Lilly and Isis Pharmaceuticals Announce Strategic Alliance


Eli Lilly and Company (NYSE: LLY) and Isis Pharmaceuticals, Inc. (NASDAQ: ISIP) announced today that they have entered into a strategic alliance that includes the license of Isis' novel antisense cancer compound and the Formation of a broad collaboration to discover antisense drugs.

The licensed compound, ISIS 3521, is a selective inhibitor of protein kinase C-alpha (PKC-alpha) expression and is in early Phase III trials for the treatment of non-small cell lung cancer. In an ongoing Phase II trial in combination with chemotherapy, ISIS 3521 is currently showing a median patient survival of 15.9 months as compared with a typical 8 to 9 months median survival of standard chemotherapy alone and is being well tolerated with minimal side effects. ISIS 3521 is also being evaluated in combination with the Lilly oncolytic Gemzar® . Lilly will have exclusive worldwide commercialization rights to ISIS 3521. Non-small cell lung cancer represents a significant market as it affects approximately one million people worldwide and is the leading cause of cancer death.

Companies form collaboration

In addition to the license of ISIS 3521, the companies have formed a four-year collaboration to discover antisense drugs for metabolic and inflammatory diseases. The companies will also use the Isis GeneTrove™ antisense technology as a tool to rapidly determine the functional role of up to 1,000 human genes in disease. More than 300 of those genes will be validated as potential drug targets for the antisense drug discovery collaboration. The functional genomics efforts will support the companies' drug discovery programs across multiple therapeutic areas.

Lilly has committed more than $200 million in funding to Isis over a four-year period. Lilly will make a $75 million equity investment in Isis through the purchase of stock at $18 per share, resulting in approximately a 9 percent ownership of outstanding common stock. In addition, Lilly will loan Isis $100 million, repayable in cash or stock at $40 per share at the end of the four-year term, to fund the research collaboration. For the license of ISIS 3521, Isis will receive $25 million in upfront fees and will be reimbursed for remaining Phase III development and registration costs. Isis may also receive approximately $50 million in milestone payments plus royalties on product sales for the non-small cell lung cancer indication, as well as additional milestones and royalties for other indications and for successes related to the gene functionalization and antisense drug discovery programs. Assuming success of ISIS 3521 and the success of multiple drugs from the collaboration, the cumulative contingent funds over the life of the development process have the potential to exceed total committed funds. The transactions relating to ISIS 3521 and relating to the collaboration and stock purchase are each subject to the approval of the United States Federal Trade Commission under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

"As an antisense drug, ISIS 3521 represents a potential new method of treating non-small cell lung cancer. This late-stage compound complements our growing oncology portfolio and represents a significant market opportunity," said August M. Watanabe, M.D., executive vice president, science and technology, for Lilly. "We are also keenly interested in antisense technology as both a novel class of highly selective drugs and as a tool to leverage genomics and accelerate target validation in support of our diverse drug discovery programs. We look forward to continuing our strong partnership with Isis, the antisense leader."

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