Continuous Innovation Against Cancer
CED Life Science Conference
John C. Lechleiter, Ph.D.
Chairman, President and Chief Executive Officer — Eli Lilly and Company
March 3, 2015
Raleigh, North Carolina
Thank you, Robbie [Huffines].
It’s an honor for me to address this CED Life Science Conference. When you consider the hosts of this conference … the Council for Entrepreneurial Development and its partners – the North Carolina Biotechnology Center and the North Carolina Biosciences Organization … it’s no wonder that North Carolina is in top tier of states in the life sciences. I’m pleased to say that Indiana is also in that select group – there’s nothing like competition! – and I can tell you that I’ve pointed to what you’re doing here in North Carolina to warn against complacency back home. Although Lilly does not have a physical presence in North Carolina, we have investments in firms based here, including Viamet and Innocrin.
In my remarks this afternoon, I’m going to take a look at what we all term the bioscience ecosystem … Big Pharma, small biotechs, venture capital, research universities, government funding and labs …. and in keeping with your conference hashtag, #thenext10, I want to talk about how I see the ecosystem evolving over the next decade.
I’ll begin with a look at the challenges and opportunities that are driving continued growth and change in the bioscience ecosystem. I’ll survey some of the myriad new collaborations that are taking shape and, in particular, the overarching trend toward collaboration earlier in the drug development process. And lastly, I want to focus on research in Alzheimer’s disease as a good example of how the bioscience ecosystem is evolving – and why it must.
So to begin, the first thing to say about the future of biopharmaceutical research is that there is one. Indeed, I believe fundamentally that the future is bright, even as every part of the bioscience ecosystem faces pressures that are driving us all toward greater, and more innovative, collaboration with each other.
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 … and higher hurdles for drug discovery and development.
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.
And although we’ve seen improvement in the past few years, the long-term trend in R&D productivity is not particularly 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!
One consequence of these pressures is the consolidation that has occurred in our industry over the past 20 years. This consolidation has been disruptive, and nearterm 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 large entities that are capable of carrying out the work of biopharmaceutical R&D on a global scale … a trend that adds to the need for new kinds of collaboration.
At the same time, we’re seeing less venture capital available to companies at the other end of the spectrum. The decline in VC firms involved in the life sciences has been variously estimated between 40 percent and 70-some percent over the past seven years – but in any case a substantial decline in VC engagement.
Even with the surge in biotech IPOs in the past two years … which we view as a very positive trend indicating that the market has not lost faith in bioscience innovation … there is less money overall coming into early-stage drug development from outside our industry compared with the peak last decade.
A report by the industry organization BIO compared the five-year periods before and after the financial crisis in late 2008 and found that total VC funding of pharmaceutical R&D declined 21 percent.
Let’s turn then to another sector in the bioscience ecosystem facing significant pressures – and that’s academia.
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 has been accompanied by 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. Success rates have dropped sharply since 1998, as 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. Continuing fiscal pressures are threatening government’s traditional role in funding basic research. NIH funding 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 briskly over the coming decades … due in no small part to rising health care costs.
Yet, with all these pressures on the bioscience ecosystem, what is equally compelling is the vast opportunity created by growing global needs for new medicines … driven by aging demographics and rising middle-class populations around the world … coupled with recent advances in scientific knowledge and technology.
If the past is any guide, new medicines will be indispensable in meeting the growing demand for improved health care and for demonstrated, positive health outcomes in an increasingly older population.
A good example is heart disease. The U.S. death rate due to diseases of the heart has declined by over half since 1979, as shown here, and by two-thirds since it peaked in 1968, when I was a sophomore in high school. 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 the inverse!
In fact, I believe this 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!
With potential so vast … science so complex and so rapidly changing … 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.
We already know that new medicines are typically not the product of a single firm or organization. In the past five years, for about 70 percent of the NMEs approved by FDA, the sponsor for the regulatory filing was not the original innovator. At the same time, we know that today a mere 12 percent of molecules that enter clinical trials are ultimately approved for patients. No part of the bioscience ecosystem can expect to thrive in the long term with so much value going down the drain.
So let me turn to my second topic – to describe some of the new relationships being created across the innovation ecosystem to advance biopharmaceutical research, to overcome some of the challenges I’ve discussed, and to reshape the ecosystem we’re all a part of.
