Eli Lilly and Co. and R&D and Drug discovery and Health Care & Life Sciences and Health Care & Insurance and Pharmaceutical and Life Science & Biotech

Lilly looks to double pipeline size again

February 23, 2011

Eli Lilly and Co. pounded its chest a couple years ago after doubling the size of its drug pipeline to 60 molecules. Now, the company thinks it has developed a creative way to double it again in the next five years.

Indianapolis-based Lilly is developing what it calls “The Mirror Portfolio,” which it expects to grow to 45 to 60 drugs in five years. This month, Lilly announced it had secured venture-capital funding for the first two drugs in this alternative pipeline.

Lilly has committed to invest up to $150 million in three unnamed venture-capital funds, providing no more than 20 percent of the dollars the funds would use to invest in the development of early-stage drug molecules. That means Lilly eventually could have $750 million at its disposal to fund development of experimental drugs.

That pot of cash could give Lilly more resources to help develop molecules that its own scientists discover. But even more valuable, the money could give Lilly a peek at promising drugs being developed by academic researchers much earlier in the development process.

“We actually are seeing innovation opportunities that may not have come to us at this stage,” said Rob Armstrong, Lilly’s vice president of global research and development, and the architect of the Mirror Portfolio.

In this month’s deal, one of the venture firms acquired two molecules from the Mirror Portfolio—one of which was a Lilly-developed drug and one of which was from an academic institution, which Armstrong declined to name. The Lilly drug is being studied as a bone and cancer treatment. The academic drug is designed to treat congestive heart failure.

The venture-capital firm will oversee the drugs’ development, but it has chosen to contract with a Lilly subsidiary called Chorus to try to prove whether the drugs work as their researchers think they will. Such proof-of-concept studies typically take about three years.

Lilly will have first right-of-refusal to buy its drug back from the venture-capital firm. For the academic drug, it can either negotiate for that right or else be one bidder among many seeking to acquire the drug.

“This allows us to share some risk,” Armstrong said, adding, “What we’ve been able to do is provide a little bit of insight even for the venture fund about what  commercial potential a molecule may have.”

Lilly also has cloned its Chorus team, which has developed faster, more efficient ways to conduct proof-of-concept studies on early-stage molecules. There will now be a second Chorus team in Indianapolis called Chorus Resonance, as well as teams in the United Kingdom and India.

Investor Jason Chew, blogging about Lilly's Mirror Portfolio at Seeking Alpha.com, said he’s skeptical about Lilly’s strategy to reinvent its R&D model.

“The company boasts over 60 compounds in its pipeline, but has been beset lately by late-stage failures,” wrote Chew, who does not own any Lilly stock. “It hopes to begin gaining two approvals per year beginning in 2013 to dig itself out of its hole. This would be quite a feat, considering only 21 new drugs were approved by the FDA in all of 2010. Perhaps it’s time to turn away from 'innovating on innovation' and simply go back to conducting research. Perhaps cheap and fast drug development is but an illusion.”

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