Lilly signs licensing deal with biotech startup for diabetes drug

In a move that could beef up its early-stage pipeline, Eli Lilly and Co. is buying worldwide licensing rights to a Massachusetts biotech startup that is developing cell therapies for potential treatment of type 1 diabetes.

Lilly said Wednesday it will give Sigilon Therapeutics of Cambridge, Massachusetts, an upfront payment of $63 million to help it develop its technology. Sigilon is eligible to receive up to $410 million from Lilly if the technology hits development and commercialization milestones.

The deal is one of the first announced by Indianapolis-based Lilly since Dave Ricks told investors in January he wanted to significantly boost the number of outside drugs in the company’s arsenal. Lilly has traditionally lagged the industry in the percentage of licensing deals with outside companies for early-stage experimental drugs.

Sigilon was formed last year by Flagship Pioneer, a life-science innovation firm, with $23.5 million in capital.

The biotech is developing a technology to help type 1 diabetes patients restore insulin production over sustained periods without triggering an immune reaction.

In type 1 diabetes, pancreatic beta cells are destroyed by the immune system, leading to high blood sugar and long-term complications.

Sigilon said its approach centers on encapsulated cell therapy, an emerging area of biopharmaceutical research that aims to unleash the therapeutic potential of cells to treat serious diseases without the need for immunosuppression.

Under the deal, Sigilon will be responsible for all pre-clinical development activities and costs until it submits the drug to the Food and Drug Administration as an investigational new drug application. After that, Lilly will be responsible for all clinical development and commercialization activities.

Lilly said it expects to record a special charge of 5 cents a share in the second quarter as a result of the deal and expects to reduce its earnings per share guidance by the same amount.

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