I’ll look first at collaboration within the industry sector ... biopharma companies large and small, as well as venture capital … and then I’ll move on to discuss a range of public-private collaborations.
The most obvious and perhaps most traditional area of collaboration is across Big Pharma.
And the most common sort of collaboration is aimed at developing molecules where the opportunity is large and costs are high. An example is Lilly’s recent agreement with AstraZeneca to co-develop and commercialize an oral BACE inhibitor as a potential treatment for Alzheimer’s disease. We’ve been engaged in Alzheimer’s research for over 25 years. We saw AstraZeneca’s BACE molecule as a valuable complement to our development portfolio, and we believe we can contribute our capabilities in this field to enhance the probability of success in a case of significant unmet need but also high risk.
We’re also collaborating with Pfizer to co-develop and jointly commercialize tanezumab, a nerve growth factor inhibitor in late-stage development as a potential treatment for pain.
Equally interesting, I think, is that pharma companies are collaborating in the pre-competitive arena to address common problems and needs. Lilly is among 10 leading biopharmaceutical companies that joined together in 2012 to form TransCelerate BioPharma. This nonprofit industry-wide collaboration is aimed at developing shared R&D solutions to accelerate the delivery of innovative medicines to patients and eliminate inefficiencies that drive up R&D costs.
Still more important is the increasing collaboration between large and small companies … collaboration that increasingly goes beyond traditional acquisition or in-licensing of molecules and/or the companies built around them.
Five years ago, Lilly and our venture capital partners were pioneers in the creation of a new alternative model for accessing and advancing molecules in pre-clinical and early clinical development.
Working with our fund manager partners at groups like TVM and HealthCare Ventures, we created new hybrid VC funds called the Capital Funds Portfolio.
Through the Capital Funds Portfolio strategy, independent venture capital is used to share the financial risk of funding development of molecules—both Lillydiscovered molecules and external prospects—at early stages, when they are the most likely to fail.
What was different about these funds was that, while there was independent decision making, fund managers had access to drug development capabilities at Lilly that could generate data of a quality likely to be valued by pharma companies.
The Capital Funds Portfolio is an asset-centric model. For example, this slide depicts the role of virtual “Project Focused Companies,” or PFCs, created through partnerships with VC firms. Each PFC is formed around a particular molecule … which may have come from Lilly, another big pharma company, a biotech, or academia. The PFC is financed by independent funds that include investments from Lilly and the venture firms. This critical funding enables the molecule to advance from pre-clinical development through clinical proof of concept.
With a total of more than $250 million in risk capital in play, we and our partners expect to create some 20 companies on the asset-centric model … we have already created 14 … and to generate, on a probabilized basis, four to five positive proof-ofconcepts and, ultimately, one or more launches.
In this model the fund managers typically take advantage of Lilly’s drug development engine called Chorus. Chorus is a small, cross-disciplinary group of Lilly physicians and scientists that designs and oversees early-stage development work through a network of organizations outside Lilly.
Using this virtual model, Chorus has been able to provide the data needed to determine whether to advance or terminate a molecule’s development about 12 months earlier and at a significantly lower cost than the current industry model.
This slide lists early-stage molecules in which we currently have a stake through PFCs or through an option. These molecules – many of them first-in-class – span multiple therapeutic areas.
Through this strategy, independent investment firms and portfolio companies provide a unique way to access molecules, share risks, and expand funding to develop potential new medicines.
As an example, in late 2013, Lilly acquired all development and commercial rights from Arteaus Therapeutics for a CGRP antibody – which originally came from Lilly labs. It is currently in Phase 2 studies for the prevention of frequent, recurrent migraine headaches.
In the bioscience ecosystem of the future, progress will depend on the success of collaboration not just across industry, but across sectors. So let me turn now to collaboration between industry and scientists in academia and government labs.
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.
Today, there’s a much broader platform for collaboration, as academic researchers consider the commercial application of some of their research, and as industry seeks new ideas … new sources for innovative thinking … and new ways to organize our work.
In many cases, universities today are interested in 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.
Like the small biotechs, academic researchers who have a promising molecule need the capabilities of a Big Pharma company to advance it through the clinic and regulatory process.
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.
At Lilly, we are increasingly focusing on geographic areas where we have an R&D footprint to foster collaboration with academic scientists. For Lilly today, that means the Midwest, New York City, San Diego, and more generally Europe.
