May 16, 2011 / 11:19 AM / 9 years ago

UPDATE 4-Amylin sues Lilly over diabetes partnership

* Chides Lilly plan to help sell rival Boehringer drug

* Lilly, Amylin sell Byetta diabetes medicine

* Amylin shares fall 4.5 pct, Lilly edges up 0.7 pct (Adds analyst comment, byline)

By Lewis Krauskopf

NEW YORK, May 16 (Reuters) - Amylin Pharmaceuticals Inc AMLN.O sued longtime diabetes-drug partner Eli Lilly & Co (LLY.N) over its plans to help market a rival product with another company.

Lilly helps the smaller Amylin sell the Byetta diabetes medicine. Byetta, which is also known as exenatide, is Amylin’s main product.

Shares of Amylin fell 4.5 percent after it announced the lawsuit on Monday. Analysts said the disagreement could mean Lilly has a weaker outlook for sales of the Byetta franchise, while the dispute also brings into question any potential acquisition of Amylin by Lilly.

Earlier this year, Lilly struck an agreement to develop five diabetes drugs with Germany’s Boehringer Ingelheim. That alliance includes a Boehringer drug, known as linagliptin, that Amylin said is set to be a potential competitor to Byetta.

Linagliptin won U.S. approval earlier this month under the brand name Tradjenta.

Amylin wants to stop Lilly from using the same sales force to sell both products, the company said in a statement announcing the lawsuit.

“Obviously, there are disagreements currently as it stands, whether it’s commercialization or their concern about Lilly’s commitment to future growth of the exenatide franchise,” Collins Stewart analyst Salveen Richter said. “That’s one concern when you think about the outlook for sales.

“Then you’ve got the other question: Are they interested enough to acquire these guys or is this a potential acquirer that maybe is not going to pan out?” Richter said.

Lilly has been long seen as a potential acquirer of Amylin, should it desire full control of the Byetta franchise.

Amylin said the lawsuit, filed in U.S. District Court for the Southern District of California, alleges Lilly was engaging in anti-competitive activity and breaching its agreement to maximize commercialization of exenatide.

“Amylin selected Lilly as a partner to promote development and maximize sales of Amylin’s exenatide products,” Amylin said. “We are disappointed that we could not resolve this matter amicably and that we were forced to bring legal action to protect our rights, our products and our shareholders.”

Amylin said it would still collaborate with Lilly on exenatide products, despite the litigation.

In a response, Lilly said it was committed to its obligations under the exenatide agreement and that it believed the lawsuit was without merit.

Lilly and Amylin began their alliance in 2002. Byetta was approved in the United States about six years ago. A longer-acting version, called Bydureon, was recommended for approval in Europe in April, but has faced repeated delays in the United States.

In January, Lilly announced the drug-development alliance with Boehringer. Indianapolis-based Lilly is trying to develop new medicines as it faces impending generic competition to its big-selling Zyprexa schizophrenia medicine.

Amylin shares were off 4.5 percent at $13.05 in afternoon Nasdaq trading, while Lilly edged up 0.7 percent to $39.23 on the New York Stock Exchange. (Reporting by Lewis Krauskopf; John Wallace, Lisa Von Ahn and Tim Dobbyn)

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