The mission of The Hoosier Coefficient, which appears on MidwestBusiness.com every Thursday, is to profile the often-overlooked rich technology development and commercialization in Indiana. The Hoosier state is home to four of the top technology research and engineering universities in the nation and tech pros ignore Indiana at their own peril.
INDIANAPOLIS – With Eli Lilly’s stock price less than half of its millennial high, hundreds of Hoosier executives and community leaders breathed easier once Eli Lilly CEO John Lechleiter thundered: “We’ve embarked on a transformation – the likes of which our company has never experienced.”
In a remarkably open presentation at the Indianapolis Economic Club meeting on Wednesday, Lechleiter sketched out three main components of the new strategic focus for Eli Lilly. The global company, which generated more than $5 billion in 2007 revenue, will aggressively address what Lechleiter called “the innovation drought”.
Lechleiter (who was elected chairman of Lilly’s board of directors earlier this month) said the industry’s innovation issue is one of “three 800-pound gorillas” that Lilly needs to tame.
The two others represent Lilly’s current stock price, which hovers today around $45 and is down from more than $100 in 2000, and the overall negative image of the pharmaceutical industry. That image, the Lilly CEO joked to the crowd, “can barely win a beauty contest against tobacco or Big Oil. That’s saying something!”
Addressing the image issue first, Lechleiter pointed out that prescription medicines “account for only about 10 cents on the U.S. health care dollar. It’s frankly absurd to lay the many dysfunctions of the U.S. health care system at the doorstep of pharma.”
A reason exists why branded prescriptions remain expensive, he explained. He said: “It’s the astonishing cost and risk of R&D in our industry with one-in- 5,000 odds of success, 10- to 15-year time lines and price tags well in excess of $1 billion on every new medicine that reaches a patient.”
Facts and figures justifying why brand-name drugs are costly are irrelevant to the public, he acknowledged. Lechleiter added: “In the end, it won’t matter unless we can restore trust.”
Regarding Lilly’s stock performance, Lechleiter attributed it to a myriad of factors including the current political and regulatory environment, “skepticism toward the entire pharmaceutical sector” and the fact that “solid performance has gone unrewarded at times”.
The time has come for solid action. The CEO of the world’s 10th-largest pharma company stated: “A company leader railing against the unfairness of his stock price [is] like a kid railing against the unfairness of his report card. It’s no fun to listen to.”
An underperforming stock price suggests what Lechleiter describes as “the more interesting and important question”: “Son, what are you going to do about it?” Under his watch, Lilly will do plenty both in the short and long term. In the coming months, Lechleiter said Lilly will serve up three new strategic targets:
- Assure that the benefits of Lilly products are unmistakable “to consistently deliver improved outcomes for individual patients”.
- “Speed up the process of developing new medicines with every insight and means at our disposal. We aim to reverse the innovation drought.”
- “Significantly improve the value that our products represent in the health care marketplace.”
In 2008, he said Lilly’s list of molecules in any given stage of human testing “is larger than it has ever been”. This is addressing the coming challenge represented by the fact that key patents will expire in the coming years. In 2007, Lilly moved 16 new molecules into clinical testing. Lechleiter added: “[This nearly doubled] the size of that portfolio. We’re expecting to add up to 15 more this year.”
Lilly will be aggressive in bringing those new molecules to market. He declared: “We’re flat out rejecting the conventional wisdom that says it must take 10 to 15 years and $1 billion [or more] to bring a single new molecule to patients.”
“To be very clear, Lilly’s strategy is to create value for shareholders by accelerating the flow of innovative [and] new medicines that provide improved outcomes for individual patients.” How will Lilly support these three strategies? He said: “First, there will be no part of Lilly left untouched by our commitment to being more patient centered and customer focused.”
Developing “tailored therapies” will support this renewed customer focus all the way from the lab bench to the sales force. Second, he says Lilly will become more aggressive in biotechnology.
Citing the fact that Lilly recently dedicated a coveted $1 billion biotech development campus in Indianapolis, the former chemist and scientist stated: “Lilly is virtually unique among existing [biotech pharma] companies. We’ve been able to marry up deep therapeutic knowledge in targeted disease areas with the capability of generating potential biotech solutions alongside more traditional, chemistry-based work.”
He says Lilly will get leaner and more efficient in the coming months and years. By the end of 2008, he says the company will finish up “a company-wide effort to reduce the layers of management. [This will give] Lilly people more autonomy and [will speed] up decision making.”
Making more than a few of the Indianapolis Economic Club attendees nervous, the Lilly CEO pointed out that the company had cut employees down from a 1990s high of 46,000 to under 40,000. He added: “You can fully expect that Lilly will continue to push down on our overall employment numbers.”
Lilly is introducing a new organizational model called “FIPNet,” which refers to a “fully integrated pharmaceutical network”. While Lilly will remain a standalone Big Pharma company, company watchers will see the 126-year-old enterprise engage in more collaboration and partnerships.
An element of diversification will emerge as the company executes on new strategy. That said, Lechleiter added: “We do not plan to stray from our core business any time soon. Rest assured that having generated more than $5 billion in operating cash flow [in 2007 that] Lilly will not be buying back Elizabeth Arden!”
Focusing on Lilly’s commitment to “contribute in a major way to human health in the 21st century,” the Lilly CEO concluded: “We’re confident, we’re fired up and now I hope you know why.”
Michael Snyder is principal of The MEK Group, a marketing and business development consulting firm that provides communications-driven strategies to increase market share, enhance productivity and build distinctive brand awareness. Snyder can be reached at msnyder@themekgroup.com.
 Click here for Snyder’s full biography.
