Collaborative Agreements

We have entered into various collaborative agreements which provide us with rights to develop, produce and market products using certain know-how, technology and patent rights maintained by our collaborative partners. Terms of the various collaboration agreements may require us to make and/or receive milestone payments upon the achievement of certain product research and development objectives and pay and/or receive royalties on future sales, if any, of commercial products resulting from the collaboration.

Amounts due from our collaborative partners related to development activities are generally reflected as a reduction of research and development expenses and amounts due to our collaborative partners related to sharing of commercialization expenses are generally reflected as selling, general and administrative expenses. Milestone payments and up-front payments received are generally reflected as collaborative revenue as discussed above in Note 1, and milestone payments and up-front payments made are generally recorded as research and development expenses if the payments relate to drug candidates that have not yet received regulatory approval. Milestone payments and up-front payments that we make related to approved drugs will generally be capitalized and amortized to cost of goods sold over the economic life of the product. Royalties received are generally reflected as collaborative revenues and royalties paid are generally reflected as cost of goods sold.

For collaborations with commercialized products, if we are the principal we record revenue and the corresponding operating costs in their respective line items within our statement of operations based on the nature of the shared expenses. If we are not the principal (which is the case for our sales of exenatide products to Lilly for sale outside the United States), we record operating costs as a reduction of revenue. The principal is the party who is responsible for delivering the product or service to the customer, has latitude with establishing price and has the risks and rewards of providing product or service to the customer, including inventory and credit risk.

Collaboration with Eli Lilly and Company

In September 2002, we and Lilly entered into a Collaboration Agreement for the global development and commercialization of exenatide, or the Lilly Agreement. On November 7, 2011 we and Lilly entered into a Settlement and Termination Agreement, or the Termination Agreement, to terminate our collaboration for exenatide and resolve the outstanding litigation between the companies. As part of the agreement, the parties agreed to transition full responsibility for the worldwide development and commercialization of exenatide to Amylin, starting in the U.S. on November 30, 2011, progressing to all markets by the end of 2013. Under the agreement, the companies completed the U.S. Transition on November 30, 2011, or the U.S. Transition Date, and the OUS Transition will occur no later than December 31, 2013. In the event the OUS transition does not occur by December 31, 2013, the agreement contains various provisions with respect to future rights and obligations of each party that extend beyond December 31, 2013.

The Lilly Agreement included BYETTA, our twice-daily formulation of exenatide for the treatment of type 2 diabetes, and any sustained release formulations of exenatide such as BYDUREON, our once-weekly formulation of exenatide for the treatment of type 2 diabetes, which received FDA approval on January 27, 2012. Under the terms of the Lilly Agreement, operating profits from products sold in the United States were shared equally between us and Lilly through November 30, 2011, which is the date Lilly’s involvement in the United States commercial operations ceased. Lilly was responsible for 53% of shared exenatide global development and commercialization expenses that generate utility both in the United States and outside the United States through the U.S. Transition Date; we were responsible for 47% of these expenses. Lilly is responsible for 100% of all exenatide development and commercialization expenses that generate utility predominantly outside of the U.S. until the OUS Transition is complete. The Lilly Agreement provided for tiered royalties payable to us by Lilly based upon the annual gross margin for all OUS exenatide product sales and the Termination Agreement also provides for the payment of such royalties through the date the OUS Transition is complete. Royalty payments for OUS exenatide product sales commenced during the second quarter of 2011 upon the achievement of a one-time cumulative gross margin threshold.

In October 2008, we and Lilly entered into an Exenatide Once Weekly Supply Agreement, or the Supply Agreement, pursuant to which we agreed to supply commercial quantities of BYDUREON for sale in the United States and outside the United States. In connection with the Termination Agreement, the Supply Agreement was amended and restated effective November 7, 2011, or the Amended and Restated Supply Agreement, pursuant to which Lilly will pay Amylin a fixed price for product supplied under the agreement. Under the terms of the Amended and Restated Supply Agreement, we are required to manufacture BYDUREON intended for commercial sale by Lilly in jurisdictions outside the United States through the OUS Transition period.

The following is a summary of activity related to our collaboration with Lilly and the location in the consolidated statements of operations (in thousands):



	Classification within Consolidated Statements of Operations	Three Months Ended				Six Months Ended
Activity	Classification within Consolidated Statements of Operations	June 30, 2012		June 30, 2011		June 30, 2012		June 30, 2011
Royalty revenue	Revenues under collaborative agreements	$	957	$	1,401	$	2,083	$	1,401
Gross margin sharing	Collaborative profit sharing	$	—	$	60,652	$	—	$	120,503
Development expense cost-sharing payments received from Lilly for BYETTA and BYDUREON development expense	Reduction of research and development expense	$	—	$	17,842	$	—	$	35,188
Cost-sharing payments due from Lilly for shared sales force expenses, marketing expenses and other commercial or operational support	Reduction of selling, general and administrative expense	$	—	$	2,300	$	—	$	5,637

Collaboration with Alkermes, Inc.

In May 2000 we entered into a development and license agreement with Alkermes Controlled Therapeutics, Inc. II, or Alkermes, a subsidiary of Alkermes, Inc., a company specializing in the development of products based on proprietary drug delivery technologies. The development and license agreement, or the Alkermes Agreement, was amended in 2005 and provides for Alkermes to assist us in the development, manufacture and commercialization of BYDUREON. Under the terms of the Alkermes Agreement, Alkermes has transferred to us its technology for manufacturing BYDUREON. We are responsible for manufacturing BYDUREON for commercial sale. In exchange, Alkermes is entitled to receive funding for research and development. During the six months ended June 30, 2012 we paid Alkermes a $7.0 million milestone upon the commercial launch of BYDUREON in the United States. Alkermes is also entitled to receive royalties on any product sales. In addition to the collaboration agreement, Alkermes is supplying us with the polymer materials required for the commercial manufacture of BYDUREON under a Supply Agreement dated December 29, 2007.

Collaboration with Takeda Pharmaceutical Company, Ltd.

On October 30, 2009, we and Takeda Pharmaceutical Company Limited, or Takeda, entered into a License, Development and Commercialization Agreement, or the Takeda Agreement, pursuant to which the companies will co-develop and commercialize pharmaceutical products containing compounds specified in the Takeda Agreement for the treatment of human indications including, but not limited to, (i) weight management and/or obesity, (ii) glycemic control and (iii) cardiovascular disease. We received a one-time, nonrefundable cash payment of $75 million from Takeda in connection with the execution of the Takeda Agreement. We recorded the up-front payment as deferred revenue in our consolidated balance sheets and will recognize the revenue over the estimated development period of ten years. As of June 30, 2012 deferred revenue associated with the Takeda collaboration equaled $55.0 million, of which $47.5 million is classified as long-term.

The following is a summary of activity related to the Takeda Agreement and the location in the consolidated statements of operations (in thousands):



	Classification within Consolidated Statements of Operations	Three Months Ended				Six Months Ended
Activity	Classification within Consolidated Statements of Operations	June 30, 2012		June 30, 2011		June 30, 2012		June 30, 2011
Amortization of up-front payments	Revenues under collaborative agreements	$	1,875	$	1,875	$	3,750	$	3,750
Cost-sharing payments due from Takeda for shared development expenses	Reduction of research and development expense	$	571	$	1,971	$	1,329	$	6,989