In March 2011, Eli Lilly and Advion BioServices formed a multi-year, early-stage bioanalytical outsourcing partnership. Advion added a new, 22,000-sq.-ft. facility in Purdue Research Park. To find out more about the partnership and the companies’ history, I recently spoke to Gregg R. Lundeen, MS, Ph.D., vice president, Toxicology / Drug Disposition / Pharmacokinetics at Lilly and David B. Patteson, president and chief executive officer at parent company Advion BioSciences.  —GYR

Contract Pharma: Where did Lilly’s partnership with Advion begin, and how did it evolve into its current shape?

Gregg Lundeen: The relationship between Lilly and Advion goes back to 1998. It was really the beginning of Lilly’s efforts to leverage external capabilities. Initially, we worked with Ad-vion more as a capacity play in the bioanalytical space. At that point in time, our portfolio was growing almost exponentially and internal capacity was constrained, so we went looking for a high-quality laboratory with which we could leverage those capabilities on a transactional basis.

We picked Advion in large part because its co-founder, Dr. Jack Henion, is an internationally recognized expert on Mass Spectrometry. After we met with them, we felt very comfortable that this organization would bring the deliverables and quality we needed, in a timely fashion.

That’s where it began. It evolved as our approach to collaborating externally developed. We wanted to take it beyond the transactional level and look at things strategically. It was a request by our senior management, led at the time by Sidney Taurel, to see if there were ways to drive our fixed vs. flexible costs. In the early 2000s, they were probably 70/30 or even 80/20, and we were looking to get them to 50/50. We hoped that pushing for added flexibility would increase efficiencies and expedite getting new medicines to patients much quicker.

Stepping back and looking at the strategic opportunities caused us to look at our business in two pieces. On one side there were the core capabilities, the judgment-based activities, that we would want to continue to own and leverage as a competitive advantage. Then there were the rules-based activities, the data-generation component, that were essential for the business to operate, but that we could access from outside the company.

Our experience with Advion enabled us to move all of our Good Laboratory Practice (GLP) bioanalytical activities out to them in 2003-04. This was in play for us before FIPNet became a common term at the company. It was at the core of our evaluation of the business.

This new deal with Advion, which covers discovery-based activities, resulted from our review and conclusion that these were data-generating, rules-based activities that we felt comfortable moving to an outside partner.

We went through an RFP process with a number of companies, but at the end of the day, Advion was the organization we decided to go with. The dozen-year history of quality and the trust between our groups helped us make the decision.

CP: How will the staff at Advion’s facility be composed? How many will be Lilly transfers and how many will be new hires?

David Patteson: There were 24 full-time Lilly employees who transferred over to Advion, and another 15 scientifically capable contractors that Lilly was using from another provider. They were co-located and working shoulder-to-shoulder with the Lilly scientists. We brought all of them on, and we’ll be adding a minimum of eight support and management personnel on the ground in the new facility in Indianapolis.

So, within the first 30 days of operation, we’ll have a headcount of 47, and we’ll grow from there.

CP: What’s the cultural transition like for an in-house employee transferring to a service provider?

DP: Early on in the first meetings with the scientists about the integration, I think there were some genuine, understandable concerns among them. Would Advion have the same approach to science and technology? Would it have the same work ethic, or would the science be traded off for a business perspective?

We were very sensitive to that. The culture at Advion is so careful about science and regulatory compliance that this group was made to feel that they were right at home. I don’t think there was any sense among the Lilly people of taking a step backward, or not being part of the pharma industry proper by going to work for a CRO.

I think that speaks to our company culture, and I hope it holds up across the CRO field.

GL: In our experience with Covance at Greenfield and with this partnership with Advion, the initial reaction of most folks was, “Oh, my gosh, I’m going to a CRO.” It catches them by surprise. Once they step back and look under the hood of the company they’re going to, they realize they’re still intimately involved in the discovery and development of new pharmaceutical agents, and they get comfortable with it very quickly.

Dave mentioned that 24 Lilly people were moving over to Advion. That’s out of 26 people who were offered the transition. That’s almost exactly the same percentage — 92% — who took the offer to work for Covance in that deal. The turnover at Covance has been negligible in the three years since they took over Greenfield. I expect it’ll be the same at Advion.

CP: How much of that consistency is due to keeping the work in Indianapolis? Lilly’s a unique company among our Top 20, in terms of the importance of its local roots. What role does that play in how you select the terms of these partnerships?

GL: It certainly simplifies oversight and face-to-face interaction. The success of these types of models is absolutely dependent on the individuals going to the new partner.

