Amylin Scores First in Court

Amylin Pharmaceuticals (Nasdaq: AMLN  ) has won the first round of its battle with marketing partner Eli Lilly (NYSE: LLY  ) . But we still have a long way to go.

Yesterday, a U.S. District Court issued a temporary restraining order barring Lilly from using its sales force that markets Amylin's Byetta from also marketing Tradjenta. Eli Lilly recently agreed to market the latter with German Boehringer Ingelheim.

Amylin has more to lose here. The biotech says it's worried about competition between the two diabetes drugs, but I'm not sure that's the biggest issue. Tradjenta is an oral molecule that will be used early in the diabetes progression, competing against other oral compounds like Merck's (NYSE: MRK  ) Januvia, Takeda's Actos, and Onglyza from Bristol-Myers Squibb (NYSE: BMY  ) and AstraZeneca (NYSE: AZN  ) . Byetta is injected twice a day, so it's typically prescribed after diabetics can no longer control their blood sugar levels with oral medications.

But even if Tradjenta and Byetta aren't competing directly, Amylin still needs to be concerned with the relative effort that the sales force is giving to Byetta. Tradjenta was just approved, while Byetta has been on the market since 2005. Which one do you think the sales force is going to be more excited to promote?

If Amylin wins, Lilly will be stuck with the status quo, which on the surface isn't so bad. But it means losing some synergies that were likely an integral part of the decision to partner with Boehringer Ingelheim.

Clearly the best solution is for the companies to work out a compromise. It can't be productive to have the companies' lawyers dueling in court while executives try to coordinate their separate sales forces. Perhaps Amylin allows Lilly to market both products, but Lilly agrees to increase the number of reps promoting the drug.

Investors can only hope the restraining order drives the two sides to the table and doesn't push them farther apart.

Keep track of Amylin and Eli Lilly as they battle it out in court. Click on their names to add them to My Watchlist, which will help you keep track of all our Foolish analysis on the companies.

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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool's disclosure policy believes we'd all be happy with more wagging and less barking.


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