Eli Lilly (NYSE: LLY) has apparently had enough of Xigris and its languishing sales --  just $57.3 million in U.S. revenue last year The drugmaker announced yesterday that it's spinning off the sepsis drug into a new biotech called BioCritica.

Exact financial details weren't disclosed, but Eli Lilly may not be footing any of the bill. Two private equity funds, Care Capital and NovaQuest Capital, are investing in BioCritica. In exchange for giving up U.S. rights to Xigris, Eli Lilly gets a stake in BioCritica. The pharma will presumably still make some money off an agreement to supply the drug to BioCritica.

Lilly isn't the first drugmaker to chuck a nonperforming asset. Biogen Idec (Nasdaq: BIIB) sold off Zevalin to Cell Therapeutics (Nasdaq: CTICD), which eventually made its hands to Spectrum Pharmaceuticals (Nasdaq: SPPI). Pfizer (NYSE: PFE) spun out Esperion Therapeutics after buying the biotech and realizing the assets probably weren't worth the $1.3 billion price tag.

In this case, it looks like Lilly and its investors are trying to set up BioCritica as a specialty pharma. The biotech has the option to acquire several critical-care compounds that Lilly is currently developing in the lab. And it could potentially acquire the rights to Xigris outside the U.S. at a later date.

It's not immediately clear how the spinoff benefits Lilly. Perhaps it's just a way to add value to Xigris before eventually getting BioCritica acquired. Biotech IPOs aren't a great option right now, so Lilly isn't likely to be able to sell its shares in the company anytime soon. The initiators got the state of Indiana involved through the Indiana Economic Development Corporation, so perhaps there were tax breaks or other incentives for having the drug as part of a smaller company.

Whatever the reason, investors certainly won't miss Xigris, a drug once heralded as a potential blockbuster. Sometimes you just have to cut your losses. If private equity is willing to help, all the better.

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