Eli Lilly and Company and Incyte Corporation have entered into an exclusive worldwide license and collaboration agreement for the development and commercialization of Incyte's oral JAK1/JAK2 inhibitor, INCB28050, and certain follow on compounds, for inflammatory and autoimmune diseases. The lead compound, INCB28050, is currently being studied in a six-month dose-ranging phase-II trial for rheumatoid arthritis.

Under the terms of the agreement, Lilly will receive worldwide rights to develop and commercialize INCB28050 as an oral treatment for all inflammatory conditions. In exchange for these rights, Incyte will receive an initial payment of US$ 90 million and is eligible for up to US$ 665 million in additional potential development, regulatory, and commercialization milestones, as well as tiered, double-digit royalty payments on future global sales with rates ranging up to twenty percent if a product is successfully commercialized.

"This new alliance with Incyte reinforces Lilly's commitment to expand our presence in inflammation and autoimmunity through the development of a new class of oral anti-inflammatory therapies," said Eiry Roberts, Lilly vice president for autoimmune product development. "We look forward to continuing the development of INCB28050 in RA and initiating additional clinical studies to help address the unmet patient needs from debilitating autoimmune and inflammatory diseases."

Paul Friedman, Incyte's president and chief executive officer, stated, "Lilly's success in bringing novel therapies to market, their commitment to building a franchise in inflammation and autoimmunity, and their enthusiasm regarding the potential of JAK inhibition gives us confidence that the full therapeutic and commercial potential of INCB28050 in RA as well as other autoimmune and inflammatory conditions can be rapidly and effectively achieved through this agreement. This collaboration leverages the capabilities and strengths of each partner and achieves our objective to retain significant value for Incyte's shareholders."

Incyte will retain the option to co-develop its JAK1/JAK2 inhibitors with Lilly on a compound-by-compound and indication-by-indication basis beginning at the initiation of phase-IIb development. Under the agreement, if Incyte elects to co-develop any compounds and/or indications, Incyte would be responsible for funding thirty percent of the associated future global development costs from the initiation of a phase-IIb trial. Incyte would receive an incremental royalty rate increase across all tiers resulting in effective royalty rates ranging up to the high twenties on potential future global sales for compounds and/or indications that Incyte elects to co-develop. Incyte expects that the earliest it would consider exercising a co-development option would be in the second half of 2010, concurrent with the potential initiation of a phase-IIb trial with INCB28050.

Development of the JAK1/JAK2 inhibitors will be governed by a joint development committee. Incyte also has the option to co-promote products in the US.

As a result of this transaction, Lilly expects to incur a charge to earnings in the fourth quarter of 2009 of approximately US$ .05 per share. The company reconfirmed its full-year 2009 earnings-per-share guidance of US$ 3.90 to US$ 4.00 per share on a reported basis, or US$ 4.30 to US$ 4.40 per share on a pro form a non-GAAP basis.

There are four known JAK enzymes: JAK1, 2, 3 and TYK2. These enzymes are critical components of signalling mechanisms utilized by a number of cytokines and growth factors, including those that are elevated in RA patients.

INCB28050 is an orally-available, potent and selective JAK1/JAK2 inhibitor that is currently in phase-II development as a treatment for RA.

Incyte Corporation is a Wilmington, Delaware-based drug discovery and development company focused on developing proprietary small molecule drugs for oncology, inflammation and diabetes.