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Covance-Lilly Deal Continues to Bloom

Monday, March 15, 2010

A little more than a year after Covance entered into a ground-breaking $1.6-billion drug development agreement with Eli Lilly, the contract research organization (CRO) continues to reap the awards of that deal and recently expanded the relationship.

The two companies initially entered into a partnership in October 2008 that included Covance’s acquisition of Lilly’s Greenfield, Ind., preclinical research facility for $50 million. In return, Lilly agreed to provide Covance with a broad range of drug development services work over the next 10 years for a minimum contract value of $1.6 billion. As part of that deal, Covance took on 264 Lilly employees who were based in Greenfield and assumed responsibility for Lilly’s toxicology testing and discovery support activities in Greenfield.

Last month, the two companies expanded their partnership to include a three-year biotechnology services agreement, which includes Covance building a $15-million biotech facility on its Greenfield campus to take over Lilly’s bioproduct analytical testing. Covance has also offered employment to 20 Lilly employees.

The Covance-Lilly partnership has been a “win-win-win” to Lilly, Covance, employees at both companies and the affected communities, said John Watson, corporate vice president and president of Covance’s strategic partnering and integrated drug development business unit.

“Acquiring the Greenfield facility has enhanced Covance’s ability to support the development of medicines from Lilly and other companies in the biopharmaceutical industry for many years to come,” Watson said. “Gaining new preclinical service offerings in October 2008—such as discovery toxicology, in vivo pharmacology, and non-clinical imaging services—allows us to accelerate our strategic growth plans in toxicology testing and discovery support activities.”

According to Watson, more than 95% of the original 264 employees hired from Lilly have remained with Covance, and the CRO has added 70 new employees in Greenfield with plans to add another 300 in the near future.

“Since the initial agreement, Covance has also added three new service lines to Greenfield in the form of our Biomarker Center of Excellence, nutritional chemistry, and biotechnology services to support Lilly and over 20 new clients ranging in size from very small start-ups to top ten pharmaceutical companies such as Lilly,” Watson said.

The challenges in the industry that made the partnership with Covance so attractive for Lilly still exist, Watson said. Pharmaceutical companies must find quick and cost-effective strategies for bringing drugs safely to market, and partnering with CROs may be the best way to do this.

“In the first year, Covance has proven that we can help accelerate drug development timelines and improve efficiencies, enabling Lilly to focus on its core competencies in delivering better patient outcomes over the longer-term,” Watson said. “We anticipate that other companies will consider strategic partnerships as a smart way for them to go, too … especially with the success we’ve demonstrated in our first-year partnership with Lilly. Today, sponsors are also clearly leveraging global CROs to expand into new geographies, which often times presents a staff transfer or joint-focused opportunity.”

As more CROs and sponsors look to develop relationships similar to that of Covance and Lilly, Watson said it’s critical that these companies have executive-level support and ongoing participation; mutually understand each other’s strategic needs and core competencies; establish governance and operating structure; clearly define expectations, roles and responsibilities, as well as operational processes, systems and measures of performance; and foster frequent, open communication. Finally, Watson said, the companies must be flexible and adaptable with a true willingness to make the partnership work.

“Covance’s alliance with Lilly demonstrates that the pharmaceutical industry is recognizing that CROS have the ability to help accelerate drug development timelines and improve efficiencies,” Watson said.


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