, September 25, 2008 – Eli Lilly and Co. aims to grow leaner and more diverse as it pushes to keep pace with changes spreading through the drug industry, CEO John Lechleiter said in a Wednesday afternoon speech.

Biotechnology drugs that can be tailored more closely to individual patient needs and networks that speed drug development will become keys for Lilly as it approaches the patent expiration dates for several top sellers.

“We’re flat-out rejecting the conventional wisdom that says it must take 10 to 15 years, and a billion dollars-plus, to bring a single new molecule to patients,” Lechleiter said in a luncheon speech for The Economic Club of Indiana.

Lechleiter, who became CEO in April, touched on several topics as he outlined the company’s future for a hometown audience.

“We’re still a proud, Indiana-based company, but folks, this is not your grandfather’s Lilly,” Lechleiter said. “It can’t be anymore.”

The company also announced last week that Lechleiter, 55, will become chairman next year, replacing former CEO Sidney Taurel in that role too.

Lilly’s total employment ballooned from 30,000 to about 46,000 in the late 1990s and early part of this decade. It has since retreated back below 40,000 mostly through attrition and some buyouts, and Lechleiter said the company will continue to push that total down. But he did not offer specific goals for total jobs.

Meanwhile Lilly plans to expand networks with other companies that lead to drug developments through partnerships or alliances. The CEO noted that the U.S. Food and Drug Administration approved only 19 new medicines last year, the lowest annual total since 1983.

“Lilly cannot succeed as an innovator in the 21st century if we’re maintaining capacity we no longer need or undertaking tasks that others can perform better or for less,” he said.

Major acquisitions or mergers don’t make sense for Lilly, Lechleiter said. But the drug maker does plan to bulk up its animal health business with smaller-scale deals.

Biotechnology products, which are developed from living cells instead of chemical compounds, already account for about a third of Lilly’s annual revenue, which totaled $18.6 billion last year. But Lechleiter wants these drugs to account for more so the company can tailor medicines to better treat disease variations or patient groups.

Biotech molecules also are less susceptible to generic competition than chemical compounds because of the complexity of their manufacture.

Lilly spent $1 billion to develop a biotech center in Indianapolis and started building a new biotech manufacturing site last April in Ireland.

Lilly’s stock price soared past $100 in 2000 but has dropped considerably since then. Shares sold for $46.16 Wednesday, and they could take another hit Friday, when the FDA is expected to decide the fate of the cardio drug prasugrel.

Lilly and its Japanese partner, Daiichi Sankyo Co., hope to gain approval of the drug to treat patients with acute coronary syndromes, such as heart attacks or unstable angina, who are at risk of developing blood clots.

Analysts, who have expressed concern about the depth of Lilly’s product pipeline, say the drug could eventually bring in more than $1 billion in annual sales.

Lilly could use a new blockbuster. The patent protecting its top-selling drug, anti-psychotic Zyprexa, expires in 2011. The one covering its second-largest seller, the antidepressant Cymbalta, expires in 2013.

Lechleiter said before his talk Wednesday these looming expirations offer motivation for the company’s changes. But he also noted that patent expirations are part of the business cycle of a drug company.

Broader problems like the cost of developing drugs and the decrease in new drug approvals play more of a role in Lilly’s strategy.

“I do believe what’s going on in our industry right now is more fundamental than that, and we have to respond to it,” he said.


Pfizer R&D Head Sees More Drug Collaborations, September 25, 2008 – – Pfizer Inc’s research chief said he foresees more collaborations with other pharmaceutical companies in an effort to share the cost and risk of drug development and potentially get more experimental medicines into expensive late stage testing.

“I certainly would like to do more,” Martin Mackay, Pfizer’s global head of research and development, said on Wednesday at a pharmaceutical conference in Manhattan.

Pfizer is already involved in a co-development collaboration with Bristol-Myers Squibb Co on the experimental blood clot preventer apixaban from a highly anticipated new class of medicines that has been targeted by several drugmakers.

Some investors dislike such risk-sharing deals as any profit that comes from a successful new drug must be shared.

But Mackay has been so pleased with the Bristol arrangement that it has whetted his appetite for more.

“The apixaban deal has been terrific. It’s an excellent collaboration,” said Mackay, who was taking part in a panel discussion along with the research heads of Eli Lilly & Co, Wyeth and Johnson & Johnson at the Windhover Pharmaceutical Strategic Alliances conference.

“I think it has exceeded both teams’ expectations,” he said. “When we put them together we found more synergies than I certainly had anticipated.”

Such collaborations could help medicines and molecules that might otherwise languish in limbo eventually see the light of day.

“Like most of us, we have this burgeoning phase 2 pipeline which is beginning to move into phase 3, probably too many for the budget than we have, healthy as that is,” Mackay said, referring to the world’s largest drugmaker’s more than $7 billion annual R&D budget.

Phase 3 is typically the final stage of human testing before a new drug is submitted to regulators for an approval decision and involves large, extremely expensive clinical trials. So decisions on which drugs to move forward into phase 3 are as critically important as any a drug company makes.

Steven Paul, head of Lilly’s research labs, said he would love to have back some of the drug candidates they decided to pass on, which have turned out to be successful.

Mackay said Pfizer would be looking at collaboration opportunities even on drugs that are not yet nearing the critical phase 3 decision.

“I would like to be more creative about our assets, not just in the late stages but in earlier stages too,” he said.

“I see us outlicensing more of our assets and being creative about the deal making terms,” Mackay said.

Given the disturbingly high failure rate of experimental medicines — 70 to 75 percent of all phase 2 drugs by Paul’s account — all the panelists agreed that creative risk-mitigating strategies are necessary going forward.

Wyeth R&D chief Mikael Dolsten saw one more advantage of collaborative arrangements with other drugmakers.

“It’s also a way of getting access to new talent without hiring them,” he said.


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