Speeches & Presentations

Collaboration, Innovation, Opportunity
Remarks at Purdue University

John C. Lechleiter, Ph.D.

Chairman, President and Chief Executive Officer — Eli Lilly and Company

September 25, 2014

West Lafayette, Indiana

 

Thanks, Mitch. It’s a pleasure to be here at Purdue, meeting so many talented people on this campus and seeing some of the great work they’re doing. In my talk this afternoon, I want to share some thoughts, as the title of my presentation says, on collaboration, innovation, and opportunity; then I’ll ask Mitch for his comments and we’ll open it up for discussion among the whole group here.

Let me focus first on the opportunity. In spite of some big challenges around and ahead of us, I believe fundamentally that the future is bright for biopharmaceutical research– and today I’ll explain why.

Then I’ll discuss what I believe to be a key driver of success in life science research today – collaboration. And I’ll review some specific examples of collaboration, based on our experience at Lilly – and in particular our relationships with Purdue.

And lastly, I’ll take a look at the skills and qualities that I believe will prepare you to take part in the opportunities in this space.

To set the stage, let me tell you a little bit about my own involvement in this work.

I developed a passion for science, and for chemistry in particular, at an early age. I was fortunate to have had two great high school teachers who had a passion for teaching chemistry and physics.

In 1971, I enrolled at Xavier University to pursue a degree in chemistry, and I had some excellent professors there who inspired me, as well.

Between my junior and senior year in college, I participated in a summer fellowship program at the University of Minnesota doing lab-based chemistry research, and I got really excited about that work.

Following that experience I decided to pursue organic chemistry – natural products chemistry, in particular. With the encouragement of a professor at Xavier who was also a research manager at Procter and Gamble, I applied to grad school at Harvard, where I pursued my Ph.D. in organic chemistry.

When I was finishing up my degree, I started interviewing for jobs, and the place that stood out was Eli Lilly and Company. I could sense the excitement about the work that was underway there in R&D. The people whom I met were not only friendly and open and team players, but they were interested in science and passionate about what they did.

That was in 1979. I started out with Lilly as a senior organic chemist, working in the labs. I’d only been at Lilly a few years when I had an opportunity to move into research management. It was a tough decision; I liked what I was doing in the labs and enjoyed my colleagues. And I knew if I left the bench, there was likely no return.

Still, I took the plunge, and right away I could see how I could make an even greater impact by helping others to get their work done – it was and is very satisfying for me.

Over the next 25 years, I moved through a series of assignments – many of them in the area of drug development – and I became CEO in 2008. And, although I’m many years removed from the lab, I recognize full well what Eli Lilly, the grandson of our founder, meant when he said in 1946, “Research is the heart of the business, the soul of the enterprise.”

So, with that little bit of background on my perspective, let me begin with a look at what’s behind my optimism about the future of bioscience research, and what’s driving the new types of collaboration I’ll discuss today.

The pressures on the biopharmaceutical industry are formidable: increasing demands from patients, insurance companies, regulators, and governments for greater value from new medicines … an abundance of low-cost generics … higher hurdles for drug discovery and development.

Of course, as the slide suggests, there is also unprecedented upside for biopharmaceutical research – and I’ll address that in a moment – but we must overcome significant challenges to capitalize on those opportunities.

In recent years, our industry has faced a slump in R&D productivity. The cost of developing a new medicine has skyrocketed, from about $320 million in the mid 1980s to well over $1 billion in the early part of this century. Yet new drug approvals were significantly lower in the decade just past than they were in the 1990s.

And although we’ve seen improvement in the past few years, the long-term trend is not encouraging, according to a study published in Nature Reviews Drug Discovery. The study found that “the number of new drugs approved per billion U.S. dollars spent on R&D has [dropped by half] roughly every 9 years since 1950” – a phenomenon the authors dubbed “Eroom’s Law” – that’s Moore’s Law backwards – not exactly where you want to be!

Adding to the pressure on R&D, our industry has just come through a five-year period when branded medicines with sales of $150 billion worldwide have lost patent protection. This is great news for consumers who have access to low-cost generic medicines, but it translates into a negative impact of about $25 billion in annual R&D spending by the industry.

One response to these pressures is the consolidation that has occurred in our industry over the past 20 years. This consolidation has been disruptive, and near-term financial benefits have often given way to renewed pipeline challenges. At Lilly, we’ve resisted this approach, as indicated by the line at the bottom of this chart.

The important point for our discussion today is that this trend has dramatically reduced the number of entities that are capable of carrying out the work of biopharmaceutical R&D on a global scale … and that trend adds to the need for new approaches to biopharmaceutical R&D.

