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Deal Rumor: Lilly In Rewind Mode

Deal Rumor: Lilly In Rewind Mode [The Indianapolis Star]

From Indianapolis Star (IN) (October 1, 2010)

Sept. 30--Is Eli Lilly and Co. back in the market for inhaled insulin, less than three years after pulling the plug on its own experimental compound?

A rumor that the Indianapolis drug maker might be interested in buying biotech MannKind Corp. of Valencia, Calif., which is developing such an experimental drug, for $1.65 billion, or $12.50 a share, rocketed around Wall Street on Wednesday.

The speculation pushed shares in MannKind up as much as 10 percent in heavy trading Wednesday. Rumors of a possible deal were first published by, a Wall Street online tip sheet, and repeated by a blogger at Barron’s.

Several analysts batted down the idea, saying such an acquisition would make little, if any, sense.

"I don’t believe it," said Bert Hazlett of BMO Capital Markets in New York. "Call me silly, but I am just not a believer in MannKind’s product. I don’t think Lilly would be, either."

Lilly would not say whether there was any truth to the rumor. "At Lilly, we do not comment on market rumors and deal speculation," company spokesman Mark Taylor said in an e-mail.

But Lilly executives have repeatedly said they are interested in small to medium-size acquisitions that could bolster the company’s pipeline and product mix.

Just this week, Dr. Jan Lundberg, Lilly’s head of research and development, told The Wall Street Journal that the company was actively seeking to acquire the rights to other companies’ experimental drugs with potential to reach the market in the next few years.

MannKind has wrapped up clinical trials for an experimental inhaled insulin, called Afreeza, and is seeking federal approval to market the drug.

The company has sunk more than $1 billion into developing the product, touting it as easier to take than frequent insulin injections and medically superior to traditional medicines for controlling blood sugar.

A few years ago, pharmaceutical companies including Lilly, Pfizer and Novo Nordisk were racing to develop inhaled insulin. Pfizer was the first and only drug maker to launch a product, called Exubera. But the company pulled the plug after barely a year, citing disappointing sales. The move threw about 750 people out of work at Pfizer’s factory near Terre Haute.

Novo Nordisk scrapped its own experimental inhaled insulin shortly afterward. And in March 2008, Lilly followed suit, saying it had doubts about market demand and regulatory approval.

So is Lilly reconsidering now?

Les Funtleyder, an analyst at Miller Tabak & Co. in New York, sounded doubtful. "It sounds far-fetched to me," he said. "To think that Lilly would buy MannKind, given the history of this class of drugs, doesn’t make any sense to me."

Shares in MannKind closed up 8.2 percent Wednesday, at $6.58. Shares of Lilly closed up 0.4 percent, at $36.53.

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Posted: October 2010