On May 16th, Amylin Pharmaceuticals announced that it had filed a lawsuit against Eli Lilly alleging that Lilly is engaging in anticompetitive activity and breaching its strategic alliance agreements with Amylin to maximize commercialization of BYETTA® (exenatide) injection, a first line treatment for type 2 diabetes. In September 2002, Amylin and Lilly entered into a Collaboration Agreement, U.S. Co-promotion Agreement and several related agreements for the development and commercialization of BYETTA. The companies are also collaborating on the development of BYDUREON™, a weekly dosage formulation of exenatide.

Amylin disclosed that in its sealed complaint filed with the United District Court for the Southern District of California, Amylin has alleged that Lilly is engaging in improper, unlawful and anticompetitive behavior in the manner in which it plans to implement its recent global alliance with Boehringer Ingelheim for BI’s TRADJENTA™ (linagliptin) tablets, a once-daily treatment for type 2 diabetes. Amylin is principally seeking to prevent Lilly from using the same sales force to sell both exenatide and TRADJENTA.

Since the complaint was filed under seal, we do not know Amylin’s specific arguments as to how Lilly breached the agreements with Amylin. These agreements have been publicly filed with the SEC (see here for the Co-Promotion Agreement and here for the Collaboration Agreement), so a review of some of the provisions may shed some light on the possible arguments by each party.

Non-Competition Provisions

Sometimes collaboration or co-promotion agreements include provisions prohibiting a partner from developing or commercializing a competitive product. Neither the publicly filed Collaboration Agreement nor the Co-Promotion Agreement appear to include an explicit non-competition provision.

Co-Promotion Agreement

The Co-Promotion Agreement indicates in Section 2.1 that “The principal objective of the Parties hereunder is to maximize the commercialization of the Product in the [United States of America]” (emphasis added). The number of details and other specific obligations of the parties with respect to commercialization efforts are covered by the Commercialization Plan established by the parties' Joint Commercialization Committee. The Commercialization Plan has not been publicly filed.

Section 3.7 of the Co-Promotion Agreement will presumably be an important aspect of the case:

3.7 PROMOTION OF OTHER PRODUCTS

While this Agreement is in effect, each Party has the right to have its Product sales force detail other products in any detail positions not reserved by the Parties for Product.

Collaboration Agreement

In the development responsibilities section of the Collaboration Agreement (Section 2.4(a)), there are a couple references to Lilly’s obligations to “maximize the commercial value of the Product:”

Lilly will use Commercially Reasonable Efforts, as provided in the Development Plan, to develop and obtain Marketing Approval for the Product outside of the U.S., and to maximize the commercial value of the Product.

and

Lilly will use Commercially Reasonable Efforts to assist Amylin, as provided in the Development Plan, to conduct Development of and obtain Marketing Approval for the Product in the U.S. and to maximize the commercial value of the Product.

The commercialization sections of the Collaboration Agreement do not include the same “maximize the commercial value of the Product” obligations, instead requiring Lilly to use Commercially Reasonable Efforts to commercialize in accordance with a Commercialization Program approved by the parties’ Joint Commercialization Committee. The Commercialization Program and other specific details about the parties’ respective commercialization efforts have not been publicly filed.

Hopefully, further details of the parties’ respective arguments in the case will come to light. Those arguments and the outcome of the case could provide a number of lessons for future deal-making. Stay tuned.