Eli Lilly and Company (LLY) recently signed an exclusive worldwide collaboration agreement with medical device company, Synthes, Inc. Financial details of the agreement were not disclosed.
Under the agreement, early stage compounds will be licensed from Eli Lilly to Synthes. These candidates, which have the potential to be used for the local treatment and regeneration of the skeleton, will be jointly developed for use within orthopedic trauma, spine, craniomaxillofacial and reconstructive areas.
While some of the candidates under the agreement have pre-clinical data, others have clinical data packages. Eli Lilly and Synthes will focus on the development of site-specific bone healing (osteoinductive) products.
Additional Indications for Forteo to be Explored
The collaboration between Eli Lilly and Synthes includes another program, under which the companies will jointly evaluate the potential for developing Forteo for additional orthopedic indications. Forteo, Eli Lilly’s osteoporosis drug, posted $830.1 million in sales in 2010.
Based on a completed phase II study, Eli Lilly and Synthes will work on conducting additional studies for potential indications like fracture healing.
Forteo to be Co-Promoted in the US
Eli Lilly and Synthes also announced that they will be co-promoting Forteo to orthopedic surgeons in the US. In addition to co-promoting Forteo in the US, Eli Lilly and Synthes will also co-promote the product in certain countries and regions outside the US.
Synthes to Become a Part of J&J
In late April 2011, Johnson & Johnson (JNJ) announced its intention to acquire Synthes for $21.3 billion. With this deal, which is scheduled to close in the first half of 2012, Johnson & Johnson is looking to strengthen its medical devices portfolio.
Neutral on Eli Lilly
We currently have a Neutral recommendation on Eli Lilly, which carries a Zacks #3 Rank (short-term Hold rating). Eli Lilly will enter a tough period in late 2011 with the loss of exclusivity on Zyprexa. Barring significant cost-cutting efforts or additional revenue catalysts, 2013 will be the beginning of a very challenging period with Cymbalta losing US patent protection.
On the flip side, strong performance of the diabetes business, the ramp of Effient and upside from the ImClone deal should offer some downside support. We are also pleased to see Eli Lilly pursuing small acquisitions and in-licensing deals to boost its pipeline.
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