Business as usual?
As Amylin (NASDAQ:AMLN) and Lilly (NYSE:LLY) prepare to do battle in court, the two sides are also preparing for the arrival of Bydureon. While it may seem unusual that two parties involved in a legal dispute must also work together as if nothing has happened, this is exactly what’s going on between Amylin and Lilly. Now before everyone thinks that everything is just fine and that these two sides can effectively work together with this lawsuit hanging over their heads, think again. It’s important to keep in mind that the relationship between Amylin and Lilly was already strained before the lawsuit.
Lilly also isn’t getting any support from their own field sales force on their assertion that somehow their DPP-4 is not competing for the same patient as Bydureon. It seems as though there is a major disconnect between Lilly management and the folks they’ve hired to sell their products. According to Lilly sales reps interviewed by Diabetic Investor, not one can figure out why management is saying that these two products aren’t competing for exactly the same patient. Keep in mind these reps get their marching orders from management and sit in front of physicians on a daily basis, physicians who also know that the two drugs are targeted at exactly the same patient.
Diabetic Investor suspects that Amylin is using the lawsuit as a tool to force Lilly’s hand. Considering the lawsuit was filed under seal, Amylin has left the door open to reconciliation. With the suit under seal competitors can’t see the non-public aspects of the agreement. Had Amylin really wanted to cut relations with the Lilly and make this really ugly they could have filed in open court. The reality is at this point in the game the companies need each other. Amylin cannot effectively market Bydureon alone and Lilly has nothing in its diabetes pipeline as valuable as Bydureon. While Amylin may prefer a different partner they must surly realize that there just isn’t enough time to find a new partner and bring them up to speed.
Watching this situation with great interest is the third Bydureon partner, Alkermes (NASDAQ:ALKS). While not party to the suit the folks at Alkermes have to be concerned as their revenue is directly tied to how Bydureon performs. Or put another way Alkermes is like a child watching his parents go through a divorce, wondering if they will reconcile or whether they’ll have to choose who to live with when the divorce is over.
As per usual in situations like this the real fight isn’t over who slighted whom, the real fight is over money. Who spends it and who makes it. Does Amylin really want to spend resources, both human and financial, to fight in court and does Lilly really want to risk losing the most valuable drug in their diabetes pipeline? The fact that the two parties spent fourth months trying to rectify the situation prior to Amylin taking action should send a clear signal that these two disgruntled parties really don’t want a divorce. While it’s sad that the situation deteriorated to such an extent that Amylin had to go to court, this really isn’t all that unusual.
Just as the NFL owners and players are fighting in court, no one seriously believes that the two sides won’t eventually reach an agreement. The reality is there is plenty of money to go around and as is typical each side believes they are entitled to a bigger share of the pie than the other. However, if each side takes a step back and removes the bluster they will realize you can’t have football without players or owners, like it or not the two sides need each other so that the gravy train known as the NFL can continue.
This is exactly the same situation for Amylin and Lilly, like it or not the two sides need each other. A divorce at this point benefits no one as a break up would create too much collateral damage. Besides Lilly and Amylin losing millions in potential profits, millions of patients will denied one of the most promising therapy options. The folks at Lilly and Amylin would be well to remember that they are not the only parties who will suffer if they don’t reconcile.
