When Pfizer ($PFE) first let slip that it struck a deal to collaborate with Eli Lilly ($LLY) on the high-risk anti-nerve growth factor pain drug tanezumab, the news was delivered without any of the usual deal terms. But a few days ago Lilly spelled it out in its Q3 report, detailing its commitment to hand over a $200 million upfront once the FDA addresses its hold on the program, another $350 million in regulatory milestones and $1.23 billion in sales milestones.
That's all on top of Eli Lilly's commitment to share the cost of the Phase III, frozen since safety risks highlighted in 2009 forced a sudden halt on what at the time was one of the hottest fields in drug development.
Back in 2010 tanezumab was widely considered one of the top prospects in the industry's late-stage pipeline. The entire class of anti-NGF drugs was estimated by some analysts to be worth a potential $11 billion. Then the studies for the drug--as well as therapies at other major developers--were shelved after it became apparent that the pain remedy worked so well that a group of patients were blowing out joints that then needed to be replaced.
Pfizer now believes, though, that it can resolve the FDA's concerns about the drug and perhaps the class with the submission of nonclinical data in the first half of next year. That would add a major new late-stage drug to both Pfizer's and Lilly's late-stage efforts, which could use some help. And it would have implications for Regeneron ($REGN; REGN475/SAR164877), J&J ($JNJ; fulranumab) and AstraZeneca ($AZN; early-stage), which had their own anti-NGF therapies put on hold. For Lilly, though, it may well raise a common complaint about the company: Many analysts believe it has an unhealthy appetite for super-risky therapeutic programs, as witnessed by its huge investment in late-stage Alzheimer's remedies.
The numbers leave no doubt, though, that Lilly has extremely high expectations about its potential rewards. And Pfizer can't be faulted for setting up a deal tied to some rich payouts.