For example, in New York City, Lilly has taken a lead role in the City of New York Early-Stage Life Sciences Fund … an unprecedented public-private partnership aimed at financing and developing breakthrough life sciences companies emerging from the world-class research institutions in New York City.
By matching $50 million in anchor funding from Lilly, Celgene, and GE Ventures with funds from venture capital partners, the fund will deploy a minimum of $100 million and seek to launch 15 to 20 breakthrough ventures by 2020. Our investment allows Lilly to take part in early-phase research in oncology and neuroscience – particularly Alzheimer’s disease … as well as diabetes.
Lilly also engages with scientists in academia – and in small biotechs, as well – anywhere in the world through our Open Innovation Drug Discovery initiative. OIDD is a web-based platform that provides external researchers with a point of entry into Lilly’s drug discovery – and specifically molecule screening – process.
As of last month, 407 universities, research institutes, and small biotechs representing 36 countries were affiliated with the OIDD 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.
Our OIDD program is also engaged in collaboration with government research at NIH … screening molecules in the Pharmaceutical Collection of the National Center for Advancing Translational Science, or NCATS. The screening includes tests relevant to cardiovascular diseases, cancer, and endocrine disorders, which can be used to identify novel mechanisms or pathways of potential medicines. The results are made available online to the research community, and the program is expected to generate new partnerships, as promising candidates to treat specific diseases emerge.
NCATS is also funding a partnership to match deprioritized compounds from Lilly and other biopharma companies with innovative ideas for new indications.
And NCATS is fostering public-private partnerships in translational medicine – converting scientific discovery into new medical treatments – through the national network of 60-plus medical research institutions in the NIH Clinical and Translational Science Awards program.
Lilly is engaged with the Indiana Clinical and Translational Sciences Institute, or CTSI, a statewide collaboration of Purdue, IU, and Notre Dame. 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.
Lilly is also part of an exciting 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.
Focused broadly on metabolic disease, 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 in 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.
One last example of public-private collaboration is the Innovative Medicines Initiative, a joint undertaking of the European Union and the pharmaceutical industry association EFPIA. IMI comprises biopharmaceutical companies, large and small … universities … hospitals … patient advocacy organizations … regulatory agencies … and others. IMI has a 2 billion euro research budget – 1 billion euros provided by the EU, and 1 billion euros provided by industry. It is pursuing critical unanswered questions across the whole of the research enterprise, and has already recorded some remarkable achievements.
If I could draw out one overarching trend that we can expect to see in the coming years, it would be that collaboration is increasingly likely to occur earlier and earlier in the R&D process.
In relationships across the private sector, that means more acquisitions or partnerships around platforms or molecules in the early-phase or pre-clinical research stage. Earlier I noted that 70 percent of NMEs approved by the FDA in the past five years had a sponsor different from the original innovator. In about 60 percent of those cases, the first drug development deal took place before the molecule entered the clinic.
This trend reflects, in part at least, the need I described earlier – for capabilities early in the development process to ensure that the data generated will be valued by the pharma partner company that seeks to advance the molecule through clinical trials and registration.
In relationships between public- and private-sector research, this trend toward earlier collaboration is potentially more profound. Here’s what I mean:
The biggest problem in biopharmaceutical R&D productivity is that nearly twothirds of molecules in Phase 2 fail to advance to Phase 3 … and of those projects not halted for strategic reasons, the failure is most often – over 70 percent of the time – due to lack of efficacy, not safety concerns. The problem is not about the number of molecules – but about basic understanding of disease and disease pathways.
Industry and academia must, I believe, come together to develop better understanding around diseases … with clinical observations, patient phenotyping, and good lab science … as a prelude to our work on scaffolds or molecules. Partnering on molecules is good, but equally important is generating the knowledge that forms the necessary basis for identifying and advancing the right molecules.
In other words, while drug hunting remains a vital activity within the bioscience ecosystem, we need to advance from hunting to farming – cultivating the knowledge of disease that will bear fruit in the form of molecules.
We recognize that some of that fruit will be harvested by others, but there is more than enough for everybody. The fact is … as physicians, regulators, and payers demand more value from medicines, our primary competitor is not only other pharma companies, but also other treatment options. Everyone in the bioscience ecosystem … not only industry, but also academia and government … has a common interest in developing knowledge that will lead to better, more effective, and more cost-effective medicines.
