Eli Lilly 2011 Annual Report Download - page 57

FORM 10-K
Avid
On December 20, 2010, we acquired all of the outstanding stock of Avid, a company focusing on developing molecular
radiopharmaceutical tracers in positron emission topography (PET) scan imaging, for total purchase consideration of
$346.1 million, which included an upfront payment of $286.3 million and up to $550 million in additional payments
contingent upon potential future regulatory and commercial milestones. The fair value of the contingent
consideration at the acquisition date was $59.8 million. In connection with this acquisition, we recorded
$334.0 million of acquired IPR&D assets, $119.6 million of goodwill, and $116.9 million of deferred tax liability, with
$9.4 million of other net assets. Avid’s lead product under development, florbetapir, is a PET agent indicated for
imaging amyloid plaque pathology in the brain to aid the evaluation of patients with signs or symptoms of cognitive
impairment. The New Drug Application (NDA) was submitted to the U.S. Food and Drug Administration (FDA) in the
third quarter of 2010. In March 2011, we received a complete response letter that was primarily focused on the need
to establish a reader training program for market implementation that helps to ensure reader accuracy and
consistency of interpretations of existing Amyvid™ scans. During the year ended December 31, 2011 we recorded
impairment charges related to the partial impairment of the IPR&D asset related to Amyvid, as discussed further in
Note 7. We submitted our response to the complete response letter in 2011.
Alnara
On July 20, 2010, we acquired all of the outstanding stock of Alnara, a privately-held company developing protein
therapeutics for the treatment of metabolic diseases, for total purchase consideration of $291.7 million, which
included an upfront payment of $188.7 million and up to $200 million in additional payments contingent upon
potential future regulatory and commercial milestones. The fair value of the contingent consideration at the
acquisition date was $103.0 million. In connection with this acquisition, we recorded $264.0 million of acquired
IPR&D assets, $100.5 million of goodwill, and $92.4 million of deferred tax liability, with $19.6 million of other net
assets. Alnara's lead product in development is liprotamase, a non-porcine pancreatic enzyme replacement therapy.
The NDA was submitted to the FDA in the first quarter of 2010. In April 2011, we received a complete response letter
that communicated the need for us to conduct an additional clinical trial prior to a re-submission. During the year
ended December 31, 2011 we recorded impairment charges related to the partial impairment of the IPR&D asset
related to liprotamase, as discussed further in Note 7. We are currently finalizing the study design and anticipate
starting a clinical study in 2012.
Animal Health Product Lines
On May 28, 2010, we acquired the European marketing rights to several animal health product lines divested by
Pfizer Inc. as part of its acquisition of Wyeth, Inc., for total purchase consideration of $148.4 million paid in cash.
These products, including vaccines, parasiticides, and feed additives, serve both the production animal and
companion animal markets. We also acquired a manufacturing facility in Sligo, Ireland, currently used in the
production of animal vaccines. In connection with this acquisition, we recorded $76.2 million of marketed product
intangible assets, with $72.2 million of other net assets.
Product Acquisitions
In March 2010, we entered into a license agreement with Acrux Limited to acquire the exclusive rights to
commercialize its proprietary testosterone solution Axiron. At the time of the licensing, the product had not been
approved and had no alternative future use. The charge of $50.0 million for acquired IPR&D related to this
arrangement was included as expense in the first quarter of 2010 and is deductible for tax purposes. In the fourth
quarter of 2010, Axiron was approved by the FDA for the treatment of testosterone deficiency in men. In the first
quarter of 2011, the product was available in pharmacies in the U.S.
In December 2009, we entered into a licensing and collaboration agreement with Incyte Corporation (Incyte) to
acquire rights to its compound, and certain follow-on compounds, for the treatment of inflammatory and
autoimmune diseases. The lead compound was in the development stage (Phase II clinical trials for rheumatoid
arthritis) and had no alternative future use. The charge of $90.0 million for acquired IPR&D related to this
arrangement was included in expense in the fourth quarter of 2009 and is deductible for tax purposes. As part of this
agreement, Incyte has the option to co-develop these compounds and the option to co-promote in the U.S.
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 may include research and development, marketing and selling (including promotional activities and
physician detailing), manufacturing, and distribution. These collaborations often require milestone and royalty or
profit 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. Revenues related to products sold
by us pursuant to these arrangements are included in net product sales, while other sources of revenue (e.g.,
royalties and profit share payments) are included in collaboration and other revenue. Operating expenses for costs
incurred pursuant to these arrangements are reported in their respective expense line item, net of any payments
made to or reimbursements received from our collaboration partners. Each collaboration is unique in nature, and
our more significant arrangements are discussed below.
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