Executive Summary
In an effort to follow-up its success with Prozac (see Appendix A), Eli Lilly and Company saw a market for an anti-migraine drug that similarly targeted serotonin levels. Their prior research and development involving such neurotransmitters put them at an advantage over their competitors. Their goal was to find a neurotransmitter (i.e. serotonin) that matched the receptor that they felt was the key to relieving the migraine. (Appendix B provides a basic overview on how receptors and neurotransmitters integrate and function.) Aided by cutting edge methods of combinatorial chemistry and high-throughput screening, Lilly was able to test compounds at a significantly quicker rate. In fact, their first set of compounds tested resulted in a higher potency compound than any that resulted from traditional chemistry methods of testing one compound at a time.
With time being of the essence in the drug industry, the natural solution was to utilize combinatorial chemistry to develop the anti-migraine drug. It will allow for a quicker drug development and hopefully ensure a spot as one of the first market entrants. First to market was not a must but being a fast follower was very important in order to gain significant market share. Having a facility dedicated to this drug will create and efficient production process and reduce waste. The goal would be to focus just on the one anti-migraine drug in the hope that it will make it all the way to market. However, if it were to fail one of the stages of clinical trials, Lilly would have this dedicated facility to test variations on the drug formula to quickly develop a backup drug.
Background
In the mid-1990s, the pharmaceutical industry was very large and very profitable with worldwide sales around $250 billion. The G7 industrialized nations (Canada, France, Germany, Italy, Japan, United Kingdom, and the United States) accounted for 80% of these sales. As a result, the most popular drugs targeted ailments of concern primarily to these industrialized nations. For example, Eli Lilly and Company received recognition for introducing human insulin and later developing the innovative anti-depression drug widely known as Prozac. The public pressure on the pharmaceutical industry shifted from the original emphasis of safety and effectiveness to now include price reductions.
Bianca Sharma, a Project Manager with Eli Lilly and Company, was feeling downward price pressure as she worked with her Research and Development Team to develop a new generation anti-migraine drug. In this highly competitive pharmaceutical industry, drug makers have to prove that the product they are releasing will provide a substantial benefit, both in healing and actual cost, or a hospital will not utilize it. The President of Sphinx Pharmaceuticals, Martin Haslanger, explains, “The marketplace will only reward innovation. It is no longer rewarding to make incremental improvements” (K. Heine, 1995). Though this drug is a potential “hit” positioned as the first of a new product subclass it will face inevitable obstacles. Patents on new pharmaceuticals are less protected than they were prior to 1995. In fact, under current law a patent’s term expires 20 years from the time the application has been filed rather than when the patent is issued. In most instances, more than half of the products fail to return on a company’s investment by the time a drug reaches the market. Moreover, the dollar market share greatly suffers from patent expirations that leave products vulnerable to generic product substitution. Drug discovery, development and clinical approval are extremely effort intensive and very expensive. In the United States, every drug has to pass three phases of clinical trials under the inspection of the U.S. Food and Drug Administration (FDA). The clinical safety is tested in Phase I, followed by a drug efficacy assessment in Phase II, and completed with Phase III’s test on adverse effects from long-term use of the product. Unfortunately, the time delays to act can affect the company in the form of lost revenue as well as enabling prior entrants to consolidate their market positions. To further complicate the process, the new anti-migraine drug faces a huge risk using combinatorial chemistry. This new technology is not only untried but also controversial. Though it has the possibility to speed up the product development cycle, if it proves false leads then the amount of time and resources used on the research would be severe.
Issues
Project Manager Bianca Sharma presented at the PTAC meeting the three main issues that she felt were paramount in drug development for Lilly’s migraine project. The first issue of concern was how long it would take the product to get to market. Delays in entry would not only result in revenue loss, but it would also give competitors the opportunity to tighten their grasp on the market. Lilly’s compound would most likely be the fourth or fifth serotonin compound to reach the market, however it would be the first serotonin 1f-based compound to market so strategists argued that it was especially important to take the necessary time to bring the best possible compound. Lilly’s senior corporate strategist Amy Velasquez commented that in the old days they could hold back their lead compound, but in today’s competitive market it was necessary to hustle to market. She also noted that if they had a backup, they could hold it until they saw something creating a hitch; however, a backup did not exist now. Martin Haslanger, on the other hand, argued that it was sometimes better to come second - a fast follower to the first market entrant. He pointed out that the top two-hundred best selling drugs included many fast followers, and that the chance of going to market first was very slim because of the extensive time it took to develop a product. He also noted that with Prozac they jumped through hoops to get to market first and almost didn’t make it. They then faced many rough patches and it gave their competitors the chance to further improve their products which was a detriment to Lilly. The second area of concern was the diversity of leads, which was closely linked to the first issue of time to market. If Lilly had unlimited time and resources then they could take several leads through the expensive clinical trials, however they could not justify taking two similar leads down the same experimental track. It was important that Lilly send the best available compound down the exploratory track so that the follow up group would not lose a sense of urgency. It was important that the leads be explored as early as possible in the drug discovery process. This was an area where combinatorial chemistry could make a big impact, and exploring molecular diversity could also expand patent claims. The third issue Sharma presented was on the use of traditional versus combinatorial chemistry. Combinatorial chemistry had the chance to dramatically increase Lilly’s ability to create and explore multiple related compounds so they could quickly determine the best possible compound to bring to market. The only problems with combinatorial chemistry were it had never been used to get a compound to clinical trials, and many Lilly scientists were skeptical of the new technology. They also believed that their jobs could be in jeopardy, similar to converting from a manual assembly line to automated production.
