Magazine Article | October 31, 2012

Eli Lilly And Company – Open For Innovation

Source: Life Science Leader

By Rob Wright

This year, the pharmaceutical industry is facing a loss of more than $33 billion due to patents expiring. Big pharma companies realize that to remain in the business of drug discovery, let alone in business at all, they need to become more innovative and long-term focused. Eli Lilly and Company is no exception, and it began implementing a number of long-range initiatives to spur innovation. One of these is the Open Innovation Drug Discovery (OIDD) platform, headed up by Alan Palkowitz, Ph.D.

But Palkowitz, a VP of discovery chemistry research and technologies at Lilly Research Laboratories, had a problem. How could Lilly attract people outside its own four walls to want to share their research? “We don’t have infinite sources of money to pay for every idea before we know if there is any value,” he expresses. He recalled mulling the problem over while at home during a holiday break and suddenly waking in the middle of the night with a solution. The idea, which he emailed to his colleagues the next day, was to use biological data as a form of currency to attract external parties to want to share experimental molecules, in a blinded fashion, and potentially collaborate. This proved to be the final key to the successful launch of Lilly’s OIDD platform.

Gaining Access To Molecular Diversity
According to Palkowitz, Lilly had spent a great deal of time and effort building its compound collection geared toward its targeted therapeutic areas of interests. Continued evolution of this compound collection was viewed as critical for future innovation. “One of the things we realized is that we had gotten to a point where further diversification of our collection was increasingly difficult when employing past methods, either through internal projects or through access to molecules through commercial vendors,” he confides. Commercial vendor sources were becoming redundant and indistinct from what Lilly already had. Palkowitz wanted to gain “unbiased access” to compounds and scientific talent from other sources he knew existed, but had not been traditionally available to Lilly, such as academic settings, universities, and laboratories where synthetic chemistry is a key part of research programs and activities. But not many of these molecules have found their way into a drug development program. Other sources of innovation include small and emerging biotechs that are looking at new chemistry technologies and taking different approaches to spur new areas of discovery. “We thought, how do we uniquely access that dimension of capability, not only the molecules themselves, but maybe even the science and the thought processes behind them, as represented by the investigators, the originators of that work?” he wondered. The solution Palkowitz dreamed up was uncovering what these groups would value most — other than money. “Instead of paying for molecules up front before we were really able to understand their value, we thought of different types of currency that would be of value to academics and even small biotechs.” The answer was to use biological data as a form of currency. The transactional value of data became the catalyst to gaining access to external sources of innovation, because, according to Palkowitz, biological data is what drives much of the understanding of hypotheses. “When someone has a molecule, and they have a hypothesis around how it might prove useful, being able to provide data on that is actually very valuable,” he affirmed. “Data helps spur additional ideas of independent research and can also be the basis for the foundation for new research grants.” Palkowitz realized however, that it wasn’t just data, but data delivered timely, in a way that was not only meaningful but understandable to collaborators. But before he could fully create the framework for delivering data, he needed to first solve another challenge —- how best to manage these external collaborations.

Sometimes Innovation Requires Standardization
Working with external partners is challenging because nearly everyone has their own ideas for how something should be done. Though Palkowitz was trying to gain access to external sources of innovation, he didn’t want to do it in a way that created more headaches or costs for his company. He wanted to build the process using some of the traditional methods by which Lilly approached partnerships and collaborations. “We wanted to do this in a way that didn’t require us to have a unique business agreement with every group we interacted with,” he states. The solution was the development of a universal material transfer agreement (MTA) that would be acceptable to any university or small biotech and which did not have to be amended constantly or on a one-off basis. An MTA serves as a contract that governs the transfer of tangible research materials between two organizations, defining the rights of the provider and recipient, with respect to the materials and any derivatives. For help in developing the MTA, Palkowitz reached out to the Association of University Technology Managers (AUTM).

AUTM is a global network of members from more than 350 universities, research institutions, teaching hospitals, and government agencies, as well as hundreds of companies involved with managing and licensing innovations derived from academic and non-profit research. The organization provides numerous resources, including expertise in all areas of IP management. Palkowitz knew that in addition to the value academics and biotechs place on data, they are also highly concerned with protecting their IP. “There’s always the sense of trust,” he says. “Collaborators want to know how we are going to protect their structures, their IP. Will there be an opportunity to publish?” According to Palkowitz, AUTM was instrumental in providing input and advice on constructing the MTA, helping Lilly to proactively address these questions which often become pitfalls to successful collaboration. He also credits AUTM for helping in the broader design of the OIDD program. The creation of the MTA proved to be a real breakthrough for Lilly. “It allowed things to go smoothly once we launched the program, and we had a very high acceptance rate of the MTA,” he states, “And without any need for modification.” Elaborating, Palkowitz says, “We made it very clear with our material transfer agreement that it was a one-size-fits-all, and we weren’t going to negotiate this every time with different universities,” he explains. According to Palkowitz, one of the first instincts any tech transfer office will have when they get an MTA is to look it over, red line it with their own specific knowledge, and send it back. When this happened initially, he remained firm on the one-size-fitsall MTA policy. Presently, Lilly has 279 universities and small biotechs with which it collaborates in 31 countries around the globe. “We have about 650 individual investigators who have accounts and are routinely submitting compounds and receiving data,” he explains. “We’ve had more than 100,000 compounds uploaded into the Web-based system for initial computer screening and have accepted about 60% of those to be screened in the program’s biological assays.” When you consider these numbers, you can imagine the amount of work Palkowitz would be creating for the Lilly legal group if he allowed each MTA to be individualized.

