Butler talk 17 oct07 v3

Wikinomics, Globalization, and the
Medicinal Chemist at Lilly.
Scott E. Conner
Butler University Chemistry Seminar
October 17, 2007

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Company Confidential
Copyright © 2000 Eli Lilly and Company
Agenda
The Evolution of Drug Discovery
Organic Chemistry, Pharmacology, Medicinal Chemistry
Initial Successes
Productivity Issues
Globalization and Mass Collaboration

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~Pharmacology
•3100 BC: Shen Nung mentions Ma Huang as heart
stimulant and to alloy coughing.
•300 BC: Theophrastus mentions opium poppy juice as an
analgesic.
•900 AD: Rhazes introduced opium pills for coughs.
•Orientals and Greeks used henbane as sleep inducer.
•Inca miners chewed coca leaves as stimulant.
•Hindus used root of Rauwolfia for insomnia and insanity.
•South American Indians used cinchona bark for fever.
•William Withering used foxglove to treat dropsy (1785).
•Apothecaries through mid 1800s

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~Pharmacology and Organic Chemistry
As
NH2
O
OH
O
Atoxyl
Na
•The Dye and Chemical Companies Starting from Coal Tar
from Dyeing Cells to Killing Cells
•Extraction and Isolation and Concentration of Plant Based Remedies
•Felix Hoffman, motivated by an arthritic father and salicyclic acid,
invents Aspirin in 1897, then 11 Days Later Heroin
•Application to the Animal Systems - Isolation of Epinephrine from
Adrenal Glands early 1900s
•The Theory Relating Chemical Structure to Pharmaceutical Activity
Emerged
•Paul Ehrlich, Salvarsan, and the Nobel Prize in Medicine of 1908
•US Food and Drug Act of 1906
•The World Wars Forced the US to Catch Up
O
O
O
O
Aspirin
O
O
O
Salicylic Acid
As
NH2As
NH2
OHOH
Salvarsan

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From Lilly.com
“Lilly is a leader in diabetes research, dating back to our role in
developing the world's first commercially available insulin product,
Iletin®, in 1923. We continue to pursue a number of diabetes-related
targets.”
*from Novo website
~Pharmacology

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The Benefits of Drug Development
Health Benefits
• Cholesterol lowering drugs reduce the risk of heart-attack or stroke by 1/3.
• The use of ACE inhibitors reduces the mortality rate by 16% in patients with congestive heart
failure.
• Patients treated with beta-blockers are 40% less likely to die in the 2-year period following the heart
attack.
• In the 2 years following the approval of 4 new antiretrovirals (1996-1998) the AIDS mortality rate fell
70%.
Economic Benefits
• Providing patients with full access to new AIDS drugs saved the Department of Veterans Affairs
$18m in treatment costs.
• Prompt use of t-PA reduced the costs of treating a stroke patient by $4,400/yr.
• The cost of treating major depression in the U.S. fell by 25% because of advances in
antidepressants.
• Overall it is found that for each dollar spent on pharmaceutical therapy, hospital expenses are
reduced by $4.44.

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The Evidence of “Success”
In the last 10 years the average number of prescriptions per capita
has increased from 7.3 to 11.6. A 59% increase!!
This increase in utilization is reflected by the increase in total
pharmaceutical expenditure (1997-2002).
Relative Contributions to Drug Expenditure
Types of
Prescriptions
34%
Number of
Prescriptions
42%
Price
Increases
24%

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The Productivity Issue
Bruce Booth and Rodney Zemmel, Nature Reviews Drug Discovery, Volume 3, May 2004, pp. 451 - 456

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Evolution of Drug Discovery
Retrospective
Genomics and the promise of >3,000 druggable targets
Construction of poor chemical libraries
Increasingly tough regulatory hurdles
Tougher Internal scrutiny
Technological Gaps and the data crunch

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First It Was The Starting Points
Samual Gerritz, BMS Lead Generation Department, CHI LG Conference, Philadelphia, PA 2007

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Next, It Was The ADME Properties
Ismail Kola and John Landis, Nature Reviews Drug Discovery, Volume 3, August 2004, pp. 711 - 715

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The Toxicology Becomes an Issue
Jeffrey A. Kramer, et. al., Nature Reviews Drug Discovery, Volume 6, August 2007, pp. 636 - 649

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Success Rate By Target

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Evolution of Drug Discovery, Modern Era

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The Old and the New
Volker Schneke, Astra Zeneca Lead Generation Department, CHI LG Conference, Philadelphia, PA 2007

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The Costs of Drug Development
Increases Associated with Drugs and Drug
Development (1990-2000)
108
247
206
0
50
100
150
200
250
300
Average Price Development Cost R&D Spending
%Increase
R&D Spending

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R&D Spending

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R&D as % of Sales
17
10.5
8.4
5.3
0
2
4
6
8
10
12
14
16
18
Pharma Computer
Software
Electronics Telecom
Industry
%
R&D Spending

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Implications

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Future Directions for Pharma
Some Recent Successes:
Drugs in Development by PhRMA Members: Cancer: 400
Heart Disease & Stroke: 123
AIDS: 83
Alzheimer’s: 24
Diabetes: 25
Arthritis: 19
Parkinsons: 16
Osteoporosis: 14
Gleevec® (2001) Alimta® (2004)
N
N
N
N
N
H
O
N
N
H
N
N NNH2
O
N
O
H
HO2C
CO2H

