Rockville Firm Deals Drug Rights to Lilly

Rockville biotech firm MacroGenics said yesterday that it has sold exclusive rights for its lead product in development -- a novel treatment for Type 1 diabetes -- to drug behemoth Eli Lilly for an initial payment of $41 million.

The deal with Lilly, which is based in Indianapolis and employs nearly 42,000 people, contains potential royalty and milestone payments that could eventually push the value to more than $1 billion for MacroGenics, which employs 86.

"This is the most important thing that has happened to the company," said MacroGenics chief executive Scott Koenig, a former senior executive at MedImmune. "It's the largest deal we've done. It's the most significant partnership."

Lilly is one of the country's leading diabetes drug providers, having developed more than 40 insulin products. Type 1 diabetes, which is the less prevalent form of the disease, affects about 2 million people. It is usually diagnosed in childhood or adolescence.

Type 1 diabetes patients have difficulty making insulin, a hormone produced by certain cells in the pancreas. The body attacks the insulin-producing cells. By the time Type 1 diabetes is diagnosed, nearly 90 percent of the cells have been killed.

The new drug from MacroGenics is designed to extend the "honeymoon period" when the few remaining insulin-producing cells are still viable. If the drug works, patients could have an easier time controlling the disease in order to prevent more serious complications such as blindness or kidney disease.

Lilly sees the drug as an opportunity to move deeper into Type 1 diabetes treatments, which the drug industry hasn't pursued as aggressively as the larger Type 2 market.

"We remain committed to maintaining our leadership role in diabetes care, including an expanded presence in the area of Type 1 diabetes," said David Moller, Lilly's vice president of endocrine and cardiovascular research and clinical investigation.

The new drug is about to enter the final stage of human testing, and Koenig said MacroGenics doesn't expect results for a couple of years. He declined to say how much the testing would cost.

Lilly stands to pay MacroGenics, a private company, up to $200 million in development milestones and $250 million more in sales milestones and royalties if the drug is approved for Type 1 diabetes. Lilly also has rights to use the drug to go after several other diseases, including lupus, rheumatoid arthritis and inflammatory bowel disease. If Lilly wins approval in all of the extra indications, that would trigger additional payments to MacroGenics exceeding $600 million.