Eli Lilly's Alimta gains may cause Princeton pain

Eli Lilly's success with Alimta has been a boon for Princeton University, which holds a key patent on the drug compound. But because of the university's $524 million in licensing income from the cancer drug, residents of Princeton, NJ, have sued the city government and the school, challenging its tax-exempt status.

As Bloomberg reports, Princeton chemistry professor Edward Taylor invented a compound that eventually became Alimta, Lilly's ($LLY) lung cancer treatment. Princeton patented the invention, and as Alimta grew into a $2.5 billion blockbuster, the school collected that $524 million in licensing income.

It's what Princeton did with that money that has city residents riled. Over the years, the school spent a big chunk of money on a new chemistry building and dispensed $118 million in additional pay to faculty. The residents zeroed in on that spending in challenging the tax exemption under state law--and recently, Judge Vito Bianco refused to toss out the suit, clearing the way for an eventual trial.

"We don't give tax exemptions to universities so they can take profits and pay selected faculty," the residents' attorney, Bruce Afran, told the news service. "Some faculty are becoming fabulously wealthy, while taxpayers are paying more than they should. That is fundamentally unfair."

Princeton says it's not operating for profit and that it's confident it will keep its tax exemption. As Bloomberg notes, the university owns some taxable properties and thus will pay about $10.2 million in municipal, school district, county and sewer taxes this year, making it the town's biggest taxpayer. If it lost its tax exemption locally, the school would have to make much bigger tax payments.

The scrap isn't a threat to Princeton alone. Universities increasingly rely on royalty income to fund research, and the pharma industry increasingly relies on--and partners with--academia on early-stage R&D. So, the Princeton case could have a ripple effect across the country, Judge Bianco said. "There's a lot riding on this," he said (as quoted by Bloomberg). "It's not just for this university or for every university in the country, but for nonprofits as a whole."

- read the Bloomberg story

Special Reports: Alimta - Top 20 Orphan Drugs by 2018 | Alimta - Top 10 Best-Selling Cancer Drugs | 20 Major Pharma-Academic Alliances in 2012

Read more on