Eli Lilly and Company and AstraZeneca announced an agreement to co-develop and commercialize AZD3293, an oral beta secretase cleaving enzyme (BACE) inhibitor currently in development as a potential treatment for Alzheimer's disease.

The progression of Alzheimer's disease is characterized by the accumulation of amyloid plaque in the brain. BACE is an enzyme associated with the development of beta-amyloid. Inhibiting BACE is expected to prevent the formation of amyloid plaque and eventually slow the progression of the disease.

AZD3293 is an oral potent small molecule inhibitor of BACE that has been shown in phase 1 studies to reduce levels of beta-amyloid in the cerebro-spinal fluid of Alzheimer's patients and healthy volunteers. AstraZeneca announced earlier in 2014 its plan to move AZD3293 into registration trials.

Under the terms of the agreement, Lilly will pay AstraZeneca up to $500 million in development and regulatory milestone payments. Lilly will recognize the initial milestone of $50 million (pretax), or approximately $.03 per share (after-tax), as a charge to earnings in the third quarter of 2014.

AstraZeneca and Lilly aim to progress AZD3293 rapidly into a phase 2/3 clinical trial in patients with early Alzheimer's disease. Lilly will lead clinical development, working with researchers from AstraZeneca's Innovative Medicines Unit for neuroscience, while AstraZeneca will be responsible for manufacturing. The companies will take joint responsibility for commercialization of AZD3293. The companies will share all future costs equally for the development and commercialization of AZD3293, as well as net global revenues post-launch.

"Lilly has been committed to research in Alzheimer's disease for more than 25 years, and we're dedicated to developing new medicines that can change and modify the course of this devastating disease," said David Ricks, Lilly senior vice president and president, Lilly Bio-Medicines. "Lilly's pipeline of potential medicines and diagnostic agents targeting the known hallmarks of the disease has been bolstered today by this alliance with AstraZeneca, a strong strategic partner who shares our passion to bring new medicines to patients suffering from this debilitating illness. This alliance moves us one step closer to achieving our goal of making Alzheimer's dementia preventable by 2025. "

"Alzheimer's disease is one of the biggest challenges facing medical science today and BACE inhibitors have the potential to target one of the key drivers of disease progression. We are looking forward to working with Lilly, a company with a long term commitment to and expertise in treating Alzheimer's disease," said Mene Pangalos, executive vice president, Innovative Medicines & Early Development at AstraZeneca. "We believe that, by combining the scientific expertise from our two organizations and by sharing the risks and cost of late-stage development, we will be able to accelerate the advancement of AZD3293 and progress a promising new approach to support the treatment of Alzheimer's patients around the world.

"What's more, this alliance will enable AstraZeneca to further sharpen our strategic focus on core therapeutic areas, while leveraging external collaborations to maximize the potential of the strong science we have in our growing pipeline," Pangalos said.