Lilly to pay up to $400M to buy rights for early-stage immune drug

Eli Lilly and Co., which wants to turbocharge its portfolio of drugs to treat anti-inflammatory conditions such as psoriasis and rheumatoid arthritis, is making a play with a California-based biotech that could be worth up to $400 million.

The Indianapolis-based drugmaker said Monday it has acquired rights to co-develop an early-stage drug discovered by Nektar Therapeutics of San Francisco that has the potential to treat several autoimmune and chronic inflammatory conditions.

Lilly will give Nektar $150 million in upfront payments and an additional $250 million if the drug hits certain developmental and regulatory milestones.

The drug, called NKTR-358, is designed to address imbalances in a patient’s immune system. Nektar CEO Howard Robin said the drug could have a "profound effect" on a number of immune and inflammatory disorders, including lupus, psoriasis, arthritis and multiple sclerosis. 

But how well the therapy works could take years to determine. Nektar began dosing patients in Phase 1 clinical trials only four months ago. The trial will help determine how safe the treatment is in healthy volunteers. The next step is to test it for effectiveness in patients with immune disorders.

Lilly CEO David Ricks has said the company wants to increase development of immune drugs as one of its five strategic disease areas, in addition to diabetes, cancer, neurodenerative disorders such as Alzheimer's disease, and pain.

In recent years, Lilly has had a mixed track record of developing immunology drugs. Last year, it launched Taltz for treatment of moderate-to-severe plaque psoriasis. The drug rang up sales of $96.6 million in the first quarter of 2017, which Lilly said reflected a “strong launch uptake.”

But, in April, U.S. regulators rejected another drug, baricitinib, Lilly’s much-anticipated pill for the immune disorder rheumatoid arthritis. Regulators said they needed substantially more information about the drug's safety and the best doses. Lilly said it will work to eventually get the drug approved for U.S. patients.

In the meantime, Lilly is working with Nektar to develop what it says could become a first-in-class therapeutic to help patients with immune imbalances.

Nektar could use the cash infusion. The company lost $153 million last year, on revenue of $165 million as it worked to develop a wide array of new drugs.

Shares of Nektar surged 10 percent early Monday before falling back to $22.74 each, up 2.3 percent on the day. Lilly shares were up 19 cents, to $84.85 each.