Transition, Lilly amend agreement to address future development of TT-401

Transition Therapeutics Inc. ("Transition" or the "Company") (NASDAQ: TTHI, TSX: TTH) announced that Eli Lilly and Company ("Lilly") has exercised its option to assume all development and commercialization rights to type 2 diabetes drug candidate TT-401. In conjunction with this assumption of rights, Transition will receive a US$7 million milestone payment.

Lilly and Transition have amended their agreement to address future development of TT-401 and associated financial arrangements. Lilly will assume all costs and perform all future development and commercialization activities of TT-401. Transition will contribute payment of US$14 million to Lilly in three separate installments during the Phase 2 clinical study. If TT-401 is successfully commercialized, Transition will be eligible to receive approximately US$240 million in additional milestone payments. Transition will also be eligible to receive a double-digit royalty on sales of TT-401 products and a low single digit royalty on related compounds.

"We are encouraged by the early data seen to date with TT-401, and are pleased by the efficient and thorough process by which Transition Therapeutics conducted the Phase 1 studies," said David Moller, vice president of endocrine and cardiovascular research and clinical investigation for Lilly. "We look forward to continuing the development of TT-401, as it supports our strategy of offering a broad portfolio of therapies for people with diabetes."

"We are very pleased with Lilly's commitment to the development of TT-401. The Phase 2 efficacy study and parallel product development work will be performed by Lilly's world-class clinical development team. Our additional financial contribution secures a greater vested interest for Transition, and we welcome the opportunity to invest in this drug candidate that has shown encouraging data in the recently announced human proof-of-concept study," said Dr. Tony Cruz, chairman and chief executive officer of Transition.

TT-401 is a dual agonist of the GLP-1 (Glucagon-Like Peptide-1) and glucagon receptors which is being developed to treat type 2 diabetes and accompanying obesity. In March 2010, Transition entered into a licensing and collaboration agreement with Eli Lilly and Company, where Transition acquired the rights to a series of pre-clinical compounds from Lilly, including TT-401 for the treatment of type 2 diabetes.