For Advion, outside of the lead optimization bioanalytical capabilities they’ll be taking on from us (which fits very nicely with their existing business in New York), the other business lines will be step-function changes for them operationally, because they’ll be brand new. Without the people coming in with their experience and expertise, it’d be difficult to get up to speed. They simply couldn’t have launched this de novo.

So keeping this lab in Indianapolis isn’t just a benefit for Lilly; it’s also integral to Advion’s success in this venture.

DP: In our experience, the location is always talent-driven. We have deep core skill-sets in LC/MS and small molecule PK in New York, and our LC/MS biomarker and biotherapeutics assays are done there. When we decided to open up an immunoassay lab, we did that in northern Virginia. That was also an acquisition of assets and talent, which enabled us to access a broad and competent workforce in cellular biology in and around the greater DC and Maryland corridor. All of our in vitro, in vivo, ADME/T screening and lead optimization is all going to be in Indianapolis because that’s where the talent resides.

In CROs, your most valuable assets walk out the door every night at five o’clock. (Well, maybe 10 o’clock, depending on how committed they are!) Every decision we make about where we will set up our centers of excellence is based on the human assets — the talent — involved.

It was also an incredible awakening for us about eight months ago to survey and meet a number of people in the pharma and biopharma industrial community around Indianapolis. I don’t know what the exact headcount is, but within a hundred miles of that city there must be thousands of employee/scientists fruitfully engaged in the CRO field. It has become one of the epicenters of the CRO industry in the U.S.

CP: Will you be bringing in non-Lilly clients to the site?

DP: We will, but we’re in no rush to do that. One thing we’ve learned over the years with Lilly is that they’re one of the most technically demanding clients we have. To that end, they’ve been our earliest adopter in just about every service and technology that we’ve offered, and held us up to the highest standard.

We knew if we met their needs, we could roll things out to the rest of the industry with great success. That’s what we intend to do here. They have some very strong key performance metrics and expectations for deliverables. Once we have a real grasp on the full capacity of the facility, then we can move that offering out to the rest of the industry.

There’s a lot of client interest right now, but we’re holding it at bay for the moment.

CP: How long was the whole process, from RFP to announcement?

GL: It took a year, approximately.

DP: We signed the definitive agreements and had some other critical go-forward dates to make sure the facility would be ready to receive the employees by May 23. After the agreement was executed and the local talent pool was engaged to build-out the facility, things moved quickly. We could not have had better support on the ground in Indianapolis: Purdue, the contractors, everybody. It looks incredible and the employees love it.

CP: What factors do you consider critical to a successful strategic outsourcing relationship?

GL: In this case, I think the success has been driven by the long-standing relationship we’ve had with Advion. We’re not starting de novo to build that trust. Plus, it’s important that the people doing the work at Advion were the same people doing that work for us at Lilly. They know what the expectations are. Because of that, we are light-years ahead of where we would be if we were starting from scratch with a new partner.

CP: Do you think more pharma companies are going to engage in quasi-asset transfers like this partnership?

DP: My personal view is that we’ve had no fewer than four other opportunities along these same lines in the last 150 days. Whether or not they come to fruition is another matter, but the point is that the rest of pharma has absolutely awakened to this new reality.

GL: That’s consistent with what transpired in the toxicology arena after Lilly made our announcement with Covance. I think there’s a lot more talk than action going on right now at other companies, but I would say that everyone is being challenged to find the right path for that fixed vs. flexible cost balance.

---

Biographical Notes

Gregg R. Lundeen, Eli Lilly & Co.
Dr. Lundeen is responsible for the administrative and scientific activities of the Toxicology, Drug Disposition & Pharmacokinetics component in the conduct and support of preclinical safety studies and clinical studies across the continuum of drug discovery, development, and commercialization. He has been with Lilly since 2001 in several high-level toxicology roles. Previously, he worked at Pfizer Global Research.

David B. Patteson, Advion
Mr. Patteson’s career spans nearly 30 years of analytical, process, and synthetic organic chemistry instrumentation business experience. His skills involve strategic planning, acquisitions and integration, global expansion, and profit enhancement. Prior to joining Advion, he served in varying capacities including president and chief executive officer of Biotage, Inc., and was on the executive committee of Biotage AB. Prior to that, Mr. Patteson led a multi-hundred-million-dollar business group for the UK-based global engineering and instrumentation company Invensys.

Mr. Patteson serves the on board of directors for The University of Virginia Foundation, was a charter member of the board of directors for the University of Virginia – Coulter Foundation Board for Translational Research, the University of Richmond Council, and the boards of two privately held biotechnology companies.