Let’s turn then to another sector in the bioscience ecosystem facing significant pressures – and that’s academia. Here at Purdue, President Daniels has been out front in recognizing and addressing these issues.

As you can see on this graph, tuition and fees in the U.S. have grown much faster than the rate of inflation … even faster than health care costs! … for many years. And this trend is associated with a sharp rise in student debt.

The fact is, the value proposition of the modern university faces fundamental challenges from a number of forces, including online education and others.

At the same time, severe pressure on public funding for higher education and for academic research has led to demands on universities to demonstrate a direct contribution to the economy, to engage perhaps in more applied research, and to recoup as much value as possible from the research that is carried out.

One key challenge to major research universities is the increasing competition for grants, indicated by the long-term decline in grant success rates shown on this slide. Since a peak in 1998, the number of applications for research grants has roughly doubled, while the number of awards funded by the National Institutes of Health has remained flat.

And that’s a good segue to the third element in our innovation ecosystem, government – and in particular the NIH. This slide goes a long way toward explaining the previous one … showing the impact of the fiscal pressures on government. As you can see, funding for NIH has actually declined in real terms since peaking in 2003.

Meanwhile, U.S. federal debt as a percentage of GDP is higher than at any time except during World War II and is projected to grow rapidly over the coming decades.

Of significance, the biggest single long-term factor in growing federal spending and deficits is the cost of health care, so there will be growing demands to cut costs. And thus we come full circle to the pressures I cited earlier, weighing on the biopharmaceutical industry and health care providers.

Well, enough already about the challenges we face – real as they are. What is equally compelling is the vast opportunity created by growing global needs for new medicines, coupled with recent advances in scientific knowledge and technology.

Let me show you a few graphs that paint a picture of the opportunity.

The growing need for new medicines is driven by strong demographic trends around the world. The first is the aging of the population. By 2050, one in six people around the world will be over age 65. Older people place greater aggregate demand on the health care system.

A second trend driving demand for new medicines is the growth of the global middle class. Studies have projected that as many as 3 billion people worldwide will join the middle class between 2012 and 2030. Better health care not only aids and begets economic growth; it is also a key aspiration of people as they attain middle-class incomes.

Middle-class lifestyles are also leading to the increased incidence of noncommunicable diseases such as diabetes … adding to the need for new medicines. The number of people worldwide with diabetes is projected to increase by 200 million by 2035; that’s a 55 percent increase!

If the past is any guide, new medicines will be indispensable in combatting these forces and enabling us to live longer and healthier lives. For example, the death rate from coronary heart disease in the U.S. has declined by over half since 1979, as shown here, and by two-thirds since it peaked in 1968. One interesting fact: there are one million Americans alive today – one million –who would have died from heart disease in the past year at the 1968 rate. New medicines played a leading role in these astounding gains.

And we are just beginning to tap the potential of vast new scientific knowledge and tools to find and develop new medicines. The explosion of genetic information is illustrated by this logarithmic graph, charting the decline in the cost of sequencing a human genome … from over $95 million in 2001, to just $5 thousand by 2013 … a rate of change far outstripping Moore's Law, which I referred to earlier.

In fact, I believe we’re on the threshold of what will someday be known as the biomedical century, as the combination of new scientific insights, along with the application of new tools and advanced technologies, creates the potential to revolutionize our work!

Now, here’s the thing. With potential so vast … science so complex and so rapidly changing … no one can afford to reinvent the wheel or build all the necessary capabilities from scratch. All of the players in biopharmaceutical research feel intensifying pressure to seek out networks that can assemble resources … knowledge, talent, infrastructure, funding … to speed research and manage the cost of advancing breakthrough medicines to patients.

If we’re going to be in the innovation business, we have to begin by reinventing the way we develop new medicines. And a key element of that reinvention is collaboration.

So let me turn to my second topic – to describe how new relationships are being created across the innovation ecosystem to advance biopharmaceutical research. For today’s discussion, I’ll focus on collaboration between industry and academia.

Lilly has a long heritage of partnerships with academia. Two of the most historic are highlighted here. In the 1920s, Lilly’s collaboration with Nobel Prize winning scientist Frederick Banting and his colleague Charles Best at the University of Toronto led to the introduction of insulin. In the early 50s, Lilly perfected a process to mass-produce a polio vaccine based on the method developed by Dr. Jonas Salk of the University of Pittsburgh.

This slide presents a simplified depiction of the traditional relationship between academic and government research, on the one hand … and industry, on the other … in the stages of research and development on new medicines.

