How to Survive the Patent Cliff: Eli Lilly’s CEO at the BIO CEO & Investor Conference

Business of Biotech

Like a number of companies, Eli Lilly is confronting a wave of patent expirations called the patent cliff. The company lost U.S. patent protection on the anti-psychotic Zyprexa in the fall of 2011 and they’re facing the losses of the antidepressant Cymbalta in December of 2013 and the osteoporosis drug Evista in 2014. The loss of protection endangers the company’s ability to profit from the drugs and they could face a $25 billion loss in drug sales this year alone.

In the face of such a significant challenge, how can a company survive the patent cliff?

“A little over three years ago, we had our investor meeting in New York, and we said to our investors, ‘Look, we’re going to go through a rocky period here where we’re going to be challenged to reduce our costs as we lose significant revenue,” John Lechleiter, CEO of Eli Lilly, said during a fireside chat at the 15th annual BIO CEO & Investor Conference. “But at the same time we need to keep investing in our pipeline.”

Lilly then provided their investors with a complete outline of what to expect as well as milestones to reach through 2014.

“I didn’t take a straw poll among the people in the room that day,” Lechleiter said, “but, I don’t think we had uniform buy in!”

However, by sticking to their guidance and revamping the way the company undertakes research and development, the company went from having 7 molecules combined in Phase II and Phase III in 2004 to 36 today.

“We’re not spending five times as much on R&D! We more or less doubled our R&D budget since 2004,” Lechleiter explained.

While the maturation of their pipeline didn’t quite coincide with the loss of their patents, the company is in a much better position than they were three years ago.

“Going through this… patent cliff, forces you to come to grips, in a very significant way, with the fundamental question: what are we good at? What do we do well? What do we do better than anybody else?” Lechleiter asked. “Forget the business school, business book jargon. We’re good at discovering and developing medicines.”

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