Lilly Banks On Equity Investing To Grow Pipeline

By Ed Miseta, Chief Editor, Clinical Leader

Partnering with other pharma companies and academic institutions has been a cornerstone strategy for Eli Lilly and Company for close to a hundred years. One of the first major collaborations in the industry occurred in the 1920s when Lilly partnered with Frederick Banting and Charles Best from the University of Toronto. Banting and Best discovered insulin, and Lilly used its resources to develop and commercialize it. Today millions of people continue to benefit from the result of that successful collaboration.   

Lilly continues to partner with academic institutions and biotech companies, and more recently has been entering into a greater number of collaborations with other Big Pharma companies. One example is potential combination therapies in the oncology space. But one area where the company has devoted significant resources, and which is certainly a big part of Lilly’s partnering strategy, is equity investing.    

Taking Molecules From Clinical To Proof-Of-Concept

Lilly has been one of the most active equity investors in the industry, providing funding directly into promising companies. One example is a co-development and commercialization agreement Lilly did with a company called MacroGenics, which has since gone public on the NASDAQ exchange (MGNX). The investment was for development of a drug that showed promise in the treatment of Type I diabetes.

“The investment not only provided needed capital to the company, but demonstrated Lilly’s commitment to the company and the capabilities of its molecule,” says Andy Dahlem, VP and COO of Lilly Research Labs. “This relationship proved to be incredibly valuable to the company, and eventually led to other companies investing in MacroGenics as well.”

Lilly Ventures, which was started 15 years ago, invests primarily in North American companies developing therapeutics and diagnostics. Those companies also benefit from available resources within Lilly, including scientific and business expertise and the resources of Lilly Research Labs. A similar venture, begun about seven years ago, is now working with companies in greater China.  

Andy Dahlem, VP and COO of Lilly Research Labs

 While purchasing companies outright is not a primary goal of the venture effort, it can happen in certain situations. In 2010 Lilly purchased a company named Avid Radiopharmaceuticals, which had a promising imaging technology intended for the detection and monitoring of chronic human diseases. The result of that acquisition was the first imaging agent to identify depositions that the company believes are associated with the onset and progression of Alzheimer's disease.

“The overriding goal for Lilly is to help identify molecules that can get a modest amount of investment (on average about $10 million) to take them from the clinical candidate stage through to clinical proof of concept,” says Dahlem. “We are trying to do so in an incredibly efficient way, not necessarily through the old virtual-company approach that a lot of the venture capital funds experimented with in the mid to late 1990s and early 2000s. Back then there were too many companies working on molecules that, frankly, just did not have the wherewithal to be able to create the kind of data package that was needed for approval.”

Another interesting aspect of Lilly’s philosophy is that it provides the company with an outlet for some of its own molecules. One of Lilly’s first molecules to generate positive data in the treatment of pain was a GDRP inhibitor discovered by internal scientists. Based on the sheer number of opportunities the company had at the time, difficult decisions had to be made regarding which molecules warranted continued internal investment. The company approached Atlas Venture, a well-known venture capital fund in Boston. Atlas provided funding for the development of that molecule, which could soon be entering Phase III testing.

Sharing Resources To Advance Science

Oftentimes collaborations are formed to share risk between companies. Lilly has found those relationships can evolve not only the collaboration between the two companies, but help propel the partner company forward on its own. One example of that that is a company based in Shanghai, China called Hutchison Medi Pharma.

“We began a risk sharing relationship with Hutchison, where we actually gave them access to some Lilly compounds,” says Dahlem. “We then used Lilly scientists and clinical developers to help Hutchison Medi Pharma build up their own capabilities from end to end. The relationship helped them develop as a company into a more mature and integrated research and development company. As a result, we believe they are one of the premier innovation-based companies operating in China today.”

Fast forward ten years, and the relationship has now evolved into a co-development and co-commercialization arrangement in the area of oncology. The arrangement is focused on an innovative molecule that was invented by Hutchison Medi Pharma.

“When developing these relationships, we are always focused on the long-term strategy,” notes Dahlem. “We are committed to the science and the molecule, but also to the long term viability of the collaboration. Our goal is to help build collaborators like Hutchison Medi Pharma into the kind of company that could work with Lilly on any innovative molecules they discover in the future. Those molecules, like the one mentioned earlier, could one day enter the Lilly pipeline, if it gets into Phase III development for lung cancer or some other indication.”

But most importantly, Dahlem notes patients will benefit most from these successful relationships. The legacy of any collaboration is all of the individuals who receive the treatment. Today, Lilly’s diverse set of long-term public-private partnerships, consortiums, and academic collaborations continue to bring needed medicines to patients. “We think of our relationships as core parts of the responsibilities that we have, as a life sciences company, to promote the science and research that will continue to lead to needed cures.”