Eli Lilly 2008 Annual Report Download - page 46

FINANCIALS
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product, if approved, was not expected in the near term. The charge of $35.0 million for acquired IPR&D related to
this arrangement was included as expense in the second quarter of 2008 and is deductible for tax purposes.
In January 2008, our agreement with BioMS Medical Corp. to acquire the rights to its compound for the treat-
ment of multiple sclerosis became effective. At the inception of this agreement, this compound was in the develop-
ment stage (Phase III clinical trials) and had no alternative future use. As with many development-phase compounds,
launch of the product, if approved, was not expected in the near term. The charge of $87.0 million for acquired IPR&D
related to this arrangement was included as expense in the fi rst quarter of 2008 and is deductible for tax purposes.
In October 2007, we entered into an agreement with Glenmark Pharmaceuticals Limited India to acquire the
rights to a portfolio of transient receptor potential vanilloid sub-family 1 (TRPV1) antagonist molecules, including
a clinical-phase compound. The compound was in early clinical phase development as a potential next-generation
treatment for various pain conditions, including osteoarthritic pain, and had no alternative future use. As with
many development-phase compounds, launch of the product, if approved, was not expected in the near term. The
charge of $45.0 million for acquired IPR&D was deductible for tax purposes and was included as expense in the
fourth quarter of 2007. Development of this compound has been suspended.
In October 2007, we entered into a global strategic alliance with MacroGenics, Inc. (MacroGenics) to develop
and commercialize teplizumab, a humanized anti-CD3 monoclonal antibody, as well as other potential next-
generation anti-CD3 molecules for use in the treatment of autoimmune diseases. As part of the arrangement, we
acquired the exclusive rights to the molecule, which was in the development stage (Phase II/III clinical trial for
individuals with recent-onset type 1 diabetes) and had no alternative future use. As with many development-phase
compounds, launch of the product, if approved, was not expected in the near term. The charge of $44.0 million for
acquired IPR&D was deductible for tax purposes and was included as expense in the fourth quarter of 2007.
In January 2007, we entered into an agreement with OSI Pharmaceuticals, Inc. to acquire the rights to its com-
pound for the treatment of type 2 diabetes. At the inception of this agreement, this compound was in the development
stage (Phase I clinical trials) and had no alternative future use. As with many development-phase compounds, launch
of the product, if approved, was not expected in the near term. The charge of $25.0 million for acquired IPR&D related
to this arrangement was included as expense in the fi rst quarter of 2007 and was deductible for tax purposes.
In connection with these arrangements, our partners are generally entitled to future milestones and royalties
based on sales should these products be approved for commercialization.
Note 4: Collaborations
We often enter into collaborative arrangements to develop and commercialize drug candidates. Collaborative
activities might include research and development, marketing and selling (including promotional activities and
physician detailing), manufacturing, and distribution. These collaborations often require milestone and royalty or
profi t share payments, contingent upon the occurrence of certain future events linked to the success of the asset
in development, as well as expense reimbursements or payments to the third party. Each collaboration is unique in
nature and our more signifi cant arrangements are discussed below.
Erbitux
Prior to our acquisition, ImClone entered into several collaborations with respect to Erbitux, a product approved to
fi ght cancer, while still in its development phase. The most signifi cant collaborations operate in these geographic
territories: the U.S., Japan, and Canada (Bristol-Myers Squibb); and worldwide except the U.S. and Canada (Merck
KGaA). The agreements are expected to expire in 2018, upon which all of the rights with respect to Erbitux in the
U.S. and Canada return to us.
Bristol-Myers Squibb Company
Pursuant to a commercial agreement with Bristol-Myers Squibb Company and E.R. Squibb (collectively, BMS),
relating to Erbitux, ImClone is co-developing and co-promoting Erbitux in North America with BMS, and is co-devel-
oping and co-promoting Erbitux in Japan with BMS. The companies had jointly agreed to expand the investment in
the ongoing clinical development plan for Erbitux to further explore its use in additional tumor types. Under this
arrangement, Erbitux research and development and other costs, up to threshold amounts, are the sole responsi-
bility of BMS, with costs in excess of the thresholds shared by both companies according to a predetermined ratio.
Responsibilities associated with clinical and other ongoing studies are apportioned between the parties as
determined pursuant to the agreement. Collaborative reimbursements received by ImClone for supply of product for
research and development, for a portion of royalty expenses, and for a portion of marketing, selling, and adminis-