Amylin Sues Lilly

Amylin Sues Lilly

This morning Amylin (NASDAQ:AMLN) announced they were suing their longtime partner Lilly (NYSE:LLY) for breaching their strategic alliance agreement.  According to an Amylin press release; “In its complaint, which seeks among other things, a preliminary and permanent injunction, Amylin alleges that Lilly is engaging in improper, unlawful and anticompetitive behavior in the manner in which it plans to implement its recently announced global alliance agreement with Boehringer Ingelheim GmbH (“BI”) to jointly develop and commercialize BI’s linagliptin product, which will compete directly with Amylin’s exenatide products. The principal relief Amylin seeks is to prevent Lilly from proceeding with its plans to use the same sales force to sell both exenatide and BI’s competitive linagliptin.”

Lilly responded to the news with a press release of their own which contains the following passage; “We believe the lawsuit is without merit and will vigorously defend our position,” said Enrique Conterno, president of Lilly Diabetes. “Lilly has been and remains fully committed to fulfilling its obligations under its exenatide collaboration agreement with Amylin, as well as to complying with all laws and regulations. We look forward to building on the alliance’s success achieved to date.”

Although Diabetic Investor is somewhat surprised by this news we are not shocked by it, as this is not the first time the two parties have quarreled over how the partnership was working.  For their part Lilly has seemed to have a Jekyll and Hyde relationship with Amylin which goes all the way back to when Byetta first came to market. Back then Byetta sales were blunted due to a shortage of Byetta pens, a major blunder considering the anticipated demand for Byetta. This shortage prevented Byetta from gaining additional market share and allowed Januvia to get off to a better than anticipated start. (It should be noted that linagliptin is also a DPP-4 the class as Januvia.)

Next came Lilly’s pursuit of their own GLP-1, a move that seemed to indicate that the company did not have confidence in Amylin or their pipeline. Interestingly Lilly’s main competitor Novo Nordisk (NYSE:NVO) had an opportunity to partner with Transition Therapeutics and passed on the deal as they did not believe their GLP-1 would succeed.

Amylin officials were also disappointed with Lilly’s response to the Byetta pancreatitis situation. Rather than stand by Byetta and point out there was no causal relationship between Byetta and pancreatitis or that the incidence rate of pancreatitis and Byetta usage was lower than pancreatitis and the general diabetes population, Lilly distanced themselves from the issue giving the appearance this claim had some validity.

The final blow came when Lilly failed to inform Amylin they were doing the deal with Boehringer Ingelheim.  A deal which is designed to promote a product that directly competes with Byetta and Bydureon. It should surprise no one that while Amylin and Lilly attempted to work out an amicable solution to this issue, a process which went on for four months, the two parties could not find a middle ground which ultimately resulted in Amylin filing their lawsuit.

Given the status of Bydureon, which Diabetic Investor see as game changing technology, this news could not come at a worst time. Let’s assume for a moment that the two parties decide enough is enough and part ways. While there are many companies who would be eager to do a deal with Amylin, as there is no way the company could effectively launch Bydureon without a partner, the question is could this new partnership ramp up quickly enough. This would narrow the choice for possible partners to someone who is either in the diabetes drug space or wants to re-enter the space. Although Sanofi-Aventis (NYSE:SNY) has their own GLP-1 in development, the company could see Bydureon as their ticket to overtake Novo, and as we have written on numerous occasions Sanofi’s stated goal is to overtake Novo as the preeminent global diabetes company.

GlaxoSmithKline (NYSE:GSK) is another potential player, as GSK could see Bydureon as an effective way to re-enter the diabetes space after the Avandia debacle.

Given the animosity between Amylin and Lilly, Diabetic Investor believes it is highly unlikely these two companies could repair the damage and effectively work together going forward. While the two companies have always tried to put a positive spin on their rocky relationship, the central fact is these two partners simply don’t trust each other. This would be like repairing a marriage where one of the partners has cheated on the other. As much as they would like to believe they could get past this indiscretion, the wronged party would always be skeptical of the other party. In this case Amylin sees themselves as the wronged party and not just once but on several occasions.

All we know for certain is that if something isn’t resolved and resolved quickly Bydureon sales will suffer. As much as Diabetic Investor sees Bydureon as game changing technology the drug will not sell itself. As we have noted numerous occasions execution is critical and it’s not an overstatement to say that execution is difficult when the two partners are fighting in court rather than fighting to gain market share.