Lilly, Sigilon Therapeutics Announce Collaboration

Eli Lilly and Company and Sigilon Therapeutics announced a global collaboration to develop encapsulated cell therapies for the potential treatment of type 1 diabetes. Sigilon is a privately-held biopharmaceutical company that is focused on discovering and developing "living therapeutics" with its Afibromer technology product platform.

Encapsulated cell therapy is an emerging area of biopharmaceutical research that aims to unleash the therapeutic potential of cells to treat serious diseases without the need for immunosuppression. This approach holds promise to address chronic conditions, such as type 1 diabetes. In type 1 diabetes, pancreatic beta cells are destroyed by the immune system, leading to hyperglycemia (high blood sugar) and long-term complications if glucose levels are not managed effectively.

In the Lilly-Sigilon collaboration, Sigilon will create proprietary products comprised of induced pluripotent stem cells, a type of stem cell derived from adult cells, engineered into differentiated insulin-producing pancreatic beta cells and encapsulated using Sigilon's Afibromer technology. The goal of these products will be to restore insulin production over sustained periods, without triggering an immune reaction.

Research leading to the discovery of Afibromer biomaterials was funded by grants from JDRF International and the Leona M. Helmsley and Harry B. Helmsley Charitable Trust and conducted under the leadership of Daniel Anderson, Ph.D., and Robert Langer, Sc.D., of the Massachusetts Institute of Technology and Boston Children's Hospital.

"At Lilly, we endeavor to change the frontiers of what's possible in medicine, both through our own scientific labs and in collaboration with other leading researchers," said Daniel Skovronsky, M.D., Ph.D., senior vice president for clinical and product development and incoming president of Lilly Research Labs. "We are excited to be collaborating with, and investing in, Sigilon as they seek to develop encapsulated cell therapies, a potentially disruptive technology that could result in meaningful clinical advancements for chronic diseases such as type 1 diabetes."

Under the terms of the agreement, Lilly will receive an exclusive worldwide license to Sigilon's Afibromer technology for islet cell encapsulation. Sigilon will receive an upfront payment of $63 million and Lilly will make an undisclosed equity investment in Sigilon. Sigilon is also eligible to receive up to $410 million in development and commercialization milestones, as well as single to double digit tiered royalties on future product sales should the collaboration yield a commercially successful product. Sigilon will be responsible for all development activities and costs related to the collaboration until submission of an investigational new drug application (IND). After an IND is submitted, Lilly will be responsible for all clinical development and commercialization activities and costs related to the collaboration.

Sigilon was founded and created by Flagship Pioneering, a life science innovation firm, which unveiled the company in 2017 with $23.5 million in capital. Doug Cole, Managing Partner at Flagship Pioneering and Chairman of Sigilon's Board added, "We believe that unprecedented innovation, such as that at Sigilon, is necessary to uncover new solutions for patients. Sigilon's product platform offers the possibility of realizing the full potential of cell therapies, and we look forward to seeing the outcome of Lilly's and Sigilon's collaboration for type 1 diabetes."

As a result of this transaction, Lilly will incur an acquired in-process research and development charge to earnings of approximately $0.05 per share in the second quarter of 2018. The company's reported earnings per share guidance for 2018 is expected to be reduced by the amount of the charge. There will be no change to the company's non-GAAP earnings per share guidance as a result of this transaction.

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