Eli Lilly 2009 Annual Report Download - page 65

expense paid to third parties, net of any royalty reimbursements received, is recorded as a reduction of
collaboration and other revenue.
Necitumumab
In January 2010, we restructured the collaboration agreement executed by ImClone and BMS in 2001 to
allow for the co-development and co-commercialization of necitumumab, which is currently in Phase III
clinical testing for non-small cell lung cancer. Within this restructured arrangement, we and BMS have
agreed to share in the cost of developing and potentially commercializing necitumumab in the U.S.,
Canada, and Japan. We maintain exclusive rights to necitumumab in all other markets. We will
fund 45 percent of the development costs for studies that will be used only in the U.S., and 72.5 percent
for global studies. We will be responsible for the manufacturing of API and BMS will be responsible for
manufacturing the finished product. We could receive a payment of $250.0 million upon approval in the
U.S. In the U.S. and Canada, BMS will record sales and we will receive 45 percent of the profits for
necitumumab, while we will provide 50 percent of the selling effort. In Japan, we and BMS will share costs
and profits evenly.
Exenatide
We are in a collaborative arrangement with Amylin Pharmaceuticals (Amylin) for the joint development,
marketing, and selling of Byetta (exenatide injection) and other forms of exenatide such as exenatide once
weekly. Byetta is presently approved as an adjunctive therapy to improve glycemic control in patients with
type 2 diabetes who have not achieved adequate glycemic control using metformin, a sulfonylurea or a
combination of metformin and sulfonylurea; and in the U.S. only, using a thiazolidinedione (with or without
metformin) and as a monotherapy. Lilly and Amylin are co-promoting exenatide in the U.S. Amylin is
responsible for manufacturing and primarily utilizes third-party contract manufacturers to supply Byetta.
However, we are manufacturing Byetta pen delivery devices for Amylin. We are responsible for develop-
ment and commercialization costs outside the U.S.
Under the terms of our arrangement, we report as collaboration and other revenue our 50 percent share
of gross margin on Amylin’s net product sales in the U.S. We report as net product sales 100 percent of
sales outside the U.S. and our sales of Byetta pen delivery devices to Amylin. The following table
summarizes the revenue recognized with respect to Byetta:
2009 2008 2007
Net product sales . . . . . . . . ................................... $147.7 $ 96.7 $ 39.6
Collaboration and other revenue . . . . . . . ......................... 300.8 299.4 291.1
Total revenue . . . . . . . . . . . ................................... $448.5 $396.1 $330.7
We pay Amylin a percentage of the gross margin of exenatide sales outside of the U.S., and these costs
are recorded in cost of sales. Under the 50/50 profit-sharing arrangement for the U.S., in addition to
recording as revenue our 50 percent share of exenatide’s gross margin, we also report 50 percent of
U.S. research and development costs and marketing and selling costs in the respective line items on the
consolidated statements of operations.
A New Drug Application has been submitted to the U.S. Food and Drug Administration (FDA) for exenatide
once weekly. Amylin is constructing and will operate a manufacturing facility for exenatide once weekly,
and we have entered into a supply agreement in which Amylin will supply exenatide once weekly product
to us for sales outside the U.S. The estimated total cost of the facility is approximately $550 million. In
2008, we paid $125.0 million to Amylin, which we will amortize to cost of sales over the estimated life of
the supply agreement beginning with product launch. We would be required to reimburse Amylin for a
portion of any future impairment of this facility, recognized in accordance with GAAP. A portion of the
$125.0 million payment we made to Amylin would be creditable against any amount we would owe as a
result of impairment. We have also agreed to loan up to $165.0 million to Amylin at an indexed rate
beginning December 1, 2009; no amounts were loaned in 2009 and any borrowings have to be repaid by
June 30, 2014. We have also agreed to cooperate with Amylin in the development, manufacturing, and
marketing of exenatide once weekly in a dual-chamber cartridge pen configuration. We will contribute
60 percent of the total initial capital costs of the project, our portion of which will be approximately
$130 million, of which we have contributed approximately $50 million as of December 31, 2009.
Cymbalta
Boehringer Ingelheim
We are in a collaborative arrangement with Boehringer Ingelheim (BI) to jointly market and promote
Cymbalta, a product for the treatment of major depressive disorder, diabetic peripheral neuropathic pain,
generalized anxiety disorder, and fibromyalgia, outside the U.S. Pursuant to the terms of the agreement,
we generally share equally in development, marketing, and selling expenses, and pay BI a commission on
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FORM 10-K