How Should Big Pharma Partner With Academia? A Perspective From Lilly

By Ed Miseta, Chief Editor, Clinical Leader

Andy Dahlem, VP of Lilly Research Lab (LRL)Operations and LRL Europe, Eli Lilly and Company

In preparation for upcoming patent expires, Eli Lilly and Company (NYSE: LLY) has been transforming itself to better deal with the increasing costs of developing life-saving medicines and possible decreases in revenue. One of the primary goals of the company has been to move away from a model where virtually 100% of R&D was in-house. By decreasing fixed expenditures, and increasing flexible spending, the company would be in a better position to manage its clinical and manufacturing costs.

More recently, that plan is evolving into academic partnerships as well. “We are now asking if, in the ecosystem of drug development and discovery, there is a fundamental place where we can work in a systematic way with academic institutions,” says Andy Dahlem, VP of Lilly Research Lab (LRL) Operations and LRL Europe for Eli Lilly and Company. “The proposition has become more interesting because of the increasing pressures being placed on academic institutions and their business model. This is occurring at the same time Pharma faces increased cost pressures.”

Dahlem notes there has been a historic division of labor between NIH, academia, biotech, and pharmaceutical firms. For example, NIH was founded to do basic research. Academia would build on that and be partially funded by that basic research. Finally Pharma would explore promising targets, striving to develop these into eventual medicines.

Academic Funding Pressures Mount

Dahlem notes this model has been changing due to academia being under financial pressure from several different sources. “There has been a redirection of state and federal student support from direct grants to loans,” he says. “Raising tuition and fees has been a major lever for academic institutions to increase revenue, but that is becoming more difficult. You can’t have a week go by without reading something in the press about the lack of affordability of the loans and the difficulty of paying them back. Mitch Daniels, president of Purdue University (a Lilly alumni and former-Governor of Indiana) began his tenure by saying he was going to freeze tuition at Purdue. The affordability of higher education is suddenly a very hot topic.”

Philanthropy, another source of funding, has also become more difficult in the current economic environment. Federal and state funding is becoming a bigger challenge as government entities look for ways to fund other activities. Another factor is massive, open, online courses (MOOCs) that offer the course work from large universities. “Students now have the option of taking these courses online as part of an open and free education, offering everything except the endorsement of the university,” notes Dahlem. “If the end goal is the transfer of knowledge to the student, then you have to wonder what parents will be willing to pay for students to get the freshman experience. For profit universities are also taking students away from traditional academic centers. All of these factors are causing institutions to take a much closer look at their base business model.”

Dahlem believes academic institutions are looking at grant money they receive and asking if there is a way for some of it to be used to generate revenue. Although a large percentage of the grants go to basic research, some in academia and pharma believe synergies can be gained by collaborating more with pharma or biotechs. Academic institutions are now asking if they can help more in the base business of identifying targets and developing drugs, and whether there are parts of that process they can do in a more committed fashion. “Academic institutions have financial challenges and pharma has financial challenges,” he states. “The question is can these challenges bring us together in new and creative ways.”

A History of Success

The cooperation between academia and pharma has produced several examples of how this process can financially reward both sides. In the 1920s Lilly partnered with Frederick Banting and Charles Best at the University of Toronto. Banting and Best discovered insulin and Lilly used its expertise to commercialize it. Dr. Richard Silverman, a professor of chemistry at Northwestern University, developed the chemical that became the blockbuster Pfizer drug Lyrica (indicated for the treatment of fibromyalgia and epilepsy). In 2007, Northwestern sold a portion of its royalty interest for $700 million. This deal is considered to be the largest sale of a royalty stream for a pharmaceutical product. Additionally, the molecular structure of Pemetrexed (brand name Alimta), developed at Princeton University, was clinically developed and marketed by Lilly for the treatment of lung cancer.

Dahlem acknowledges these hugely successful partnerships are rare and the probability of discovering a blockbuster drug is low. Still, when these events do occur, they are profitable for all of the entities involved. They are also visible to the staff at other academic institutions that want to be a part of it.

Innovation Comes From Many Sources

Lilly scientists receive innovative ideas in many different ways. Some of it is through the company’s open innovation platform (see Eli Lilly and Company — Open For Innovation), whereby the company collaborates with university researchers on molecules. Lilly has a screening system available online for scientists who may discover a promising molecule, and will ask for first rights of negotiation from inventors willing to partner in development. “We also have a bio ventures fund that will help provide innovation funding, and we have resources that provide guidance and advice,” says Dahlem. “These are opportunities we offer but not in a contractual way. People can choose to work with us or not.”

Lilly will also acquire molecules to expand its portfolio. It would be rare for an academic institution to take a molecule all the way up to candidate selection. Dahlem notes academia does not have the financial resources to invest in necessary studies such as GLP toxicology. He refers to this as the valley of death that exists in academia. They can generate ideas and may have molecules, but are unable to translate them into the data a pharma company needs to have the confidence necessary to take the molecule forward into clinical testing.

“That is the particular place where we are looking to better collaborate with universities,” says Dahlem. “It can be difficult for academic institutions to do a lot of the more routine development work. That work can also be very expensive. We would like to collaborate in a more meaningful way and share value to take the molecules to a place where we know whether they would have potential on the clinical side. If we can do that, there is a huge potential upside for pharma and for the academic institution.”

How Do We Come Together?

Traditionally pharma and academia have worked together when universities needed grants. If a company provided a grant, the relationship generally lasted as long as the money. Dahlem is now looking for a more committed relationship with academic institutions and investigators. The relationships would involve collaborating with a memorandum of understanding or common terms agreement that would allow both sides to operate with an understanding of what will happen to the intellectual property when it’s created. “In this way, everyone is clear on the benefits to each side in the transaction,” he says.

“One problem we have struggled with is academic institutions seeing the value that can be created by some of these rare, successful events,” says Dahlem. “The tech transfer offices at the universities will attempt to contract with us with the desire to protect any value that is created with the interaction. What they have succeeded in doing is protecting 100% of nothing. So the question we are asking more and more is whether Lilly and the university couldn’t take a little more risk and produce a lot more benefit.”

Better Collaboration Is The Key

Dahlem notes some of Lilly’s peers in the pharmaceutical industry have tried different models for interacting with academia. His company keeps a close eye on all of those models, but he has not yet seen one evolve to the point where he would consider it to be a defining model. “We are still doing a lot of experimenting in this space,” he states. “What we would like to do is throw a broad net out and collaborate as broadly as we possibly can.”

The process of developing a single entity in Phase II and Phase III carries with it a high cost and higher attrition rate. Dahlem believes the investment can represent up to 30% of the overall cost necessary to take one molecule to registration and launch. He blames the high cost on the large number of failures in that space. The few molecules that make it through to registration and launch will carry with them the cost of all of the failures. If it costs a billion dollars to launch a new drug today, 30% of a billion is a large number.

“The question we are fundamentally asking is if a portion of our investment can be placed with academic institutions in a more collaborative way,” adds Dahlem. “The purpose would be to benefit everyone involved by achieving a different type of outcome. We need a new model to address the challenges this industry faces around funding the value proposition of drug discovery. This is not traditional outsourcing. This is partnering with outstanding innovators around the globe in a more committed fashion to discover and develop new medicines. We need to align our interests to produce meaningful outcomes for the research they do. If we do this right, the additional revenue they stand to generate would help solve the financial issues academia is facing.”