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Definitions
Wikinomics
Innocentive, erooms as wikis
Innovation in the age of mass collaboration
Peer innovation and production
Globalization
Increasing convergence of markets, economies, and ways
of life across the world
Shanghai ChemExplorer
Lilly’s Research Partner, Opened in October 2003

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Interesting Quotes
“The risks for China are greater in moving too slowly than in moving too quickly
towards transparent, liquid, stable markets," Henry Paulson, US Treasury
Secretary March 7, 2007(BBC News)
“The economic relationship between China and the United States is of
extraordinary importance, and both countries have much to gain from
interactions with each other,” Ben Bernanke, Chairman US Federal Reserve
December 15, 2006.
Global Imbalances in R&D Spending and Available Talent
“Lilly has 230 scientists working in China, accounting for 20 per cent of the total
number of its scientists, which is the US-based firm's largest R&D team
overseas.” August 18, 2005(People’s Daily Online)
“We are very encouraged by the input of the government... in improving the
system, and we are hoping to see more progress," Sidney Taurel(2005)

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The Need for Change:
The Industry’s Grand Challenge
April 18, 2002April 18, 2002
External Drivers of Change
Costs rising faster than launches
Significant patent expirations
Innovation has been incremental
Pricing pressures upon us
Regulatory expectations are
increasing
Safety concerns

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The Pressure is On
“This business model will become fundamentally untenable if we do
not do something about it”
Steven Paul August 11, 2006

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How to Address the Industry Dilemma
BUSINESS STRATEGY
• In-license & co-promotion
• Merge & Acquisition
R&D STRATEGY
• Scientific approach
– Symptom based → target based → personalized medicine →
Predictive/Preventive health care
– Genomics → Proteomics → Pharmacogentics / Toxicogenomics /
Chemogenomics
Operational Approach
– External collaboration
– Outsourcing
– Globalization

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Considerations: Moving from Traditional to
Transformational Out-partnering
IP Awareness & Enforcement
• Improving
Political & economic stability
• Improving
Deliver to global standards
Learning to work together effectively
Limited experience (GMP, GLP, GCP etc.)
Cultural compatibility
No experience in Drug Discovery
• Traditional medicines

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Considerations: Moving from Traditional to
Transformational Out-partnering
Topics for consideration prior to entering into Discovery
Chemistry in Asia
• Knowing why you are doing it, short term gain will be insufficient; long term
strategic benefits must be evaluated.
– Chasing cheap labor, in the long run, is a loosing proposition.
• Working with partners to understand the local market prior to project launch.
• Working with local regulators.
• Managing the IP
What is the right framework for entry?

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How to to Access Talent Pool and Resources ?
Build it
Buy it
Partner it Lilly
Examples
What is the
“appropriate”
model?

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Shanghai

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Shanghai ChemExplorer

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Breakfast

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Lunch

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Lilly Partnership
Chemistry
Screening
ADME
Computational
Lilly partners with single Chinese company, who builds internal
capabilities and capacity for multiple LRL functions including chemistry.

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Shanghai PharmExplorer

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China Chemistry Partnership
Exclusive Chemistry and
Quantitative Biology focused
partnership with
Eli Lilly and Company’s
Discovery Chemistry Research and
Technologies.
Jan.
2002
July
2002
Oct.
2002
April
2003
Oct.
2003
Aug. 2005 Nov. 2005
Began
Chemistry
Pilot
Lilly Scientist on Site
Initiate QB Lab
Dedicated BuildingExclusive
Partnership
Expand Chemistry Initiate Library Synthesis
Leveraging Global Talent for Chemistry and
Quantitative Biology in China

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Others in Pharma
Roche
>$11M investment for their wholly owned facility established in Shanghai in late 2004
About 14 of 60 scientists are Chinese expatriates
Outsource scaffold/library to local CRO, QB lab and Bioanalytical capabilities are
coming on line
Pfizer
Recently moved their China R&D center to Zhangjiang HiTech Park and currently
holds about 100 people(50% capacity)
Merck, Amgen, GSK, etc.
Using CROs like WuXi and ChemPartner in a fee for service format
Novartis
>$100M investment in a Shanghai Zhanjiang HiTech Park R&D center set to open
in May 2007
Astra Zeneca
>$100M investment over the next three years for Chinese Innovation Center to focus on cancer research
Hutchison MediPharma
Internal discovery group initially focused on TCM in cancer research
In-house cellular assays and in vivo models in the area of cancer and inflammation available
Led by several key returnees from Pfizer and Amgen.
Outsource some synthetic work to local CROs
Lilly initiated a collaboration with Hutchison in August 2006

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Traditional Partnering Models
• Fee for Service
• Success Milestone Driven
• Risk Sharing – Collaborative – Royalties
• Co-development
• Co-commercialization
• Joint Ventures
RISK Sharing
Continuum

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What a model like this provides?
It provides us:
• with flexible capacity
• a stepping stone into new emerging markets
• with a way to make our scientists and our current
infrastructure more efficient
• a way to explore new Drug Discovery paradigms
• a way to share or eliminate risk at a low cost
• a less expensive source of capacity

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Most Difficult and Complex Natural Product Synthesis

Butler talk 17 oct07 v3

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