By Anonymous
Covance in $50 million deal to buy Eli Lilly’s Indianapolis- based laboratories
PHARMACEUTICAL
THE BUSINESS MODEL for pharmaceutical research activity is leaving its familiar environs for a cheaper, faster and more efficient way to replenish new-product pipelines at drug companies.
A $1.6 billion contract research deal struck earlier this month by Princeton-based drug development company Covance, Inc. with Eli Lilly & Co. of Indianapolis underscores the onset of that change, according to industry experts.
“The Covance deal represents the next phase,” says Douglas Peddicord, executive director of the Association of Clinical Research Organizations in Washington, D.C. “It marks a move from a contract research organization providing outsourced, disintegrated services to one where it is in fact going to be a strategic partner in Eli Lilly’s drug development work.”
Instead of merely supplying outsourced clinical trials and testing work, Covance will buy Lilly’s Greenfield Laboratories in Greenfield, Ind., paying $50 million upfront for the 450-acre campus, according to a Lilly statement.
Covance will “take full responsibility” for toxicology testing and other R&D support activities for Lilly at the site, the Lilly statement adds. That approach is how the Covance-Lilly deal is different from conventional industry practice, says Wendel Barr, chief operating officer of Covance. Typically, pharmaceutical companies outsourcing their clinical trials continue to retain overall strategic and operational control of their research work, Barr explains.
Regulators too may be more comfortable with the model of outsourced clinical trials, says Peddicord, because in that model, “companies have less in the way of proprietary involvement in drugs under development, so there is the potential for less bias in the development process.”
In fact, Covance will be paid only its regular research fees, and will not share in the upside if its work results in Lilly’s drugs getting marketing approval, says Barr. He explains that because Covance conducts research work on behalf of many pharmaceutical companies, a share of profits from any drugs it helps develop would mean a conflict of interest.
Over the past decade or so, pharmaceutical companies have been outsourcing their clinical trials because they didn’t have the requisite capacity themselves, says Peddicord. More recently, they have taken that outsourcing model further to also save costs and time, he adds.
Lilly stated the deal with Covance will help it “improve productivity by gaining speed to market and lowering drug development costs.”
A study shows outsourcing clinical research can help save time.
“Development projects that used a higher degree of clinical research outsourcing got to the finish line, as in submitting a new drug application to the FDA [Food and Drug Administration], 30 days faster than others without any diminishing in quality,” says Peddicord, citing a study done three years ago by the Boston-based Tufts Center for the Study of Drug Development.
Barr says pharmaceutical companies are under more pressure than in earlier years to replenish their product pipelines in the quickest and least expensive way. Also, their window to launch new drugs is getting smaller as many major drugs will go off patent in the next few years, he says.
Covance’s deal with Lilly could help relieve the product- pipeline pressure Lilly may be feeling.
“This deal is trend-setting because of the breadth of services, duration and size of the deal,” says Barr. The contract covers the gamut of services, from preclinical safety testing all the way through late-stage clinical trials, he adds.
Covance’s $1.6 billion contract with Lilly expands a pre- existing relationship between the two companies. The Princeton company currently conducts preclinical toxicology and early-stage clinical work for Lilly, according to a Lilly press release.
Barr says he anticipates work to start the day after the contract is signed, expected to be in October.
Covance will absorb roughly 260 Lilly staffers at the Greenfield campus, which has 15 buildings. Lilly’s animal health division, Elanco, is headquartered in Greenfield but will relocate elsewhere in Indiana. Barr says it is too early to specify whether executives from Covance’s Princeton headquarters will be assigned to Greenfield for the Lilly project.
But he expects “Covance’s presence and influence in New Jersey will grow,” because of the Lilly contract. Covance’s physical presence in New Jersey is modest, but its reach is significant. From just two floors in a Princeton building, the company controls operations in more than 20 countries with about 9,000 employees.
A second building on the Princeton campus serves as the site for data management and regulatory support services for late-stage human clinical trials, according to Barr. Close to 1,000 employees work at both Princeton facilities, he adds. Barr says four centers in China, Singapore, Europe and the U.S. act as regional hubs for its entire network.
Covance posted $1.63 billion in revenue last year, representing a 16 percent growth over that of 2006, taking home $176 million in profit ($145 million in 2006). The company is already conducting a third of all the clinical trials for the pharmaceutical industry worldwide, claims Barr. “Covance has worked on a quarter of all the drugs out there, and 17 of the top 20 drugs in the market,” he adds.
Wendel Barr, Covance COO, says obtaining full control over Lilly’s site puts both companies at an advantage in the industry.
A study shows outsourcing clinical research could help save time and money for the companies involved.
Pharmaceutical companies are under more pressure than in earlier years to replenish their product pipelines in the quickest way possible.
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Copyright Journal Publications Inc. Aug 25, 2008
(c) 2008 NJBIZ. Provided by ProQuest LLC. All rights Reserved.
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