INDIANAPOLIS – Shortly after he became chief executive officer of Eli Lilly & Co. in April 2008, John Lechleiter, a former lab scientist, sent his senior executives a gift. It was a small digital clock counting down, second by second, to Oct. 23, 2011.
Thats the day the drugmakers $5 billion-a-year schizophrenia pill, Zyprexa, goes off patent. Next to the countdown were four words: Do what we do.
The message: Lilly must pick up the pace of drug development so it can replace revenue lost when three top-selling medicines lose patent protection in the next few years, Lechleiter said. The company stands to lose $10 billion in annual sales to generic competition by the end of 2016, almost half of its 2009 revenue, one of the steepest percentage losses resulting from patent expirations among the six biggest U.S. drugmakers.
Pfizer, the buyer of Wyeth, and Merck, which acquired Schering-Plough, turned to consolidation to help solve their patent issues, to mixed reviews from investors. Lechleiter said hes taking a different path.
His push isnt to get bigger; its to get faster, he said.
When Lilly faced challenges before, each and every time the answer has been new, innovative products, Lechleiter said.
Lechleiters mission is to introduce two new products a year starting in 2013, helped by a restructured development process based on an assembly line of tasks, roughly akin to the automobile manufacturing process. Each step is designed to work in concert to make the final product quickly and efficiently.
Shareholders say they arent convinced, an opinion supported by the stocks worst-in-the-industry performance last year in the Standard & Poors 500 Pharmaceuticals Index, which rose 14.2 percent in 2009.
Investors seem to price Lillys stock as if it will never develop another drug, said Michael Krensavage, manager of Krensavage Partners, a hedge fund that owns Lilly shares.
Lilly suffered two high-profile failures in July and August when a multiple sclerosis drug candidate and an osteoporosis product fell short of expectations in clinical trials. Lillys blood-thinner Effient, approved in July, pulled in only $27 million in 2009, competing against Bristol-Myers Squibbs $6 billion-a-year Plavix.
Lechleiters efficiency-focused initiative is clever, but how much money will it save? said Tony Butler, an analyst at Barclays Capital in New York who recommends holding Lilly stock. We need to see the fruits of late-stage research in risky areas like Alzheimers.
Theres always the risk – will these molecules make it or not? Lechleiter said, referring to Lillys 64 drugs in development. But my response and, I believe, Lillys has to be, Where do we find and how do we bring forth new innovation as quickly and cost-effectively as possible? Thats what were working on.
As a first step, Lechleiter in September placed every department that plays a role in turning molecules into medicines under one roof, from the people who assess side effects to those who deal with the U.S. Food & Drug Administration in getting final marketing approval.
The unit, dubbed the Development Center of Excellence, is intent on speed and willing to try new strategies, Lechleiter said.
While testing drugs is usually carried out in three phases, Lilly plans to use just two in some cases.
Last year, instead of having one clinical trial determine the best dose for a new diabetes drug, then a second to determine effectiveness, Lilly tested several doses at once.
Statisticians assessed the data in real time, allowing researchers to drop dosages that werent working.
After the best dose was known, researchers tested it on the same group of patients, rather than recruiting new ones for a separate study.
The company may save 14 months on projects streamlined in this manner, said Timothy Garnett, Lillys chief medical officer.
Lilly is also adopting a technique known in industrial manufacturing as critical chain, which prioritizes individual tasks to save time, Garnett said.
Previously, people working on a 30-page report might also be involved in other projects at the same time, so they might be given three weeks to return a finished project.
Now, they may get seven days to complete the task, with specific instructions on their schedule and which person in the chain they need to pass the project along to next.