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Lilly agrees to pay up to $1.2B for diabetes drugs

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Eli Lilly and Co. agreed to pay up to $1.2 billion for 50 percent rights to two diabetes drugs developed by Germany-based Boehringer Ingelheim, including one on the cusp of market approval.

In exchange, Boehringer Ingelheim agreed to pay up to $650 million for 50 percent rights to two experimental insulins in Lilly’s pipeline, and it could buy rights to a third diabetes drug for another $525 million.

The five-drug deal, announced Tuesday morning, is a way for Lilly to have a shot at new sales quickly. In November it entered a three-year period in which U.S. and European patents will expire on five of its bestselling drugs, sapping roughly half Lilly's total revenue.

"Working together, we will comprise one of the most robust diabetes pipelines in the pharmaceutical industry,” John Lechleieter, CEO of Indianapolis-based Lilly, said in a statement. “For Lilly, this alliance expands our range of offerings for people with diabetes, strengthens our diabetes care capabilities and offers the prospect of near-term revenue opportunities as we address the upcoming loss of patent exclusivity for several of our products."

The leading diabetes drug developed by Boehringer Ingelheim, which has a research and development facility outside Columbus, Ohio, is called linagliptin. It’s an oral pill for Type 2 diabetics and is currently being reviewed by regulators in the United States, Europe and Japan.

The sales potential of linagliptin isn’t clear, as Boehringer is a closely held company. If approved, linagliptin would join a growing class of drugs, known as dipeptidyl peptidase-4 inhibitors, which analysts project could grow to $7 billion in global sales by 2015.

However, there are already two similar drugs on the market—Januvia, made by New Jersey-based Merck & Co. Inc., and Onglyza, made by U.K.-based AstraZeneca plc and New York-based Bristol-Myers Squibb Co.

Linagliptin is one of four other drugs being developed by drug companies in the same class.

"The big challenge will be that by the time linagliptin comes to the market, prescribers will have four to five years of experience with Januvia," Klaus Dugi, Boehringer’s head of medical affairs, told Bloomberg News in October 2009. "It will be an uphill battle to convince them of the benefits of linagliptin."

On the upside, linagliptin does not require a kidney test to determine the proper dose for a patient—a convenience factor that could give it an advantage over its competitors.

Boehringer’s other drug in the deal is also an oral diabetes pill, BI10773, which is in Phase 3 clinical trials.

Lilly contributed two experimental insulins: LY2605541 and LY2963016, which are expected to begin Phase 3 trials this year. Boehringer also could buy partial rights to a biotech drug in Phase 2 testing.

Lilly and Boehringer have worked together in the past on drugs, most notably the European rights to Cymbalta, an antidepressant that is Lilly’s No. 2 selling drug now. In August, Lilly paid $400 million to buy back those rights from Boehringer.

Because of the deal, Lilly will record a $300 million charge, or 27 cents per share. The company said it would factor the charge into its 2011 profit forecast, which it will issue on Jan. 27.

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  1. to mention the rest of Molly's experience- she served as Communications Director for the Indianapolis Department of Public Works and also did communications for the state. She's incredibly qualified for this role and has a real love for Indianapolis and Indiana. Best of luck to her!

  2. Shall we not demand the same scrutiny for law schools, med schools, heaven forbid, business schools, etc.? How many law school grads are servers? How many business start ups fail and how many business grads get low paying jobs because there are so few high paying positions available? Why does our legislature continue to demean public schools and give taxpayer dollars to charters and private schools, ($171 million last year), rather than investing in our community schools? We are on a course of disaster regarding our public school attitudes unless we change our thinking in a short time.

  3. I agree with the other reader's comment about the chunky tomato soup. I found myself wanting a breadstick to dip into it. It tasted more like a marinara sauce; I couldn't eat it as a soup. In general, I liked the place... but doubt that I'll frequent it once the novelty wears off.

  4. The Indiana toll road used to have some of the cleanest bathrooms you could find on the road. After the lease they went downhill quickly. While not the grossest you'll see, they hover a bit below average. Am not sure if this is indicative of the entire deal or merely a portion of it. But the goals of anyone taking over the lease will always be at odds. The fewer repairs they make, the more money they earn since they have a virtual monopoly on travel from Cleveland to Chicago. So they only comply to satisfy the rules. It's hard to hand public works over to private enterprise. The incentives are misaligned. In true competition, you'd have multiple roads, each build by different companies motivated to make theirs more attractive. Working to attract customers is very different than working to maximize profit on people who have no choice but to choose your road. Of course, we all know two roads would be even more ridiculous.

  5. The State is in a perfect position. The consortium overpaid for leasing the toll road. Good for the State. The money they paid is being used across the State to upgrade roads and bridges and employ people at at time most of the country is scrambling to fund basic repairs. Good for the State. Indiana taxpayers are no longer subsidizing the toll roads to the tune of millions a year as we had for the last 20 years because the legislature did not have the guts to raise tolls. Good for the State. If the consortium fails, they either find another operator, acceptable to the State, to buy them out or the road gets turned back over to the State and we keep the Billions. Good for the State. Pat Bauer is no longer the Majority or Minority Leader of the House. Good for the State. Anyway you look at this, the State received billions of dollars for an assett the taxpayers were subsidizing, the State does not have to pay to maintain the road for 70 years. I am having trouble seeing the downside.

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