Eli Lilly

(LLY) - Get Report

said Wednesday that it had acquired an experimental insomnia compound, currently in early stage clinical testing, from the German drug and chemical company



Under the terms of the agreement, the German company will receive an upfront payment of $29 million during the fourth quarter as well as milestone and royalty payments based on the drug's development and commercialization. Lilly will report the upfront payment as an acquired in-process research and development charge worth 2 cents a share during the fourth quarter.

The transaction is expected to close next month. Lilly receives exclusive rights to develop and market the drug worldwide. Merck retains rights for potential co-promotion of the product in certain countries.

The drug, called EMD 281014, is currently in phase I clinical trials, the earliest stage of testing on humans. Lilly said insomnia affects more than 164 million people worldwide, including more than 49 million with chronic insomnia.

"EMD 281014 represents a novel approach to treating insomnia and potentially other central nervous system disorders," said Dr. Steve Paul, executive vice president for science and technology at Lilly.

Lilly's stock rose $1.49, or 2.8%, to $53.94.