Casting a wider net

As a lack of innovation becomes more of an issue within the industry, Eli Lilly has decided to open up and create the framework to support a more distributed, network-based operation. Robert Armstrong talks to Nick Pryke.

“The stress of continuing to sustain the innovation and expectation that we have going forward is creating lots of creative solutions to a historical industry that perhaps was not as rapid to adapt to opportunities that came forward.”
-Robert Armstrong

The modern pharmaceutical industry has been pushing the boundaries of drug discovery for decades through effective and sympathetic collaborations. Indeed, even before society's introduction to this modern-day, multi-billion euro industry, scientists and apothecaries had been doing exactly the same behind closed doors with a fundamental goal no different from their modern-day counterparts: to create and provide medicine.

Yet today's market is witness to the drying up of pipelines and rising costs that have left some companies with their backs against the wall, desperately in need of new innovation and cutting-edge solutions. A pioneer in understanding this new perspective is Eli Lilly, a company that has remained on the leading edge of executing partnership programmes since it introduced the first commercially available insulin to the world back in 1923, with the help of Professors Fredrick Banting and Charles Best.

Lilly has come a long way since then, and the start of 2008 saw it announce a new strategy that would help it evolve into a more distributed operation, working with partners in all areas of the business. With mere outsourcing no longer sufficient, Lilly went from being a fully integrated pharmaceutical company (FIPCO) to becoming a fully integrated pharmaceutical network (FIPNet). With his finger directly on the pulse, Robert Armstrong, VP of Global External R&D at Eli Lilly, knows what this could mean for the future of the company and for the pharmaceutical industry as a whole.

With the word 'future' rolling across pharmaceutical lips worldwide, companies are starting to realise that the one-size-fits-all approach of traditional innovation cannot succeed in the current climate, leaving many looking to carve their own innovation paths. "You see most pharmaceutical companies having specific strategies around addressing the overall arching quest for increased innovations," explains Armstrong.

"Everybody's going about it in a slightly different way; some groups are shutting down therapeutic areas so that they can focus on the remaining ones that they have. I think that strategy would tell you that focus is what they're looking for instead of the work to the rest of the parts. From our point of view, we have been very successful at accessing external innovation as part of our history, and we have a large number of innovative products that are the result of collaborations with both academic groups as well as biotechs and even other pharmaceutical companies, which we intend to continue with.

"Where we're really seeing an opportunity to change the face of innovation around the globe is through a growing network of innovators who are testing new models; we're participating in a very focused way on how to act on these external innovations in ways we did before. We'll continue to look at opportunities traditionally, but have also augmented that quite dramatically with a large number of different types of interactions externally - that's essentially the framework of what we refer to as our FIPNet strategy."

Looking out

Pre-2008, Lilly functioned as a FIPCO, the traditional pharmaceutical model with certain attributes inherent within it. Perhaps one of its main characteristics was that Lilly found itself wanting to be involved in every component of the value chain from hypothesis generation to marketing products. Unfortunately for the company, that meant more than a 15-year timeline that would also require all the relevant expertise to cross the scientific and medical fields while putting together a team that would allow it to innovate from the nuts-and-bolts platform upwards.

"What we came to realise early on in the 2000s was that many of the pilot programmes were starting to highlight the degree of innovation going on externally in areas that, historically, were not even available to us a few decades ago," Armstrong continues. "The idea would be that there were a number of developing networks, not only in the US, Europe and Japan but also in the rest of the world, that would allow us to tap in where we had never tapped into before - offering specific expertise that was extremely focused and, in some cases, even more efficient at doing some of the tasks that are required in contributing to the development of drugs.

"We renamed our strategy in the framework of FIPNet, with the concept being that we no longer have to own every single component from beginning to end, and that we might be able to amplify and increase our innovations by being far more savvy and strategic about what source we can access that complements and makes us better than we would otherwise have been. We're very comfortable in knowing what we needed to do to sustain a standard of innovation that was coming out of our own labs as well as things that we were accessing externally."

Armstrong defines three levels within the FIPNet as a company-wide framework by which both local management and portfolio management groups can think about this concept simultaneously and intertwine it into the entire portfolio execution. In level one, FIPNets deal with the more traditional outsourcing components where they have effectively empowered the function and technical expertise in support of the global portfolio to basically establish strategic relationships with external partners, where a fair amount of the work that can be done here can be done efficiently across the globe. This has allowed middle managers to be able to make decisions, recommendations and run pilots effectively to allow them to become more entrepreneurial about how to make themselves more efficient.

"Level two is molecule based and dramatically different from level one in as much as now all the functions touch the molecule," Armstrong says. "The complexity of support of that in the network is substantially greater than it would be at level one, but nonetheless we see it as a huge opportunity to access external innovation and new innovative funding models to access development groups that are going to become substantive innovation groups - either in academia, biotech or academic centers.

"Level three ultimately deals with equity investments in new innovative interests. We have a corporate ventures group and what we refer to as a 'mirror portfolio' that we're currently developing that's extremely new in innovation terms, working with both external and internal partners to create and obtain other avenues for molecule developments. Basically, they're funding the financial transformation that we feel is important for this industry in terms of risk sharing for development of a number of molecules."