In the tried-and-true model, academic and government institutions pursue basic research and transfer knowledge to the private sector … and biopharma companies, in turn, apply that knowledge to develop and commercialize innovative medicines that create value in the market.

Over the course of a century of modern pharmaceutical research, working relationships between the private sector and the academic sector have strengthened enormously.

Yet, even up to recent times, these relationships might have been more of a quid pro quo: Pharma will pay the university to get this body of work done, or support a graduate fellowship because we tend to hire people who come out of this university, etc. etc.

Those kinds of relationships still have their value to both participants today, but there’s a much broader platform for collaboration, as academic researchers consider the commercial application of some of their work, and as industry seeks new ideas, new sources for innovative thinking, and new ways to organize our work.

The fact is, universities are increasingly seeking a more direct, peer-to-peer, participation in a company’s R&D activities and budget. Beyond up-front grants, universities are seeking opportunities to share in a project’s potential success, such as milestone payments and, eventually, royalties.

We’re seeing great research universities embracing an active role in the process of translating new knowledge into useful products that benefit society. They’re infusing an entrepreneurial spirit across their institutions so that more people are open to pursuing the application of their research … collaborating with others outside their own walls … and even starting companies.

This is certainly true at Purdue, and you see it, for example, in the Purdue Foundry, an entrepreneurial hub that supports collaborative research and startup development by faculty, staff, and student innovators. Purdue is also noteworthy for the extent to which it funds research through collaboration with the private sector. While the typical university might receive 5 percent of its total research expenditures from industry and private and corporate foundations, Purdue on average receives 15 to 25 percent of its total funding from these sources.

Of course, new forms of collaboration create new challenges … notably, respecting each other’s individual mission, managing potential conflicts of interests – both the reality and the perception – and protecting the proprietary information and intellectual property of all parties … but I believe we can work through these issues, and in fact, we are doing so.

In addition, even as industry and academia work to expand the ways we collaborate in pursuit of innovation, we must also join forces to build support … among decision makers and the public at large … for policies essential to a truly global infrastructure of innovation. These include policies on trade, tax, immigration, and regulation that promote the free flow of ideas, talent, and investment, and allow individuals and institutions in every country to participate in the work and the fruits of scientific advancement.

It’s vitally important for academic institutions to lend their voice to policy matters that affect us all. I’m pleased that the Purdue Global Policy Research Institute is dedicating this year’s series to discussions around policies that are impeding drug innovation, with the intent to promote legislative action.

Let me turn now to a few specific examples of bioscience collaboration, drawing on our experience at Lilly … and it’s important to note that Purdue is involved in every single one of these collaborations.

One of our goals is to develop collaborative relationships that can help break down barriers between scientists in industry and academia.

The Lilly Innovation Fellowship Award Program creates a research partnership in which a post-doctoral fellow and academic mentor are teamed up with a Lilly scientist. Lilly invites select university schools to submit candidate applications. In its first two years, the program has named 15 innovation fellows, including one from Purdue.

The Lilly Research Awards Program identifies and supports collaborations between Lilly scientists and those at research institutions worldwide, focusing on pre-competitive research activities such as the validation of disease targets or biomarkers. The program has funded a total of 74 proposals to date, including five collaborations with Purdue.

Another way we engage with academic scientists is through our Open Innovation Drug Discovery initiative, a web-based platform that provides external researchers with a point of entry into Lilly’s drug discovery process.

As of September 2014, Purdue was among 388 universities, research institutes, and small biotechs representing 35 countries affiliated with the Open Innovation Drug Discovery program.

Affiliated researchers submit compounds, and Lilly carries out in-kind biological screening. In return, we retain first rights to negotiate an agreement with them. If no such agreement results, external researchers receive no-strings-attached ownership of the data report from Lilly to use as they see fit in publications, grant proposals, or further research. I should note that Purdue has signed the Material Transfer Agreement which allows all Purdue faculty to participate instantly in this program.

Another platform for collaboration with academia is public-private partnerships, and an important area of collaboration is translational medicine – converting scientific discovery into new medical treatments. Here’s a glimpse of this kind of work in Indiana.

The Indiana Clinical and Translational Sciences Institute, or CTSI, is a statewide collaboration of Purdue, IU, and Notre Dame – established in 2008 with an award from the NIH, with additional support from the state and public and private partners.

In addition, the Indiana CTSI – along with Lilly, Takeda Pharmaceuticals, and the NIH – is leading a consortium … known simply as SPARC … that includes universities across the Midwest. Based at IUPUI, SPARC is intended to facilitate larger projects and to compete with translational sciences centers in the New York and Boston areas by leveraging the comparatively untapped research capacity in our region.

