Amylin Pharmaceuticals Inc. and Eli Lilly and Co. have agreed to end a decade-long diabetes partnership to resolve litigation between the two drugmakers, the compananies announced Tuesday morning.

Amylin will assume global responsibility for developing the injectable drug Byetta, the companies said in a prepared statement. Amylin, based in San Diego, will make an upfront payment of $250 million to Indianapolis-based Lilly and future revenue-sharing payments of $1.2 billion plus interest.

The drug brought in $559 million for Amylin last year, almost 85 percent of the company’s revenue, according to data compiled by Bloomberg. It accounted for $151 million in sales for Lilly last year. Amylin said it sees the agreement adding to cash flow by the end of 2013

The relationship between the two companies turned sour earlier this year after Lilly teamed with the German company Boehringer Ingelheim to develop diabetes treatments. Amylin sued Lilly over that deal and accused the larger drug company of breaking a commercialization agreement for diabetes drugs.

On behalf of people living with diabetes, the companies determined it was in the best interest of all constituents to amicably terminate the collaboration,” the companies said in the statement.

Shares of Amylin sank more than 15 percent, or $1.70, to $9.23 in midday trading, while Lilly shares climbed 36 cents to $38.71.

The collaboration meant more to San Diego-based Amylin, which only has two products on the market, than it did to the much larger Lilly, said Les Funtleyder, health care portfolio manager for Miller Tabak, which owns Lilly shares.

He noted that the resolution will give Lilly a capital infusion, and he said the company's relationship with Boehringer has more potential to help Lilly, which is facing a loss of revenue from several patent expirations.

Byetta stimulates the pancreas cells to produce insulin when blood sugar is high. It has been approved for patients taking other diabetes medicines and on its own as a therapy with diet and exercise. A long-acting version of the drug sold by the companies is called Bydureon.

Amylin sued Lilly in May, saying the manner in which Lilly plans to implement an agreement to develop and sell Boehringer Ingelheim’s type 2 diabetes drug breached its agreement to develop and commercialize Amylin’s competing drugs.

In June, a federal judge in San Diego denied Amylin’s request for a preliminary order that would have imposed restrictions on Lilly’s diabetes sales force.