Palkowitz admits that, initially, Lilly did receive some pushback from some partners regarding the MTA. Involving AUTM proved beneficial in overcoming initial pushback, as the organization is external to Lilly and provided credibility for the MTA. “We actually had AUTM endorse the program and the MTA, which we advertised in press releases as well as on the website,” he states. “Once people saw this, they knew that we had really put a lot of thought into the creation of the program and the MTA.”

In addition to reducing legal headaches, having a universal MTA streamlined and standardized the communication process between Lilly and external partners. It also provided time lines for when external parties that submitted a compound for screening could expect to receive data in return. Within three months, the submitter will receive a data report generated by Lilly for the submitted compound. The MTA also provided, that in exchange for the currency of the provided biological data, Lilly would have first right of negotiated access to the compound or collaboration. “If we see something interesting, Lilly would be able to collaborate, or maybe even access through a direct license, the compounds from the investigator, to use for our own internal purposes,” he states. “If we go through the process and they’re not interested, then it’s certainly their prerogative to go off and use the data in any way they see fit.” Lilly hopes that, by presenting itself as a credible and viable partner, researchers will want to continue to work with the company to enhance and uncover the potential of their science. Throughout the process, Palkowitz had to overcome both internal and external roadblocks to creating the OIDD business model.

Overcoming Internal Challenges
For Palkowitz, the initial roadblocks to internal adoption of the program were typical with this type of outside-the-box idea. He heard things such as “Academics will never go for it,” “It’s too complicated,” and “You’ll never find anything.” His approach to overcoming these comments was simple. First, keep the team small. Addressing challenges is easier to overcome when the team is small and focused, allowing for streamlined communications. If his team lacked specific expertise, Palkowitz would bring in different people to augment what he needed, when he needed it, and only for a limited time period, so as to maintain the team’s size. In addition, keeping the team small helped to facilitate and maintain focus.

The second key to overcoming internal roadblocks was having a highly focused vision. “There are a lot of ideas of where to go, what to do next, and how to broaden different dimensions of the program,” he states. “I’ve had to say, let’s keep focused on the key job and collaborators, making sure we’re delivering value for them, as well as for us.”

The third key to overcoming internal roadblocks is team member selection. Palkowitz suggests finding members who really click with the vision. “I think it’s important in any situation, when you talk to people about an opportunity, you can either select somebody because you think they have a certain skillset, or look beyond to assess somebody’s passion, interest, and desire — even if they don’t have the skillset,” says Palkowitz. “Sometimes that takes you further, and I think a learning point is don’t always go to the same sources when you have a new idea.” Palkowitz describes being amazed by what people can achieve when they are truly inspired.

Inspiration, however, can be contagious, which ironically created another challenge to keeping Lilly’s new team small. For as the program gained momentum, a lot of people wanted to join, and Palkowitz found himself having to turn people away. In addition to wanting to maintain the team’s focus — something which he foresaw as being difficult with a large team — Palkowitz did not want the program to become a massive resource burn, especially since it was still growing and being defined. Presently, the number of full-time employees is just under five, with three being fully dedicated, while others provide fractional time commitments.

Don’t Forget the Pilot
The MTA and its endorsement by AUTM proved beneficial in overcoming external resistance to adoption. But don’t forget to pilot to gain firsthand customer input. Palkowitz selected a few potential customers to test the program. His approach was to go to the biggest doubters and potential critics right from the start. Palkowitz admits that he and his team didn’t have a lot of internal experience in developing this business-within-a-business, and this is why the pilot proved so valuable. “We got a lot of valuable input, because they saw the potential value and benefit to them personally and were eager to help us anticipate issues,” he states. For example, through the pilot they learned that some of the details within the MTA, which he and his team may not have deemed as being very important, were very important to the customer (e.g. the ability and timing of being able to publish articles from the data). They shared sample reports of the data to find out what was instructive and what was confusing. How would they prefer to receive the data and in what format? What should be changed? All of this was taken into account in fine-tuning the program.

