Beyond Borders: Global biotechnology report 2010

Using FIPNet to supercharge the innovation engine
The engine driving pharmaceutical
innovation is broken. At a time when
the world desperately needs more new
medicines — for everything from influenza
to Alzheimer’s disease — our industry is
taking too long, we’re spending too much,
and we’re producing far too little. Ironically,
this crisis comes at a time when we have
vastly more scientific knowledge and data
than ever before. But unless we change the
way we do research, we won’t translate this
knowledge into advances for patients.
One of the key changes we’re making at
Lilly is transforming our fully integrated
pharmaceutical company into a fully
integrated pharmaceutical network, or
FIPNet. In R&D, we’re using FIPNet to build
additional capacity and capabilities that
leverage what we do well, while attracting
molecules, funding and expertise from
partners. Through FIPNet, we can greatly
expand the pool of opportunity. We can
share investment, risk and reward. And we
can operate around the globe, and around
the clock, to get work done more efficiently.
Our FIPNet activity in R&D can be grouped
into three areas.
The first is functional outsourcing. Building
on long experience with contract research
organizations (CROs) in our clinical trials
and toxicology work, we’re developing
new partnership models that provide us
high-quality services at reduced costs with
greater flexibility.
Consider two examples. In 2008, we
sold our lab facilities and operations in
Greenfield, Indiana, to Covance — a CRO
with which we already had a FIPNet-style
connection. As part of the transaction,
we established a long-term relationship
with Covance for work they perform for us
in Greenfield. In China, rather than build
our own chemistry facility, we partnered
with a Chinese entrepreneur to develop
ShangPharma, which provides exclusive
chemistry services to Lilly.
The second broad area of our FIPNet is
partnering around novel ways to discover
and develop molecules beyond our
traditional model.
In 2007, we signed a pioneering risk- and
reward-sharing deal with India-based
Nicholas Piramal, which develops molecules
from our discovery pipeline up to the end
of Phase 2, when we may opt to bring them
back into our Lilly portfolio. Nicholas Piramal
receives milestone payments — and a royalty
if the product makes it to the market. We
have similar risk-sharing arrangements
for early-stage molecules with Suven Life
Sciences in India and Hutchison MediPharma
in China, as well as a relationship with
TPG-Axon Capital for our two late-stage
Alzheimer’s disease molecules. [Editor’s note:
for more on Hutchison MediPharma’s model,
refer to “The dream of the sea turtles,” by
Samantha Du, CEO, in the 2009 edition of
Beyond borders.]
Chorus, our virtual drug development
network, is managing a steady state of 15
molecule programs with a dedicated staff
of only 29 scientists. This cross-disciplinary
group designs, interprets and oversees work
through a network of organizations outside
Lilly walls. Because of the lean development
model, Chorus is able to reach proof of
concept about 12 months earlier and at
half the cost compared with the average of
the current industry model. So far, Chorus
has delivered data on 14 molecules, six of
which resulted in positive proof-of-concept
decisions, saving Lilly approximately
US$100 million in the process. [Editor’s
note: for more on the Chorus approach,
refer to “Lean proof of concept” on
page 9, by Michael Clayman, CEO of
Flexion Therapeutics.]
In 2008, we extended the Chorus model in
22 Beyond borders Global biotechnology report 2010
John Lechleiter, PhD
Eli Lilly and Company
Chairman, President and
Chief Executive Officer
India through a collaboration with Jubilant
Organosys. Lilly will provide drug candidates
to be advanced to proof of concept by
a joint venture called Vanthys, and we
will receive a right of first negotiation on
non-Lilly assets developed by the JV — those
sourced by Jubilant or other third parties.
We’ve also launched an “open source”
R&D platform, our Phenotypic Drug
Discovery Initiative. Through “PD 2
” Lilly
tests, free of charge, compounds submitted
by outside researchers in four assays
representing diseases of interest to us. In
return, we retain first rights to negotiate a
collaboration or licensing agreement with
the submitters. If such an agreement does
not result, the external researcher receives
no-strings-attached ownership of the data
report to use as they see fit in publications,
grant proposals or further research. Since
the launch of PD 2
in June 2009, 130
universities and biotechs in 21 countries
have joined the program, and we’re now
evaluating thousands of molecules.
The third area of FIPNet includes equity
investments and partnerships. Our Lilly
Ventures and Lilly Asian Ventures — with
a combined US$300 million in funds — are
investing in emerging biotech, health care
IT and medical technology companies
in the US and around the world. These
investments enable us to evaluate and
advance emerging technology that may play
a role in long-term opportunities for Lilly,
and even to build companies such as HD
Biosciences in Shanghai that can provide
critical capabilities in our FIPNet.
We recently established a new venture
capital fund with HealthCare Ventures,
which will enable the acquisition of
high-quality molecules from external
sources and utilize Chorus and other
alternative development engines to
advance them to proof of concept, with