amylin, two companies in particular stand out. Takeda, with Actos poised for a dramatic decline ahead of key patent expiries in the US and ex-US markets, is desperate to find candidates to help fill the gap; Bydureon could offer the company an opportunity to utilize its diabetes experience outside the US. Although the company does have a DPP-IV inhibitor (Nesina), this drug is yet to launch in any major markets other than Japan and realistically will struggle to compete even if it does launch in these regions. The second potential suitor is Roche, who saw its own once-weekly GLP-1 analog (taspoglutide) spectacularly fall from grace after unexpected side-effects in Phase III trials. Bydureon could offer Roche another opportunity to access the GLP-1 space and potentially negotiate co-rights to any of Amylin's other exenatide candidates (e.g. the once-monthly suspension formulation in Phase II).
For Eli Lilly, the termination of the partnership with Amylin represents a move to re-prioritize and re-position its diabetes portfolio to give it the best possible chance of longer-term franchise growth. Its January 2011 deal with Boehringer Ingelheim (BI) signaled Lilly's intent to become the only diabetes player with a full complement of treatment options, from orals to GLP-1 analogs to insulin (both human insulin and insulin analogs). This strategy effectively represented a conflict of interest with its Amylin arrangement, however, given that its commercialization efforts alongside BI for Tradjenta (an oral DPP-IV inhibitor used early in the course of the disease) would run counter to Amylin's interest in pushing the injectable Bydureon up the treatment algorithm and into the oral space.
We view this move as representing a change in strategy for Lilly, who has shifted its bet to Tradjenta (in addition to the Phase III SGLT-2 inhibitor, empagliflozin) from Byetta / Bydureon. This turn of events could be interpreted as a vote of no confidence from Lilly in Bydureon's ultimate commercial potential, relative to the overall potential that the GLP-1 market holds. Moreover, Lilly has two of its own GLP-1 analogs in development for which no revenue-sharing obligations exist. The first, dulaglutide (Phase III), is a GLP-1 / antibody fragment fusion compound, also dosed once-weekly, that could offer greater resilience to the DPP-IV enzyme (responsible for degrading GLP-1). This property suggests dulaglutide has potential to offer advancements in administration (lower required dose and smaller needle) as well as efficacy (longer-lasting GLP-1 activity) in comparison to Bydureon. The second is a pegylated form of GLP-1 (Phase II) about which little is currently known.
Overall, this outcome steps up the pressure on Tradjenta and empagliflozin to deliver a level of commercial success that justifies Lilly's exit from the exenatide franchise. If these products fail to impress, shareholders may be left ruing Lilly's decision to jump ship from the exenatide franchise in favor of the costly BI deal; in securing access to BI's Tradjenta and empagliflozin, Lilly has also sacrificed co-commercialization rights to its two developmental insulin analogs (an ultra-long acting insulin and a biosimilar version of insulin glargine).