The team also gained insight from AUTM and the pilot as to how the website should look and feel. According to Palkowitz, the website turned out to be THE key part of the whole biological data transactional process. “This is the place where we advertise the business process, the MTA, the actual biological assays that we screen the compounds against,” he explains. The website explains how the data is generated, from where, and what will be provided back to the investigator. The website ( com/dd/) would also serve as the key to managing the logistical flow of information for every individual who develops an account, submits compounds, and receives data. Thus it had to be extremely user-friendly and approachable. For this, the team drew upon much of their daily personal experiences with conducting transactions on the Internet. “We really tried to model it after a common experience that everybody shares with e-commerce,” he explains. The other benefit of creating the website was that it automated much of the process. This allowed the team to spend time on more important things, such as providing more of a personal touch to their external collaborators, viewing them as customers, not merely an idea machine.

Treat Your External Collaborators as Customers
Palkowitz refers to his external collaborators as customers and strives to treat them as such. He explains, “There are some things where we spent a lot of time, maybe some of the documentation, some of the systems we thought were really cool and important, but in the end, people want a phone call.” This personal touch, considering the small size of the OIDD team, would not be possible without the standardization of the MTA and the automation of the submission process. To provide a more personal experience, Lilly actually created a help line for the site. If people want to see a face, Lilly offers webinars so customers will be able to ask questions interactively and not just have to read information on a website. Palkowitz claims this all came about only by doing a lot of homework up front to fully understand the needs of its customers, and it is why Lilly is open for innovation.

Getting The Word Out

Ralph Waldo Emerson once said, “Build a better mousetrap and the world will beat a path to your door.” Alan Palkowitz, Ph.D., VP of discovery chemistry research and technologies at Lilly Research Laboratories, was not willing to subscribe to Emerson’s wisdom when he created Lilly’s Open Innovation Drug Discovery (OIDD) platform. The whole idea is to interact with the community, which is not a one-way communication. To spread the word that Lilly was interested in partnering with a variety of external sources to find innovation, Palkowitz involved his corporate communications group for key press releases regarding the program. He suggests that when doing something as different as the creation of the OIDD platform, don’t keep it secret. Articles about your program in a variety of journals and magazines serve as another form of advertising. In addition, Palkowitz believes the website (the company advertised the program on its website, as well as in a number of scientific journals) and positive customer experiences added to a strong word-of-mouth buzz. That interest was further enhanced through the use of open-innovation ambassadors — Lilly employees who would conduct scientific outreach programs and present at various conferences. Lastly, Palkowitz stresses to not forget the importance of providing the personal touch of making a phone call or sending personal letters to university department chairs to inform them of the program. Don’t rely on the outdated wisdom of Emerson. If you are going to build a better mousetrap, build a comprehensive communications strategy to go along with it, so the world will know not only why they should beat a path to your door, but how to do so.

Spend Money To Make Money

How do you define customer service? Better yet, how do you define customer? For Alan Palkowitz, Ph.D., VP of discovery chemistry research and technologies at Lilly Research Laboratories and champion behind Lilly’s Open Innovation Drug Discovery (OIDD) platform, it is every person who is interested in submitting a potential compound for investigation. These are all potential customers, potential future collaborators, and in essence, the foundation for potential future revenue streams for his company. In creating the OIDD platform, Palkowitz asked himself the following questions in relation to providing better customer service: “How do we eliminate a lot of the barriers, burdens, and hidden costs for our potential partners? How can we actually communicate in an efficient way and make information available?” The answer: Create bar-coded vials and utilize prepaid shipping. “All they have to do is enter their compound into a vial that’s already bar-coded and send it back,” he states. “This then seamlessly becomes integrated into our sample handling system while the structures are still blinded to Lilly.” By removing some of the burden from the customer, both the company and customer benefit. Lilly benefits as well. Instead of receiving samples from different carriers in a variety of formats, with the possibility of missing or limited documentation, and creating more work for Lilly employees, the process is standardized. Palkowitz explains the bar coding and prepaid shipping as, “Trying to make the program a continuous part of our internal research activity.” The process also facilitates the ease with which the company can track and trace information. The customer benefits by not having the out-of-pocket cost of having to pay for shipping.

When considering the cost of doing business, sometimes you need to look beyond initial dollars and cents. Lilly has already accepted around 60,000 compounds for physical screening, which is a lot of prepaid shipping. To give you an idea of the cost, let’s say, hypothetically, that Lilly was using the U.S. Postal Service’s flat rate prepaid shipping boxes which you see advertised on TV. These range in price from $5 to $45 dollars, depending upon the size of box and shipping zone. For 60,000 samples, this would translate into minimal spend of $300,000 to more than $2.7 million. This cost may not be a bad investment, especially if Palkowitz and his team find the next Zyprexa — a former Lilly blockbuster responsible for generating $2.5 billion in annual sales revenue. Sometimes you need to spend money to make money.