Boehringer Ingelheim and Eli Lilly and Company Announce Strategic Alliance

Boehringer IngelheimBoehringer Ingelheim and Eli Lilly and Company (NYSE: LLY) announced a global agreement to jointly develop and commercialize a portfolio of diabetes compounds currently in mid- and late-stage development. Included are Boehringer Ingelheim's two oral diabetes agents - linagliptin and BI10773 - as well as Lilly's two basal insulin analogues - LY2605541 and LY2963016 as well as the option to co-develop and co-commercialize Lilly's anti-TGF-beta monoclonal antibody.

Linagliptin is a dipeptidyl peptidase-4 (DPP-4) inhibitor discovered by Boehringer Ingelheim and being developed as an oral once-daily tablet for the treatment of Type 2 diabetes.It is currently under regulatory review in the U.S., Europe and Japan. Boehringer Ingelheim's BI10773, a sodium-dependent glucose co-transporter-2 (SGLT-2) inhibitor, began enrollment in Phase III clinical trials last year. It belongs to a new, emerging class of diabetes compounds that block tubular reabsorption of glucose in the kidney. Currently there are no SGLT-2 inhibitors approved for use.

Lilly's two basal insulin analogue candidates are expected to enter Phase III clinical testing in 2011. Lilly's two basal insulin analogue candidates are LY2605541, a structurally novel basal insulin analogue, and LY2963016, a new insulin glargine product. The agreement also includes an option for Boehringer Ingelheim to co-develop and co-commercialize another Lilly diabetes molecule, an anti-TGF-beta monoclonal antibody, which is currently in Phase II of clinical testing in patients with diabetes with chronic kidney disease.

The alliance will leverage the collective scientific expertise and business capabilities of two leading research-driven pharmaceutical companies to address patient needs arising from the growing global diabetes epidemic.

"We are very excited about this new and extensive alliance with Boehringer Ingelheim, with whom we have partnered successfully in the past," said John C. Lechleiter, Ph.D., Lilly chairman and chief executive officer. "Working together, we will comprise one of the most robust diabetes pipelines in the pharmaceutical industry. For Lilly, this alliance expands our range of offerings for people with diabetes, strengthens our diabetes care capabilities and offers the prospect of near-term revenue opportunities as we address the upcoming loss of patent exclusivity for several of our products."

"Boehringer Ingelheim and Lilly have agreed to form a strategic alliance in diabetes at a time point when we at Boehringer Ingelheim are entering another new therapeutic area with innovative compounds out of our own Research and Development. This cooperation will give Boehringer Ingelheim and Lilly the combined benefits of Lilly's expertise in the diabetes market and two basal insulin analogues as well as Boehringer Ingelheim's rich and innovative late-stage pipeline." said Prof. Andreas Barner, Chairman of the Board of Managing Directors of Boehringer Ingelheim.

Under the terms of the agreement, Lilly will make an initial one-time payment to Boehringer Ingelheim of €300 million. Boehringer Ingelheim will be eligible to receive up to a total of €625 million in success-based regulatory milestones for linagliptin and BI10773. Lilly will be eligible to receive up to a total of $650 million in success-based regulatory milestones on its two basal insulin analogues. Should Boehringer Ingelheim elect to opt-in to the Phase III development and potential commercialization of the anti-TGF-beta monoclonal antibody, Lilly would be eligible for up to $525 million in opt-in and success-based regulatory milestone payments. The companies will share ongoing development costs equally. Upon successful regulatory approval of any product resulting from the alliance, the companies will equally share in the product's commercialization costs and gross margin. Each company will also be entitled to potential performance payments on sales of the molecules they contribute to the collaboration.

As a result of this transaction, Lilly expects 2011 earnings per share dilution in the range of $0.45-$0.50, including a charge of approximately $0.27 per share related to the one time payment. Assuming a successful launch of linagliptin, Lilly anticipates progressively and significantly less dilution in 2012 and 2013, no dilution to slight accretion in 2014, and more significant accretion in 2015 and beyond. The 2011 financial impact of this transaction will be reflected in Lilly's 2011 financial guidance, which will be provided as part of the fourth quarter and full-year 2010 financial results announcement on January 27, 2011.

About Diabetes
Diabetes affects an estimated 285 million adults worldwide and more than 24 million people in the U.S.(1,2) Approximately 90-95 percent of those affected have type 2 diabetes. Diabetes costs approximately $174 billion per year in direct and indirect medical expenses in the U.S.(3)

According to the Centers for Disease Control and Prevention's National Health and Nutrition Examination Survey, approximately 60 percent of people with diabetes do not achieve their target blood sugar levels with their current treatment regimen.(4)

About Boehringer Ingelheim
The Boehringer Ingelheim group is one of the world's 20 leading pharmaceutical companies. Headquartered in Ingelheim, Germany, it operates globally, with 142 affiliates in 50 countries and more than 41,500 employees. Since it was founded in 1885, the family-owned company has been committed to researching, developing, manufacturing and marketing novel products of high therapeutic value for human and veterinary medicine.

About Eli Lilly and Company
Lilly, a leading innovation-driven corporation, is developing a growing portfolio of pharmaceutical products by applying the latest research from its own worldwide laboratories and from collaborations with eminent scientific organizations. Headquartered in Indianapolis, Ind., Lilly provides answers - through medicines and information - for some of the world's most urgent medical needs.

1. The International Diabetes Federation Diabetes Atlas. Available at: http://www.diabetesatlas.org/content/some-285-million-people-worldwide-will-live-diabetes-2010. Accessed September 10, 2010.
2- Diabetes Statistics. American Diabetes Association. Available at: http://www.diabetes.org/diabetes-basics/diabetes-statistics/. Accessed September 10, 2010.
3. Direct and Indirect Costs of Diabetes in the United States. American Diabetes Association. Available at: http://www.diabetes.org/how-to-help/action/resources/cost-of-diabetes.html. Accessed September 10, 2010.
4. Saydah SH, Fradkin J and Cowie CC. Poor control of risk factors for vascular disease among adults with previously diagnosed diabetes. JAMA. 2004;291:335-42.

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