“Transformations in the Pharma Industry”

Andrew M. Dahlem, Ph.D. Vice President, LRL Operations/LRL Europe August 31, 2012 9/20/2012 Copyright © 2012 Eli Lilly and Company

The Current Biopharma Environment: Challenges and Opportunities Patients

Payers

More cost aware and informed but still adherence issues

Cost pressure and want real-world drug information

Legal IP challenges, Product Liability

Media Regular reports on drug/health care issues

Better Value

Regulators Increased drug safety concerns, benefit/risk

Providers Want assurance on how to use drug

Global Unmet Medical Need, Increased Patient Population, Science & Technology Advances 9/20/2012

Confidential

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Drug Discovery and Development Process Hypothesis Generation

Candidate Development

Commercialization

Target Identification and Validation

Assay Development

Lead Optimization

First Human Dose

Phase IA

Phase IB/II

Phase Submit III

Global Global Launch Optimization

Lead Generation

Project Sanction

Project Phase 9/20/2012

Product Decision

Program Sanction

Program Phase Copyright © 2012 Eli Lilly and Company

Product Phase

Launch Launch

The Drug Development Pathway

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Copyright © 2011 Eli Lilly and Company

Public and Private Sector Investment in R&D

Pharma $49.4B

NIH $30B

Biotech $18B Can we extract greater synergy? Pharmaceutical Industry Profile 2011, PhRMA, pg. 19

Dr. Andy Dahlem Copyright © 2012 Eli Lilly and Company

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A FIPNet Model for Drug Development: The Emergence of Innovation Nodes

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Copyright © 2011 Eli Lilly and Company

Academic/Gov’t and Biopharmaceutical Companies: Complementary Partnerships for New Medicines FUNDING/CONTRIBUTION Academic & Biopharmaceutical Government Labs Companies

BASIC RESEARCH

PRE-CLINICAL TESTING

PHASE I

PHASE IB/II

PHASE III

FDA REVIEW AND APPROVAL PRODUCT LAUNCH & POST-MARKETING TESTING

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Copyright © 2011 Eli Lilly and Company

Trend in R&D Efficiency

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Copyright © 2011 Eli Lilly and Company

Emerging Threats to Academia Business Model

• Free Education – Stanford, Harvard, MIT, etc. (Coursera)

• Flat Federal Research Funding – More competition for grants

• Philanthropy effected by economy • Tuition and fees creating large student debt • Federal and state subsidies changing from direct grants to student loans • For profit universities Company Confidential Copyright © 2012 Eli Lilly and Company

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Transforming R&D Strategy: Open Innovation Partnerships

9/20/2012

Copyright © 2011 Eli Lilly and Company

Chorus: An Early Phase, Virtual Drug Development Group Is a full-service, operationally independent R&D division of Lilly Research Laboratories (LRL) located in Indianapolis, Indiana …that functions as an alternative R&D platform to efficiently move select molecules through early phase development Accepts molecules between Candidate Identification (CI) and end of Phase I Develops molecules to Proof-of-Mechanism(PoM) or Proof-of-Concept (PoC) Discovery

Asset flow

Phase I

Phase Ib

CI

PoM

Phase IIa

Phase IIb/III

Launch

PoC

…that develops New Molecular Entities (NMEs) across all therapeutic areas Neuroscience, Endocrine, Cardiovascular, Bone/Inflammation, Oncology, Women’s Health Currently prosecuting mix of Lilly and External early phase assets ~30% of molecules in Chorus portfolio are biologics

9/20/2012

Chorus was an early alternative development pilot aimed at the industry’s productivity problem Copyright © 2011 Eli Lilly and Company

Principles for Selecting Compounds for the NCATS Program • Parked compounds not under active development • Must have completed Phase I

• Safety profile does not limit moving to Phase II • Small molecule only at this stage • API already exists or can be easily made • Mechanisms with broad scientific literature on potential use • Compounds where Lilly has IP filed 9/20/2012

Copyright © 2011 Eli Lilly and Company

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NCATS Repurposing Initiative: Contractual Framework Lilly 3 Memorandum of Understanding

1

5 2

NIH 4

Collaborative Research Agreement

License Agreement

Requests for Applications Grant Agreement(s)

Academic Institutions

1

Lilly and NIH capture the public private partnership framework and initial list of Lilly nominated assets in a Memorandum of Understanding.

