United turns to Eli Lilly

United Therapeutics gets rights for tadalafil PAH indication, Lilly gets equity stake

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SILVER SPRING, Md.—In an already unkind stock market landscape, United Therapeutics Corp. saw its stock price drop just over 35 percent in one day which was well off its 52-week high of $117.82. The likely cause: Poor results announced that day from a clinical trial of its oral blood pressure drug Remodulin (treprostinil). The response: Find a partner who can hook the company up with a new oral antihypertension candidate, fast.

So it happened that on the very same day United Therapeutics got its double-dose of bad news, it and Eli Lilly and Co. announced they had entered into a license and a supply agreement related to the U.S. commercialization rights for the pulmonary arterial hypertension (PAH) indication of Lilly's molecule, tadalafil, which is used in Lilly's erectile dysfunction drug Cialis. The PAH indication for the molecule is currently under regulatory review in the United States, Canada, Mexico, Japan and the European Union.

Under the terms of the agreements, United Therapeutics will make an upfront payment of $150 million to Lilly for the exclusive rights to commercialize tadalafil for PAH in the United States, as well as for a product manufacturing and supply arrangement. Lilly will manufacture and supply tadalafil to United Therapeutics and will retain authority globally for all regulatory, development, intellectual property and manufacturing aspects of the tadalafil molecule for all potential indications. Lilly will also retain commercialization rights to tadalafil for PAH outside of the U.S.

But instead of being simply a way for Lilly to get a quick bit of cash, it would seem that the Indianapolis-based Big Pharma company sees longer-term value in United Therapeutics, because the deal also calls for Lilly to buy common stock from United Therapeutics—to the tune of the very same $150 million Lilly is getting paid for the license deal.

"United Therapeutics brings substantial expertise and passion to the treatment of patients with PAH and will be an excellent partner for this product," says Dr. Gwen G. Krivi, vice president of Lilly Research Labs and global brand development platform leader for Lilly.

"Their experience in this field will greatly enhance the ability to provide tadalafil for PAH, if approved, as a new therapeutic option for this very serious disease. We are also pleased to make a financial investment in a promising and profitable biotechnology company. The collaboration with United Therapeutics adds to the success of Lilly's networking strategy."

"The addition of tadalafil for PAH expands our portfolio and strengthens United Therapeutics' position in the area of cardiovascular disease," notes Dr. Martine Rothblatt, chairman and CEO of United Therapeutics. "Building upon the success of Remodulin, we are committed to addressing the unmet medical needs of patients. We also welcome the support and confidence expressed by Lilly through their financial investment in our company."

In a conference call to investors, Rothblatt actually framed the outcomes of Nov. 17 as an "upside surprise" for investors, noting that the deal means United Therapeutics can go to market faster with an oral PAH drug now than it could have otherwise.

"Rather than having one of two pivotal trials for an oral PAH trial successfully completed, which was certainly our expectation, we have an actually filed NDA for an oral PAH treatment to announce, specifically, tadalafil, via an in-license agreement with Eli Lilly," he notes. "In other words, subject to tadalafil's approval by the FDA, our launch of an oral treatment for PAH [is accelerated] from the late 2010 timeframe anticipated by our oral treprostinil program to the mid-2009 timeframe implied by tadalafil's PDUFA date."

United Therapeutics' Remodulin already is an effective drug, already marketed in an injectible form—and the FDA is reviewing an application for an inhaled version. But in making an oral form of the drug, tolerability and efficacy apparently are not up to the injectible version's performance. In the Freedom-C trial that caused United Therapeutics' stock price to plummet, 14 percent of patients dropped out because of adverse events and nearly one in five were unable to handle more than the smallest dose of the drug, which proved no more effective than placebo—though efficacy was seen in higher dosages.

"The issue with oral prostacyclins remains, at doses at which they work, they are intolerable, and at lower doses where tolerability is manageable, insufficient efficacy is seen," Piper Jaffray analyst Andrew S. Fein said in a note to investors, reaffirming his "sell" rating for the company's stock.

Oppenheimer & Co.
analyst Bret Holley and Rodman & Renshaw analyst Thomas E. Shrader, on the other hand, reaffirmed their "outperform" ratings for the stock. Holley notes that the one study didn't tank the entire oral Remodulin program and thinks the upcoming March 2009 results of the Freedom-M study for the drug will be better. Moreover, Holley pointed out in a note to investors that disappointment should be somewhat offset by the licensing deal with Lilly. DDN

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