Transition Therapeutics Scores Lilly in Diabetes Pact (TTHI, LLY)

Transition Therapeutics Inc. (NASDAQ: TTHI) is seeing shares surge in after-hours activity.  It has signed a pact with Eli Lilly and Co. (NYSE: ELY) where Lilly will acquire exclusive rights to its Gastrin-based therapies program for the treatment of Diabetes.  This is a licensing and collaboration pact that grants Lilly with the exclusive worldwide rights to develop and commercialize Transition’s gastrin-based therapies.  This includes the lead compound TT-223, which is currently in early Phase II study testing. Gastrin based therapies have been shown to provide sustained improvement in glycemic control to help avoid complications and symptoms of diabetes.

Under the terms, Transition will receive a $7 million payment and it may also receive up to $130 million milestone payments as well as royalties.  Both companies will participate in the planned phase II clinical trial for type 2 diabetes.  Lilly will then be responsible for later R&D and sales of all gastrin based therapeutic products worldwide. Other terms of the deal were not disclosed.

Shares rose almost 8% today to $11.11 and the 52-week trading range was $8.73 to $14.09.  Shares are up over 30% to $14.75 in after-hours trading, although we would warn traders that this one sees around 20,000 shares per day on average.

Just last week, Canaccord Adams started coverage with a Buy rating.  Hats off to them, great call.

Jon C. Ogg
March 13, 2008