Lilly's setbacks could lead to Amylin buyout, other deals

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Eli Lilly CEO John Lechleiter (photo) has long said that his company won't pursue a mega-deal like its competitors. But the possibility of numerous smaller buyouts is looking more and more appealing following a tough week for the company.

Earlier this week, the FDA rejected Lilly's application for Bydureon, forcing a new trial and a delay that will stretch to mid-2012. Additionally, its once-promising Type 1 diabetes drug teplizumab flunked a Phase III study; two other trials have been suspended. Bloomberg notes that by 2013, Lilly will lose patent protection for drugs that account for half its revenues. To make up for the losses, the Indianapolis-based company may consider its Bydureon partner Amylin to boost its diabetes franchise. Now would be a good time to buy, as Amylin's stock was hit hard by the FDA rejection. Lazard Capital Markets analyst Bill Tanner adds that Cephalon or Endo Pharmaceuticals could also be buyout targets, while Leerink Swann's Seamus Fernandez believes United Therapeutics and Forest Labs present attractive buyout opportunities.

"Our fundamental strategy remains intact," Lechleiter said in a conference call, as quoted by Bloomberg. "We're not interested in large-scale combinations. I think there are many other opportunities that I think we could consider along the lines of several that we have done this year." The company has more than $5 billion in cash available to make deals.

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