2

NIH solicits and evaluates applications from academic institutions based on the list of Lilly nominated assets. A sub-set of the applicants (each a “Qualified Applicant”) will be invited to submit a full proposal.

3

Lilly and Qualified Applicants will negotiate Collaborative Research Agreements, which will become part of the full proposal.

4

NIH evaluates submitted full proposals and decides which one(s) to fund.

5

Based on the results of the pre-clinical and/or clinical studies, Lilly will decide if it would like to take a license to the resulting intellectual property and/or data.

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Copyright © 2011 Eli Lilly and Company

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Probability of Technical Success • We have improved the success rates of new molecules by taking causes of technical attrition in development and moving them forward in drug discovery. • We can further optimize success by improving: disease mechanism validation, tailoring earlier in development and focusing on therapeutics which affect more than one disease pathway.

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Probability of Technical Success Concerted steps already implemented to increase development success of candidates: • In situ salt screening

• Pre clinical toxicology • In vitro genetic toxicology • Metabolism studies

• Quantitative pharmacology • Bioavailability in two species • Pre clinical pharmacology (animal disease models) • Expanded biomarker discovery and testing • Investment in Translational Science and Medicine •20/09/2012

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•Company Confidential - Internal Use Copyright © 2012 Eli Lilly and Company

Reasons For NME “Technical” Termination By Phase 2005- 2009 Industry Portrait Preclinical 4%

Number of events = 295 2%

6%

Number of events = 277

Efficacy Toxicology

Formulation

6%

Phase 1

Clinical Safety

17%

3%

27%

PK/Bioavailability

27% 25%

82%

Phase 2

Phase 3

Number of events = 207

1% 3%

3% 19%

17%

10%

77%

68%

•20/09/2012

Number of events = 31

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•Company Confidential - Internal Use Copyright © 2012 Eli Lilly and Company

Future Strategies: Timely and Affordable Precision Molecules Becoming Medicines • Targets validated in humans and understanding of underlying causes of disease progression • Early intervention in disease progression with therapeutic agents • High-quality multi-specific therapeutic agents addressing key pathways

• Human patient data and identification of best indication early in development • Tailoring for specific patient populations using biomarkers and companion diagnostics • Clinically meaningful outcomes with relevant comparators.

Supported by Innovation Ecosystem Confidential 2012 Eli Lilly and Company

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Innovation Ecosystem in Pharmaceutical Research: Checks and balances should be maintained FDA

Academia

Industry

Checks and balances are important to protect public. • FDA – No financial interest in outcome • Academia – Perceived lack of bias in interpreting risk/benefit • Industry – Financial interest in outcome creates issues in perception of data interpretation 9/20/2012

Copyright © 2012 Eli Lilly and Company

Collaboration Opportunities: Tailoring for Specific Patient Populations •

All candidate programs need a biomarker and diagnostic strategy

•

Better clinical effect vs. safety (benefit/risk) understanding

•

Avoid treating non-responders

•

Overall faster and less costly R&D (more investment early)

•

Higher regulatory acceptance

•

Higher healthcare acceptance (Payer, Provider, Patient) 9/20/2012

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Collaboration Opportunities: Generation of Right Therapeutic Agents •

Agonist vs. Antagonist

•

Single Mechanism vs. Multispecific

•

Small Molecule vs. Biologicals

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Add on to Standard of Care vs. Combo and Bio-betters

•

Competitiveness and IP

•

Better, more predictive, animal models

•

Collaboration for Signal Searching in Clinic

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Research Project Grants Competing applications, awards, and success rates

NIH Data Book – (http://report.nih.gov/ndb/index.aspx)

Data provided by the Division of Information Services, Reporting Branch