Understanding

Armstrong is quick to point out that all three levels are offered concurrently to afford every employee a specific understanding of how it plugs into their work; if this were overlooked, more than likely Lilly would end up with a moniker called FIPNet that only a few, essential staff would be able to comprehend. It was therefore pivotal for Lilly that everybody was able to align themselves with the new strategy and, while it's a bit premature to predict which areas will be affected the most, Armstrong is confident that it will conjure a positive movement across the board.

"We're very opportunist. We're constantly monitoring, evaluating and surveying the growth for interesting opportunities to entertain where we present ourselves to these potential future partners. I think emerging markets will affect components of areas of opportunities that we are currently pursuing actively in this network environment, but I wouldn't restrain it to that as I think there are many other areas. The FIPNet evolved out of individual piloting activities in the early 2000s that led to a substantial critical mass that then allowed us to have the confidence that this is the direction we wanted to go in.

"Part of the reason we waited was to ensure that the external world was sufficiently mature for us to feel confident, so again we anticipated that there would be many new, exciting things happening around the globe and we feel that we're poised to jump on opportunities that might come up with time."

With an almost living, breathing network evolving in front of their eyes, Lilly needs to ensure that their security measures are second to none and viable on all levels. As this is the case, it's only logical that security issues are also implemented on multiple levels. "We would begin with ensuring thorough diligence of potential partners, which would allow us to evaluate the kind of maturity and confidence in which we could initiate an interaction," continues Armstrong. "The second thing we have is a proactive and focused group of individuals within the company that have become, for lack of a better word, FIPNet experts; they have plenty of experience working with external collaborators, so we actively put them front and center into the initiation of all our collaborators.

"This network concept gives you a lot of latitude to strategically direct from the company; you can rely very heavily on our internal expertise in certain areas while relying just as heavily on external expertise in other areas. For example, one of the groups that I run, called Chorus, consists of 29 very experienced medical and technical minds who have been developing Lilly molecules and will soon begin on developing non-Lilly molecules. They've been able to achieve efficiencies and speed that are far better than the industry average by being close and relying heavily on a network of service providers, centres of excellence and even external experts to design and carry out the clinical trials specific to each of the individual aspects."

The Chorus group that Armstrong talks of has witnessed solid success since its inception, but he is quick to assert that the group will avoid growing in size as a result of its success and instead should be 'cloned' to ensure that the group retains its high levels of efficiency. Undoubtedly, opportunistic experimentation in many of these areas will continue to make sure they keep hitting the two molecules per year per two employees in the development stage of each specific molecule.

"The stress of continuing to sustain the innovation and expectation that we have going forward is creating lots of creative solutions to a historical industry that perhaps was not as rapid to adapt to opportunities that came forward. I feel that Lilly is leading in this phase and that the FIPNet has been effective as a working tool to allow our scientists and business folk to think about more globally while removing the historical boundaries on how we think of ourselves as a super company."

To analogise the potential of the FIPNet, Armstrong cleverly equates it to the iPhone 'apps' phenomenon and asks - "What did they really create?" They created a framework for creative people with ideas that Apple would never have been able to think of on its own, and let them innovate. In its simplest form, the FIPNet is no different: it provides a framework that allows ideas to slot in logically and non-disruptively as the entire strategy continuously evolves in the context of innovation.

What remains once the scaffolding has been removed and the dust clouds have blown away is precisely what Armstrong describes: a framework that not only invites innovation, not only encourages innovation, but allows a vacuum of freedom to be exploited by open, reciprocal channels that give those creative minds the expertise, knowledge base and tools needed to bring innovation to the table. Just as the iPhone changed the pace of mobile technology in recent years, hindsight could prove the same for FIPNets and the pharmaceutical industry in the years to come.

FIPNet Q&A with Tim Garnett, CMO and SVP, Lilly's Center of Excellence

Please tell us about the current face of innovation in the pharmaceutical industry and how that is affecting conditions in the pipeline?

Tim Garnett. We are all well aware of the significant challenges facing the pharmaceutical industry, including patent cliffs, a slower regulatory approval process, and rising expectations and requirements from payers and regulators. And yet there is tremendous opportunity because many diseases remain unconquered and there is room for improvement in diseases for which treatments exist.

Our strategy is to create value by accelerating the flow of innovative new medicines that provide improved outcomes for individual patients. To take advantage of this opportunity, we must substantially increase our productivity and rise to meet the significant challenges that we face. We currently have nearly 70 potential new medicines in our pipeline - the largest in Lilly's 135-year history - and our goal is to begin launching at least two new medicines a year beginning in 2013. We believe that innovation is key to the future, but it doesn't just mean a new molecule or mechanism of action: it can also mean innovative clinical trial design or analysis.

Your new operating model, the DCoE, was launched last September. Has it lived up to Lilly's expectations and how will it function within the new FIPNet?

TG. It is still early days, of course, and the full benefits of the DCoE will be apparent with time. However, we have already seen early successes with, for example, our advanced analytics group and the expertise it has brought to our clinical trial designs and analysis.  We will heavily leverage FIPNet within the DCoE to take full advantage of the expertise and efficiencies that exist outside Lilly's walls, so our commitment to FIPNet is unchanged and will indeed expand as the DCoE develops.