LILLY BETTING ON CENTOCOR’s CENTOXIN WITH $100 MIL.

LILLY BETTING ON CENTOCOR's CENTOXIN WITH $100 MIL. in cash and stock purchases in exchange for marketing rights to the antisepsis monoclonal antibody. Under an agreement announced July 16, Lilly will acquire 2 mil. shares of newly-issued Centocor stock for $25 a share and make an upfront cash payment of $50 mil. to cover costs associated with Centoxin (HA-1A) development. Lilly also has the option to spend an additional $25 mil. for rights to Centocor's Phase III MAb platelet aggregation inhibitor, CentoRx. The $25 per share price represents a 72% premium over Centocor's $14.50 a share closing price of July 15. Lilly's stake in Centocor will be slightly below 5%. The deal calls for Lilly to market the monoclonal antibody in the U.S. and foreign markets with the exception of Japan and Spain; HA-1A is now sold in Germany, the U.K., France and the Netherlands. Centocor will continue to pursue regulatory approval in the U.S., manufacture the drug, and "assist" Lilly with marketing and sales. In anticipation of a Centoxin launch, Centocor built up its sales force by more than five-fold in 1991 to 270 people. The addition of Centoxin would fill a gap for Lilly in the hospital market with the upcoming patent expiration of the antibiotic Ceclor (cefaclor) in 1993. Details about Centocor's role in promoting the product and the amount of royalties (if any) to be paid by Lilly were not disclosed. The alliance follows by one month Centocor's announcement that the firm will conduct a second, randomized, double-blind, placebo- controlled study to compare mortality rates between Centoxin and a placebo after 14 days, per FDA's request ("The Pink Sheet" June 8, T&G-12). The study is expected to analyze up to 1,500 patients suffering from shock and documented gram-negative bacteremia. FDA informed Centocor in April that Centoxin needed an additional trial ("The Pink Sheet" April 20, T&G-1). The decision represented a major setback for Centocor. Following a September approval recommendation by FDA's Vaccines and Related Biological Products Advisory Committee, Centocor had expanded its sales force and stepped up production in anticipation of a 1992 launch. A subsequent shakeup at Centocor led to the ouster of its president and co-CEO, a 15% reduction in the firm's workforce and the decision to reduce its $42 mil. cash burn rate for the first quarter and pursue a collaborative marketing agreement. FDA's decision to request an additional study was based in part on concerns about the integrity of the data. Lilly said that it has "looked at Centocor's data on HA-1A and [has] found it to be scientifically sound and persuasive." The deal places Lilly in a position to compete with Pfizer in the sepsis arena; the two firms are already rivals in the hospital antibiotic market. Pfizer has marketing rights to Xoma's antisepsis monoclonal E5. FDA has requested more data from Xoma on E5 as well. The agreement could put pressure on Synergen to add some marketing muscle behind its Phase III sepsis treatment Antril (interleukin-1 receptor antagonist). Synergen had licensed Antril to Roche, a third major player in the hospital antibiotic market. Synergen reacquired exclusive rights to Antril in May 1990. Lilly's marketing of Centoxin will face non-regulatory complications as well. Resistance among hospitals to the antisepsis monoclonals was already emerging prior to the FDA action due to the products' projected $3,000-$4,000 per dose price. Lilly and Centocor said they "will work closely with physicians, pharmacists, and hospital administrators to assure the appropriate, cost-effective use of HA-1A." There is also an ongoing patent dispute between Xoma and Centocor. Xoma has won a ruling that Centoxin infringes its E5 patent and is seeking 40% royalties on any Centoxin sales. Centocor, however, is charging Xoma with infringing its Centoxin patent ("The Pink Sheet" Feb. 24, p. 7). Lilly has been active in forming partnerships with biotech firms -- including Athena Neurosciences, Glycomed, COR Therapeutics, Agouron, Cytogen and Sphinx -- frequently with equity investments in the $4 mil. range.