Combinatorial Chemistry Method
Combinatorial chemistry is a collection of techniques which allow for the synthesis of multiple compounds at the same time (See example Appendix C). These techniques are now largely automated, but do not necessarily have to be. The collection of compounds made in this way is generally known as a library. This branch of chemistry is very young, but it has had profound effects in its brief existence. These effects can be seen by its impact on medicinal chemistry and, in particular, the drug design process. Traditionally, potential lead compounds were synthesized one at a time.
This traditional method was useful, but time consuming and expensive when compared to the emerging combinatorial chemistry method. Synthesis of one compound at a time could no longer keep up, and thus became the rate limiting step in the process. Combinatorial chemistry was the solution to this problem. It will help make large numbers of compounds at the same time in small amounts, forming libraries which can be used for desired end products all at once. The creation of large libraries of molecules in a short amount of time is the main advantage of combinatorial chemistry over traditional. The cost of combinatorial chemistry’s library generation and analysis of said library is very high, but when considered on a per compound basis the price is significantly lower when compared to the cost of individual synthesis.
Recommendations
Invest in Combinatorial Chemistry
Combinatorial Chemistry made the promise to shorten the drug development cycle by boosting the ability to create and explore different compounds simultaneously. Using this technology, the locksmith-chemists who had to screen through multitudes of combinations to find a right fit will be able to cut that feat substantially and additionally compose libraries for future use in research. The hesitation, however, comes in the fact traditional chemists were skeptical of its clinically unproven success. Such an extensive investment in a technology that has to date been unproven as effective seems like a risk that poses as a substantial loss should the technology fail to produce. Additionally, traditional chemists felt threatened by the competition of a new technology limiting job opportunities in the field.
Regardless, factoring these considerations into the decision, two additional elements demonstrate that Combinatorial Chemistry was a risk worth taking. First, there existed significant pressure in the industry to cut prices, but consumers (and the government) were not willing to sacrifice the quality of medicinal products to account for costs. Therefore, combinatorial chemistry seemed to be the only solution to satisfy high quality production at a lower cost by speeding up the development process.
Secondly, the current state of the market almost demanded new technology. As discussed, the industry was at a point where only innovation was being awarded, not incremental improvement. Looking beyond the reach of simply the anti-migraine project, combinatorial chemistry could substantially boost innovation efforts by enabling chemists to screen through combinations of compounds at a significantly faster pace.
Eli Lilly was looking for its next blockbuster, and its recent product line had become stagnant. Combinatorial chemistry was the risk worth taking to satisfy: (1) Eli Lilly’s desire to produce new innovative products due to the library-capability the chemistry encouraged, (2) the industry pressure to lower costs while maintaining high quality products, and (3) the market demand for innovation and not incremental development in current drugs. The match of being able to satisfy these needs in an ever-changing competitive market environment that currently beckons for its production makes combinatorial chemistry a worthy solution to the problem.
TIme to Market Strategy Eli Lilly was balancing the strategy of either racing to market while having an opportunity to be a first follower. As discussed above, using combinatorial chemistry, production time in the drug development cycle would be significantly decreased. The competitive advantage Eli Lilly held which other competitors developing similar serotonin-based products was that Eli Lilly’s compound would be the first 1-f receptor serotonin entrant. Fast tracked to market, the Eli Lilly product was projected to still only be the 4th or 5th entrant, where the top three typically own a majority of the market share. Thus, it is recommended that Eli Lilly invest in the technology that can help reduce the required stages of the life development cycle, but additionally invest in the time needed to properly introduce the 1-f receptor product to the market as an entirely unique innovative drug.
Hybrid Manufacturing Facility
a) Reduction in Development Lead-time and Manufacturing Costs
It is highly recommended to have a hybrid system wherein Lilly can be flexible during the early life of the product. After a few years, a dedicated, specialized facility will be used for the same product. This will help in reducing the manufacturing costs during the earlier life of the product, since only the market demand will be catered and hence, there will be no wastage of available capacity.
b) Positive Effect on Revenue
Since the earlier years of the product will be manufactured in the flexible facility where combinatorial chemistry technology can be used, they will have a built-in advantage when introducing products in the market. During the latter part of the product’s life, having the specialized facility will boost up the available capacity so that market demand can be fulfilled and hence will add to the revenue generated. However, it should be carefully understood that the hybrid system should only apply to the products which are expected to have consistently high demand in the future.
An Afterword
Lilly’s anti-migraine drug was expected to launch in 2001. Unfortunately, according to a 1999 filing with the U.S. Securities and Exchange Commission, Eli Lilly discontinued production of their anti-migraine compound. According to the filing, the compound was effective at treating migraines and made it through level II of its clinical trials. However, ongoing toxicology studies in animals forced Lilly to discontinue production. (Synaptic, 1999)

Bibliography
K. Heine, "Sphinx Paves the Way to Discover," Focus, Eli Lilly, March 1995

Synaptic Pharmaceutical Corp, “Form 8-K”, www.sec.gov, March 1999

“Combinatorial Chemistry: To avoid becoming a commodities industry, combinatorial chemistry companies are broadening their technology base.” NATURE BIOTECHNOLOGY, 18. (1998).

Burnman, Stu. “Combinatorial Chemistry: To avoid becoming a commodities industry, combinatorial chemistry companies are broadening their technology base,” Chemical & Engineering News,
Feb. 24, 1997.

Appendix A – Top 20 Prescription Drugs by Wordwide Sales (1994) ($ in millions)

Appendix B – Receptors and Neurotransmitters

Appendix C – Combinatorial Chemistry Example