I’d like to illustrate the bioscience ecosystem with some examples of the network of collaboration that has grown around what is perhaps the most urgent medical challenge of our time – Alzheimer’s disease. As I mentioned earlier, this is an area in which Lilly has been engaged in research for over a quarter-century.
Key elements of most current clinical trials in Alzheimer’s were made possible by the Alzheimer’s Disease Neuroimaging Initiative – called ADNI – a partnership between NIH, the Alzheimer’s Association, and industry, in which Lilly was involved from the start. ADNI has played an important role in mapping out the natural history of the disease, facilitating both fluid- and image-based biomarker assessments … which in turn can make it possible to identify patients with the amyloid plaques or tau tangles in the brain that are hallmarks of Alzheimer’s.
Lilly became directly involved in the development of these breakthrough diagnostics through a scientific collaboration in which we helped test imaging agents then being developed by the start-up Avid. Eventually our Lilly Ventures fund invested in Avid, and Lilly ultimately acquired the company. We have one FDA-approved PET imaging agent for amyloid plaques – Amyvid – which we are using to identify patients in our ongoing Phase 3 trial of solanezumab in Alzheimer’s. We also have a Tau imaging agent in Phase 2 trials.
We’re using these diagnostics in a broad-based Alzheimer’s research program that includes, in addition to the BACE inhibitor I noted earlier, in collaboration with AstraZeneca … solanezumab, the first agent to show a slowing of cognitive decline in patients with mild Alzheimer’s disease in Phase 3 trials … and another BACE inhibitor as well as an amyloid-plaque-specific antibody, both in Phase 1.
A major thrust in Alzheimer’s research today is to identify and treat patients earlier in the disease progression. One partnership testing this approach is the so-called “A4” trial. A4 is a prevention trial funded by NIH and by Lilly, and conducted by the Center for Alzheimer Research and Treatment at Harvard’s Brigham and Women’s Hospital. Investigators are testing solanezumab in older individuals with evidence of amyloid plaques – as detected by Amyvid –but who do not show clinical symptoms of the disease.
Another partnership in this area is studying the possibility of preventing the loss of cognitive function in people with inherited mutations that cause early-onset Alzheimer’s disease. The DIAN Trials Unit at Washington University School of Medicine – part of the Dominantly Inherited Alzheimer’s Network, an international web of research institutions established with funding from NIH – is conducting a worldwide clinical study of three experimental medicines – including solanezumab – in these patients.
When you think about the people involved in the DIAN study – people who know they are genetically pre-disposed to Alzheimer’s disease, with onset typically in their 30s, 40s, or 50s – the urgency of this work begins to hit home.
Today, public-private partnerships are enabling a wide range of activity in Alzheimer’s research … from target discovery, to biomarker validation, to even conducting late-stage clinical trials in hard-to-find populations. This collaboration across sectors of the bioscience ecosystem is reminiscent of the efforts that achieved dramatic successes against polio in the 1950s and HIV/AIDS in the 1980s and 90s.
Let me conclude, then with a few observations about the bioscience ecosystem of the future.
- The opportunity for progress in medicine has never been greater.
- Biomedical research and drug discovery have become more distributed; new models are required.
- Progress will depend on the success of collaboration not just across industry, but across sectors.
- As new collaborations are considered, we must be prepared to address and break down traditional barriers.
- We need to recognize that different parts of the ecosystem have different interests and risks, and therefore we need to align incentives and effectively share risk to foster a common commitment to success, and I believe we will be increasingly able to do that.
- More broadly, we need more effective collaboration with government and academic research – particularly in the area of disease understanding – to help reduce failures, which drive up the cost of R&D – and ultimately enrich outcomes in Phase 3 and create more value throughout the bioscience ecosystem.
The few examples I’ve cited here today barely scratch the surface of new forms of bioscience collaboration, much less the vast array of possibilities across the entire innovation ecosystem. It is my hope that the combination of external pressure, selfinterest, and pure opportunity will spur even more new and creative approaches to partnering now, and in the years ahead … to realize the full potential of the bioscience ecosystem to meet the urgent and growing health challenges facing people around the world today … and to seize the tremendous opportunity for all of us across the ecosystem to add to the astounding gains that have already been achieved.
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