Lilly Halts Development of Semagacestat for Alzheimer's Disease Based on Preliminary Results of Phase III Clinical Trials

Indianapolis, August 17, 2010 (ots/PRNewswire) - Eli Lilly and Company
will halt development of semagacestat, a gamma secretase inhibitor
being studied as a potential treatment for Alzheimer's disease,
because preliminary results from two ongoing long-term Phase III
studies showed it did not slow disease progression and was associated
with worsening of clinical measures of cognition and the ability to
perform activities of daily living.

The company's decision does not affect the ongoing clinical
trials of solanezumab, Lilly's other compound in Phase III trials as
a potential Alzheimer's treatment. While both drugs focus on
amyloid-beta proteins, which are believed to play a critical role in
Alzheimer's disease, they have different mechanisms of action. Lilly
also has two other compounds in earlier stages of clinical
development; those studies are not affected by today's announcement.

In two pivotal Phase III trials, semagacestat was compared with
placebo in more than 2,600 patients with mild-to-moderate Alzheimer's
disease. Lilly has now reviewed data from a pre-planned interim
analysis of semagacestat studies. This interim analysis showed that,
as expected, cognition and the ability to complete activities of
daily living of placebo-treated patients worsened. However, by these
same measures, patients treated with semagacestat worsened to a
statistically significantly greater degree than those treated with
placebo. In addition, data showed semagacestat is associated with an
increased risk of skin cancer compared with those who received
placebo.

"This is disappointing news for the millions of Alzheimer's
patients and their families worldwide who anxiously await a
successful treatment for this devastating illness," said Jan M.
Lundberg, Ph.D., Executive Vice President, Science and Technology,
and President, Lilly Research Laboratories. "This is a setback, but
Lilly's commitment to beating Alzheimer's will not waver."

Lilly is instructing clinical trial investigators for all
semagacestat studies to contact study participants as soon as
possible and tell them to immediately stop taking the study drug they
have received. Study participants or caregivers should call their
study physician to schedule their next appointment. Lilly has
appropriately informed regulatory agencies and is providing
instructions to investigators outlining the process for finalizing
the studies.

Lilly's clinical team will continue to gather and evaluate data
from these studies, and will publish the results for the benefit of
future Alzheimer's research. Although dosing with semagacestat is
being stopped, Lilly plans to continue collecting safety data,
including cognitive scores, for at least six months through regularly
scheduled follow-up visits with study physicians and modifications of
the existing Phase III protocols. These additional follow-up visits
will help to answer a number of important questions, including
whether the differences between patients who received semagacestat
and those who received placebo will continue after semagacestat has
been discontinued. Other smaller short-term studies will be stopped
and participants will receive appropriate follow-up.

The decision to halt development of semagacestat is expected to
result in a third-quarter charge to earnings of approximately US$.03
to US$.04 per share. The company confirmed its previous 2010 earnings
per share guidance range of US$4.44 to US$4.59 on a reported basis,
or US$4.50 to US$4.65 on a non-GAAP basis.

"We are clearly disappointed by the results we are announcing
today. However, Lilly's innovation strategy, based on advancing a
pipeline of nearly 70 molecules currently in clinical development,
does not rest on the success or failure of any single compound," said
John C. Lechleiter Ph.D., Lilly's chairman and chief executive
officer. "Pharmaceutical research always carries risk, as these
results show. But it offers as well the potential for tremendous
reward for millions of patients who await new medicines. Despite this
and other recent setbacks, Eli Lilly and Company remains financially
strong and is even more determined to prevail in our quest to provide
new treatments for Alzheimer's and other serious diseases."

About Alzheimer's disease

Alzheimer's disease is a fatal form of dementia that causes
progressive decline in memory and other aspects of cognition. It
occurs when billions of neurons in the brain begin dying prematurely.
Researchers don't know exactly what causes it, but the leading
hypothesis is that amyloid beta plaques play an important role.

About semagacestat

Semagacestat is an oral agent designed to reduce the body's
production of amyloid beta plaques, which scientists believe play an
important role in causing Alzheimer's disease. Semagacestat is
believed to block the activity of gamma secretase, an enzyme that is
essential to the body's production of amyloid beta plaques. The
compound's safety and efficacy are being tested in two Phase III
clinical trials called IDENTITY and IDENTITY-2.

About the IDENTITY trials

IDENTITY (Interrupting Alzheimer's Dementia by EvaluatiNg
Treatment of AmyloId PaThologY) and IDENTITY-2 are Lilly's Phase III
placebo-controlled trials studying semagacestat, a gamma-secretase
inhibitor being investigated as a potential treatment to slow the
progression of mild to moderate Alzheimer's disease. Both Phase III
trials are fully enrolled, with more than 2,600 patients from 31
countries, and include a treatment period of approximately 21 months.
An open-label extension study (IDENTITY-XT) is available to all
participants completing either study.

All study participants had to be at least 55 years old and meet
the National Institute of Neurological and Communicative Disorders
and Stroke/Alzheimer's Disease and Related Disorders Association
(NINCDS/ADRDA) criteria for probable Alzheimer's disease, with
certain assessment scores indicating mild to moderate Alzheimer's
disease. Patients with more advanced Alzheimer's disease were not
included in the studies.

Use of approved treatments for Alzheimer's disease (including
donepezil (Aricept), rivastigmine (Exelon), galantamine (Razadyne,
RazadyneER), tacrine (Cognex) and memantine (Namenda)) is permitted
during the study, provided that such medications had been given for
at least 4 months and the dose had been unchanged for 2 months before
study participants first received their study drug.

The primary objective of both IDENTITY trials was to determine
whether semagacestat given orally would slow the decline associated
with Alzheimer 's disease as compared with placebo. The study
protocol calls for this to be evaluated periodically for 21 months
after initiation of treatment for most patients. A participant's
cognition and function are assessed using two 2 co-primary endpoints:

- the Alzheimer's disease Assessment Scale - Cognitive subscore (referred
to as the ADAS-Cog11); and
- the Alzheimer's disease Cooperative Study - Activities of Daily Living
Inventory (Referred to as the ADCS-ADL).

About Eli Lilly and Company

Lilly, a leading innovation-driven corporation, is developing a
growing portfolio of pharmaceutical products by applying the latest
research from its own worldwide laboratories and from collaborations
with eminent scientific organizations. Headquartered in Indianapolis,
Ind., Lilly provides answers - through medicines and information -
for some of the world's most urgent medical needs. Additional
information about Lilly is available at http://www.lilly.com.

This press release contains forward-looking statements that are
based on management's current expectations, but actual results may
differ materially due to various factors. There are significant risks
and uncertainties in pharmaceutical research and development. There
can be no guarantees with respect to pipeline products that the
products will receive the necessary clinical and manufacturing
regulatory approvals or that they will prove to be commercially
successful. The company's results may also be affected by such
factors as competitive developments affecting current products; rate
of sales growth of recently launched products; the timing of
anticipated regulatory approvals and launches of new products;
regulatory actions regarding currently marketed products; other
regulatory developments and government investigations; patent
disputes and other litigation involving current and future products;
the impact of governmental actions regarding pricing, importation,
and reimbursement for pharmaceuticals, including U.S. health care
reform; changes in tax law; asset impairments and restructuring
charges; acquisitions and business development transactions; and the
impact of exchange rates and global macroeconomic conditions. For
additional information about the factors that affect the company's
business, please see the company's latest Forms 10-Q and 10-K filed
with the U.S. Securities and Exchange Commission. The company
undertakes no duty to update forward-looking statements.

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