It's time for the IN VIVO Blog's Fourth Annual Deal of the Year! competition. This year we're once again presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A Deal of the Year, Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'll supply the nominations (a half dozen in each category throughout December) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.
It's one of the biggest risk-sharing deals ever. It has oral drugs. It has insulins. It has biosimilars. And it's still making waves (including deal-breakers) in the already-choppy ocean that is diabetes.
Who would have expected Indianapolis-based Lilly to marry its struggling diabetes franchise with what's still only a pipeline at private German group Boehringer Ingelheim? The culture clash in itself deserves a DOTY nomination, but then there's so much more besides.
The January 2011 deal saw Lilly and BI agree to develop and market two of BI's oral diabetes compounds, a DPP-4 inhibitor Tradjenta (linagliptin) and a SGLT-2 inhibitor, and two of Lilly's basal insulin analogs, including a potential biosimilar version of Sanofi's Lantus (basal insulin glargine). So far, so fair. Except that BI gets an initial $388 million up front from Lilly, plus an option to co-develop and co-promote Lilly's chronic kidney disease antibody once it reaches Phase III.
Deal of the year for BI, then, perhaps, which gets paid to enhance its emerging diabetes portfolio and to tap into the services of an experienced diabetes marketing partner. This perceived imbalance is in part explained by Lilly's desperation, as it faces one of industry's steepest patent-cliffs, with the recent US expiry of $5 billion schizophrenia drug Zyprexa compounded by that of Gemzar in 2010, and by Cymbalta and Evista in 2013 and 2014. It's also in part about Lilly's defiant anti-M&A stance.
The effects of the Lilly/BI deal have rippled well beyond these two unlikely spouses. The deal provided a window onto the fascinating dynamics of the diabetes market, and -- importantly to those dynamics -- triggered Amylin's walk-out from its own Lilly partnership on the first-to-market GLP-1 agonist Byetta (exenatide) and once-weekly follow-on Bydureon. (No-deal-of-the-year nominee, perhaps?)
After almost ten years in bed with Lilly, Amylin felt let down by Lilly's agreement to co-commercialize BI's Tradjenta, which it felt would compete with its GLP-1s, even though the latter are injectable. After a lawsuit, Amylin paid (up to $400m in up-fronts and milestones) and left. Now the question is which of the diabetes leaders (Sanofi, Novo?), or indeed, which diabetes hopeful (GSK, Pfizer?) will buy Amylin? (Let's make that deal a 2012 nominee ... see, we're just so ahead of ourselves).
If the big-picture twisting-and-turning plot of this deal haven't convinced you yet, consider some of the commercial back-stories in the fast-moving diabetes space: can third-to-market Tradjenta carve out any niche in what has become a comfortable playing field for Merck & Co. Inc.'s first-to-arrive Januvia (sitagliptin)? And do safety concerns raised by an FDA panel over BMS/AZ's dapagliflozin, the first SGLT-2, spell the end for BI's second asset in the deal? As such, is Diabetic Investor's David Kliff right in saying that "Lilly has made a huge mistake" with this deal?
Meanwhile, can Lilly, whose strength has lain in insulins, rather than oral diabetes drugs, successfully apply the aggressive pricing tactics that have recently bought it some time (and market share) in existing insulin markets, to its insulin glargine candidate?
The story of Lilly-BI and the sub-plots it has generated is un-putdownable. There will be further series to follow. It's not a single DOTY, its a whole DOTY (and non-DOTY) franchise. Never mind those 'biggest ever', or 'most-creative ever'. Vote for the most interesting -- and get more bang for your vote.
image by flickrer watch4u, used under creative commons
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