Lilly Won’t Develop 3 of Ligand’s Diabetes Drugs

Ligand Pharmaceuticals Inc., a San Diego biotechnology company that recently won approval for its first two products, said Thursday its partner, Eli Lilly & Co., won’t develop three of Ligand’s experimental diabetes drugs.

Instead, Lilly will focus on second-generation Ligand drugs, which are in earlier stages of research, Ligand said.

The decision means that the rights to one of the first-generation diabetes compounds, known as Targretin, return to Ligand, which is already developing Targretin for a different use, in cancer and skin disease.

San Diego-based Ligand’s shares fell $2.06 to close at $10.31 on Nasdaq.A Lilly shares rose $4.88 to close at $93.38 on the New York Stock Exchange.

“It’s bad news,” said Richard van den Broek, a Hambrecht & Quist analyst with a “buy” rating on Ligand. “It’s a product that Lilly’s taken a pass on. It doesn’t condemn the technology, but it certainly doesn’t validate it either.”

Van den Broek said he didn’t believe Lilly’s rejection of the compound would affect its development for other illnesses.

Ligand said it was “disappointed” in Lilly’s decision not to develop the first-generation diabetes compounds, which would have brought payments to the company if developed further. Still, Ligand said it should be able to develop Targretin faster now that there’s no other program studying its use in diabetes.

Ligand said Lilly’s decision not to proceed with the first-generation drugs resulted from a better “therapeutic index,” or benefit-to-risk ratio, seen with the second-generation drugs.