Lilly is also part of an exciting new initiative focused on collaboration between Indiana’s life sciences industry and its major research universities. The Indiana Biosciences Research Institute is the first such institute in the nation that’s industry-led.

The Indiana state legislature approved $25 million in start-up funding last year, and we’re working to raise additional capital, to identify and recruit a CEO, and to develop the rules of engagement for intellectual property and commercialization by all partners and IBRI.

IBRI builds on Indiana’s strong position as a life sciences hub, with our great research universities and a vibrant life sciences industry. Amazingly, Indiana’s life sciences exports in 2012 ranked second-highest among all 50 states, behind only California.

IBRI is intended to engage entrepreneurial faculty from leading research universities in Indiana … and across the United States … and enable them to work collaboratively with industry leaders to pursue research on the frontiers of biotechnology, human health and nutrition. It’s designed to foster innovative activity through liberalized intellectual property policies … readily accessible sponsored research arrangements … and other professional opportunities.

With these few examples, I’ve only scratched the surface of the vast network of collaboration that’s evolving in bioscience research, but I hope it gives you some idea of the myriad avenues of opportunity in this exciting field.

So let me devote the last several minutes of my remarks to describe what I believe are the skills and attributes that will enable you to take advantage of these opportunities, and to contribute to the advance of scientific knowledge and human health.

Let me speak from our perspective at Lilly. Developing medicines is a long, complex process – a truly massive effort requiring an investment of hundreds of millions of dollars and lasting a decade or more. It’s not the project of any one person, and it demands a wide range of expertise as a potential medicine moves through the development process.

In our industry, we need scientists who not only have deep knowledge in their own fields, but also the ability to work with other people from a wide range of disciplines and backgrounds … and who are curious enough to want to know what’s going on in the lab across the hall. Indeed, with the explosion of knowledge and communication technologies, effective research scientists must be able to seek and connect knowledge across a broad network both inside and outside the company.

These qualities – depth of knowledge, breadth of interest, and an ability to communicate and to work with others in increasingly diverse settings – are essential not just for scientists, but for the whole gamut of responsibilities throughout our organization … particularly for those in leadership roles.

At Lilly, when we recruit and assess talent across our enterprise, we first of all want people who share our core values – integrity, excellence, and respect for people. Beyond that, we look for candidates who are … to use the terminology developed by Michael Lombardo and Bob Eichenger … “learning agile.” These are people who learn readily from their experience and can apply that knowledge in new and difficult situations to perform at a high level. Learning agility is also highly correlated with leadership potential.

We’ve distilled 12 factors we think are critical to learning agility. For example, we seek people who are insatiably curious … people with foresight … who can identify root causes and underlying patterns and trends … who draw upon broad sources of knowledge … who are open to others and their ideas … who can take the heat and lead change.

Toward these ends, at Lilly we offer employees assignments in other functions and in other countries. In addition, we encourage involvement on boards, mentoring relationships, and teaching opportunities. I’d urge you to find ways to incorporate these kinds of experiences in your academic careers … and to take advantage of the opportunities that Purdue has created for internships and entrepreneurial activities that will expand your horizons beyond the classroom.

Finally, let me add two qualities that are absolutely essential to any successful career today.

The first is the ability to express yourself clearly … to be able to communicate complex and sometimes contentious issues in ways that make sense not only to you, but to the people you’re attempting to reach.

The second essential quality is an external focus, an awareness and appreciation of the wider environment in which your organization operates. The world is the opposite of a controlled experiment, and success requires the ability to identify and adjust to rapidly changing variables. As in the work of drug discovery and development, success seldom comes from the perfect plan executed perfectly. It is more often the result of dealing effectively with anticipated and unanticipated challenges, drawing on knowledge and resources from the world over.

In conclusion,

  • All segments of the innovation ecosystem are under pressure to reduce costs and prove their value.
  • At the same time, global demands for new medicines, along with dramatic scientific advances, are creating vast new opportunities for innovation.
  • In response to these pressures and opportunities, we’re seeing true innovation in the ways that biopharmaceutical companies, research universities and medical centers, and a host of other players are collaborating on path-breaking research.

These new networks are creating new opportunities for talented people dedicated to advancing science and human health, and I believe they will generate the next wave of breakthrough medicines to meet some of the world’s most urgent unmet medical needs.

I thank you for your attention. I hope that I have sparked some ideas, and some questions. I’d like to invite President Daniels to add his thoughts, and then we’ll open up the discussion. Mitch?

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