It should have been the best of news for the Ann Arbor–based biotech company. On March 4, the New England Journal of Medicine published the results of a huge clinical trial of its cholesterol-lowering drug, Nexletol. Reported the same day at the annual meeting of the American College of Cardiology, the study showed that the drug lowered the risk of heart attacks by 23 percent compared to a placebo.

An accompanying editorial in the journal called the results “compelling.” The New York Times ran the headline, “Statin Substitute Cuts Heart Attack Risk.” Since Nexletol was already approved by the FDA, it seemed poised for takeoff once the assembled cardiologists began prescribing it for their patients.

Esperion CFO Ben Halladay contends that there is no contractual basis for Daiichi’s position: “It’s just, $300 million is a lot of money that people don’t want to pay.”

Yet the next trading day, the company’s stock price fell by 20 percent; investors apparently felt the results weren’t good enough. And then a cruel blow was delivered by Esperion’s big-pharma partner, Daiichi Sankyo, which had licensed the drug in Europe. In a March 15 regulatory filing, Esperion revealed that the Japanese company refused to pay $300 million to Esperion for hitting an agreed-upon “milestone” in the drug’s development.

Daiichi Sankyo had agreed to fork over the money if Esperion achieved a 20 percent or greater cardiovascular risk reduction. Esperion says it hit that target, citing the 23 percent reduction in heart attacks—but Daiichi counters that the drug reduced the risk of death from a combination of four different heart events, the study’s main outcome measure, by only 13 percent. So it says it owes the company nothing.

Esperion’s stock plunged to $1.24 a share on the news, an all-time low. On March 27, Esperion sued Daiichi for the $300 million in federal court in New York.

“The main headline of the Esperion story right now is this disagreement with their partner,” says Serge Belanger, a securities analyst at Needham & Company, a New York investment bank. But Belanger thinks the market overreacted. By mid-May the stock was back up to $1.70 and “could recover quickly once we get some better clarity” on the legal case, Belanger says.

But for now the dispute has investors spooked and employees worried. The FDA approved the drugs on the cusp of the Covid-19 pandemic in 2020 (“The Vindication of Roger Newton,” April 2020). With pandemic restrictions, the newly assembled sales force could not make personal visits to cardiologists to educate them on the new products, and sales languished. In October 2021, Esperion cut 40 percent of its workforce, about 170 employees, because of slow sales of Nexletol and a slightly different drug, Nexlizet (which combines Nexletol with a different cholesterol drug).

The company has never been profitable, and in 2022 it lost $233 million on revenue of $75 million. All its hopes rested on the cardiovascular outcomes study, because most cardiologists won’t prescribe—and many insurers won’t cover—a new drug based on its ability to lower cholesterol alone.

Sales did increase following the March cardiology meeting, and Esperion raised $57 million in a stock offering later that month. But with Daiichi Sankyo’s refusal to pay, the company faces a reckoning sometime next year: chief financial officer Ben Halladay expects that their cash on hand will last only through mid-2024.

Esperion now employs between thirty and forty people in Ann Arbor, out of 220 total in the company. Could more layoffs be coming? “The company is already running extremely lean, and downsizing is probably the last tool we would pull,” Halladay replies. “We can’t go any lower and still be able to run the company.”

They’re trying hard to further boost sales. Esperion effectively doubled its sales force in April when it signed a co-promotion deal with a drug company based in Tennessee. While annual sales could easily top $100 million this year, that’s still not nearly enough to cover costs. And Esperion’s drugs may never meet the company’s original expectations.

“I do feel a little bit more confident using it in clinic knowing that we have this benefit attached to it from the clinical trial,” says U-M cardiologist Eric Brandt. But, Brandt says, he is still likely to turn first to a competing class of drugs known as PCSK9 inhibitors, which must be injected every two weeks but that lower cholesterol more than Esperion’s pills. “There’s going to be scenarios where we reach for [Nexletol] first,” he says, “But I still think the PCSK9 inhibitors will dominate.”

Esperion will need to raise more money from investors, but the Daiichi situation makes that a lot harder: The $300 million in dispute represents almost twice the company’s recent market value. “If there’s no sign of a resolution around this disagreement with their partner, it definitely adds a significant layer of complexity to raise additional money down the road,” says Belanger.

The company has requested a trial early next year, and Halladay says it expects to recover the full $300 million. “We’ve run this by a number of law firms, all of whom have said, ‘This is your money, it’s just a matter of when,’” he says. He contends that there is no contractual basis for Daiichi’s position: “It’s just, $300 million is a lot of money that people don’t want to pay.”

Halladay’s biggest regret, he says, is that the financial dispute has sucked all the attention away from his company’s drugs and their ability to prevent heart attacks. “The lawsuit is a distraction from that,” he says. “It’s a shame, because otherwise we’d have a great story, frankly, about saving lives.”