* Lilly to partner on AstraZeneca's BACE inhibitor drug
* Astra expects first $50 mln payment in first half 2015
* Full payout of up to $500 mln dependent on drug's success
* AZD3293 seen high-risk but potential $5 bln-a-year seller (Adds further details on drug, sales forecast, background)
By Ben Hirschler
LONDON, Sept 16 (Reuters) - AstraZeneca has signed a partnership deal with U.S. rival Eli Lilly that could earn the British company up to $500 million if a promising - but risky - experimental Alzheimer's drug proves successful.
AstraZeneca said in May that it was looking to find a partner for its so-called BACE inhibitor drug called AZD3293, which is set to enter late-stage Phase III clinical testing against Alzheimer's..
The decision by Lilly to buy into the project is an endorsement of the science behind the new oral drug, given the U.S. drugmaker's long history of trying to find an effective treatment for the memory-robbing condition.
Lilly will pay AstraZeneca up to $500 million to share rights to the drug, with the exact scale of payments depending on the medicine's progress in clinical trials and its commercial success.
BACE inhibitor drugs work by blocking an enzyme called beta secretase that is involved in production of beta-amyloid, a protein that creates brain plaques considered a major cause of Alzheimer's.
They are viewed as a promising new approach and have taken centre stage after an injectable class of medicines targeting beta-amyloid plaque failed or fell short in trials conducted by Pfizer and Lilly.
Merck & Co is currently in the lead in the BACE inhibitor field, with the first Phase III data from the U.S. company's programme likely to emerge in around 2017.
AstraZeneca said on Tuesday it expected to receive the first payment of $50 million from Lilly in the first half of 2015, adding the deal would have no impact on its 2014 earnings.
Most of the pipeline focus at AstraZeneca is on drugs for cancer, diabetes, respiratory and cardiovascular disease, with neuroscience projects - including Alzheimer's - no longer a core area for the group.
AstraZeneca had flagged the potential of AZD3293 during its successful fight against a $118 billion takeover bid by Pfizer .
A strategic defence document at the time said the BACE inhibitor could potentially sell as much as $5 billion a year, though AstraZeneca gave it only a 9 percent chance of success on a risk-adjusted basis given the high failure rate in the Alzheimer's research field.
AstraZeneca and Lilly aim to move AZD3293 rapidly into a Phase II/III clinical trial in patients with early Alzheimer's disease. Many experts believe that giving drugs early on could be the key to successful treatment.
Lilly will take the lead on clinical development of the drug under the new partnership, while AstraZeneca will be responsible for manufacturing the product. The companies will be jointly responsible for commercialisation.
They will share equally all costs for the development and commercialisation of AZD3293, as well as net global revenues after its launch.
Dementia - of which Alzheimer's disease is the most common form - already affects 44 million people worldwide and this is set to reach 135 million by 2050, according to Alzheimer's Disease International, a non-profit campaign group.
Unlike heart disease and cancer, no major advancements have been seen in Alzheimer's drug research since the first treatment was approved in 1993 by U.S. regulators.
Current Alzheimer's drugs, including generic forms of Pfizer's Aricept, or donepezil, can minimally and briefly help memory and ability to perform daily functions, but do not slow the disease. (Reporting by Ben Hirschler; Editing by Jason Neely and Mark Potter)