Amylin vs. Lilly – Round Two

Amylin vs. Lilly – Round Two

Anyone who was hoping that Amylin (NASDAQ:AMLN) and Lilly (NYSE:LLY) would come to their senses and settle their differences amicably should think again. Late yesterday Amylin won a key victory in court and was granted a restraining order which according to an Amylin press release;

“The U.S. District Court restrained Lilly from proceeding with its plans to use the same sales force to sell both exenatide and Boehringer Ingelheim GmbH’s competitive linagliptin. The court also enjoined Lilly from disclosing any confidential information about exenatide to any of its sales representatives or employees participating in the marketing, promotion or sale of linagliptin.”

In a press release of their own Lilly noted that while they are disappointed with the court’s ruling the company will comply.

A complete copy of the court’s ruling can be found in Amylin’s most recent 8-K filed with SEC and is located in the investor relations section of Amylin’s web site,

As Diabetic Investor has noted previously on this subject, while we understand why Amylin is suing Lilly, this legal maneuvering comes at critical time for both companies.  As everyone in diabetes knows the American Diabetes Association (ADA) Annual Scientific Sessions is coming up at the end of June; by far the biggest and most important diabetes conference of the year. In years past when the two companies weren’t battling in court and were only battling in private, the two companies at least pretended to be working together at shows like the ADA. Given their private arguments have now become public it will be interesting to see how these two companies interact at the most important diabetes conference of the year.

Although not an expert on legal maneuvering Diabetic Investor sees this recent move by Amylin as further evidence that the company is trying to force Lilly’s hand before the FDA approves their most promising product, Bydureon.  Amylin knows that Lilly desperately needs Bydureon if they are to remain a relevant player in diabetes. They also know it would be a serious blow to Lilly if Bydureon ended up in the hands of competitor and while they may not like the folks at Lilly they would be happy to take their money if Lilly ended this whole thing by buying Amylin.

On the flip side based on their public comments, both past and present, Lilly doesn’t seem all that enamored with Amylin or Bydureon.  Lilly foolishly believes that somehow they can magically turn around their struggling diabetes franchise by cutting prices for insulin and introducing another me-too DPP-4.  Perhaps Diabetic Investor is just overly tainted from years of watching companies implement incredibly stupid strategies but we have never seen a company grow by cutting prices on their legacy product or by coming, very late, to market with a product that has no compelling advantage over the two products, one a blockbuster, which are already established in the market.

Unfortunately this is typical for Lilly who has seen their standing in the diabetes community drop faster than Newt Gringrich’s chances of becoming president. Back when Novo Nordisk (NYSE:NVO) was beating Lilly like a rug, taking share away at every turn the company rather than acknowledge they had a problem kept their heads in the sand and frankly have never recovered.  It was only after the company feel well behind Novo and Sanofi-Aventis (NYSE:SNY) they actually realized the building was on fire and it might not be a bad idea to call the fire department. Sadly it was too late and too much damage was inflicted which lead to their most recent strategy; when all else fails cut prices and watch margin erode.

Diabetic Investor also would like to know which genius at Lilly believed that they could make money coming to market with a DPP-4 that is no different than the two DPP-4’s already on the market. Someone needs to explain the relational of going against an established blockbuster in Januvia. Just in case anyone believes there is a real difference between Lilly’s DPP-4 and Januvia, Diabetic Investor suggests looking at the data on both drugs and ask why a physician would prescribe Lilly’s DPP-4 over Januvia.

The truly sad part here is that if you follow the same path and look at Bydureon over the establish competition Byetta and Victoza®, the drug offers several compelling advantages most notably its once-weekly administration. Unlike their DPP-4, the company really has something to sell with Bydureon, a product which physicians are anxiously waiting to prescribe. The reality is Bydureon does not just have mega-blockbuster potential but could also save Lilly’s diabetes franchise from becoming irrelevant.

Since we’re in the early stages of this legal battle we suppose it’s possible the two companies could reconcile. It’s also possible that Newt Gingrich might think before opening his mouth and interesting his foot. Although it would not be an ideal solution, given how close Bydureon is to getting approved, Diabetic Investor believes it’s time for Lilly and Amylin to go their separate ways.  Even if Lilly woke up and realized that they are a better company with Bydureon rather than without it, Diabetic Investor does not believe they would effectively market the drug after being forced into a deal.

The reality is back when this deal was originally signed Amylin needed Lilly more than Lilly need Amylin. Now the tables have turned and while Amylin can’t market Bydureon on their own, there are several companies who would jump at the chance to replace Lilly. Diabetic Investor suspects Amylin knows this which is why they have taken such an aggressive legal strategy.  The fact is Amylin has never been happy with the Lilly relationship and has run out of patience.

While Diabetic Investor had hoped cooler heads would have prevailed and these two companies could have settled their differences, this now seems like a remote possibility.