Previous Columns in 2007:
Indiana Tech Summit to Focus on Job-Generating Innovation, People (9/18/2008)
Economist Predicts Potential For ‘Perfect Storm’ in 2009 to 2010 Economy (9/11/2008)
2008 Indiana Venture Idol Competition to Attract High-Growth Entrepreneurs (9/4/2008)
Ivy Tech Community College Transforming Modern Work Force in Indiana (8/28/2008)
Indiana University Ramping Up For Global Economic Development Impact (8/21/2008)
Indiana Gov. Daniels: Serious Work Force, Education Reform on Deck (8/14/2008)
Chicago’s ad:tech in 2008: The Big Brand Idea Strikes Back For Advertising (8/7/2008)
Hoosier Life Sciences Sees Progress, Challenges as Experts Tout Success (7/31/2008)
Indiana Sets Historical Precedent With Standard & Poor’s Credit Rating (7/24/2008)
CNBC: Indiana ‘Most Improved State For Business’; Plus Balanced Budget (7/17/2008)
Midwest Experts Outline Subatomic Potential For Worldwide Nanotech Growth (7/10/2008)
Raytheon’s High-Tech Communications Network Bolsters Indiana Operations (6/19/2008)
BRAC Outcome Promises New Technology Growth Across Midwest, Indiana (6/12/2008)
Marcadia Biotech’s Success Underscores Indiana Life Sciences Potential (5/29/2008)
Indiana’s Best, Brightest on Display to VCs at 2008 Mira Awards (5/20/2008)
Purdue University: On the Brink of Midwest Technology ‘Supernova’? (5/15/2008)
Indiana Ready to Flex Subatomic Muscles With Nanotech Advances (5/8/2008)
Looming Energy Crisis: Where’s the Technology Policy DNA Headed? (5/1/2008)
Voicemail Inventor Scott Jones Sells Gracenote For $260 Million (4/24/2008)
Indiana Quietly Makes Gains in Foreign Direct Investment (4/17/2008)
Smithville Battles Digital Divide in Indiana With $90 Million Investment (4/10/2008)
CyberStates 2008: Indiana Tech Growth Still Pushing Ahead (4/3/2008)
Indiana’s Second-Largest City Moves to Seize $1 Billion Defense Growth Pie (3/27/2008)
World-Class ‘Big Red’ Supercomputer Opens Up For Indiana Development (3/20/2008)
Marcadia Biotech Scores Big Pharma Deal With Merck (3/13/2008)
FedEx CEO Fred Smith: Indiana ‘In Position’ For Global Growth (3/6/2008)
$2 Billion Indiana Military Center Taps World-Class University Firepower (2/28/2008)
TechPoint MIRA Awards Prepare to Showcase Indiana Tech Best (2/21/2008)
Purdue University Intensifies Global Life Sciences Innovation Position (2/14/2008)
AIT Management Team Takes Growth to ‘Higher Standard’ (2/7/2008)
Purdue University: Space Junk Accidents Producing Celestial Road Rage (1/31/2008)
Hoosier High-Tech Agriculture: The World Depends on It (1/24/2008)
Indiana Pumps Up Broadband Economy With $16 Million From FCC (1/17/2008)
Sen. Richard Lugar: ‘Energy, Ideas’ New Drivers to Avert Current Oil Crisis (1/10/2008)
Indiana’s Top 10 Best Technology Achievements, Worst Developmnets in 2007 (12/27/2007)
Vontoo, ExactTarget Bearing Holiday Gifts For Major Indiana Investor (12/20/2007)
Nathan Feltman: 2007 Indiana Growth Blazes on Record-Setting Pace (12/13/2007)
Indiana Rapidly Moving Toward Technology-Based Economy (12/6/2007)
Purdue’s New President: Growth Plans Reaching For the Stars (11/29/2007)
Entrepreneurs Swamp Indiana; Milestone Tech Summit on Deck (11/18/2007)
Second-Annual Entrepreneur Week Starts in Indiana on Nov. 5 (11/1/2007)
BioCrossroadsLINX to Bond Critical Indiana Biotech Assets (10/25/2007)
Burrill, BioCrossroads Conference: Indiana Life Sciences Expansion on Deck (10/19/2007)
Convergence Drives Runaway Success For Hoosier Biotech (10/11/2007)
‘Deals Are Getting Done, Market is Open’ in Indiana, CBRE Says (10/5/2007)
Nanotechnology ‘Backbone of Development’ Expands With Grant (9/27/2007)
Big Changes Under Way For $6 Billion Defense Industry in Indiana (9/13/2007)
Indiana is ‘Undisputed Juggernaut in Attracting Japanese Investment’ (9/7/2007)
High-End IT Professionals: Indiana’s Exploding Tech Industry Needs You (8/30/2007)
Indiana Biodiesel Plant a ‘Strategic Centerpiece’ For French Fuel Giant (8/23/2007)
China: Half a Billion in Indiana Exports and Growing Exponentially (8/16/2007)
Indiana University: New $2 Billion Partner For Economic Development (8/9/2007)
Message From ad:tech Chicago: Ignore Consumer Voice at Your Peril (8/2/2007)
Indiana Gov. Daniels: WestGate to Be ‘Flagship’ of Tech, Engineering (7/26/2007)
Taxpayer Revolt: A Constitutional Convention For Indiana? (7/19/2007)
$100 Million Formula One Rolls Out of Indianapolis, Won’t Return in 2008 (7/12/2007)
State of Indiana’s Defense Business: $4.6 Billion and Growing (7/5/2007)
Purdue Simulation of World Trade Center Impact Could Improve Design, Safety (6/21/2007)
Nobel Prize Winners, Scholars Primed For ‘Premier Conference’ in Indianapolis (6/14/2007)
2012: Repeat of 1859 Solar ‘Super Storm’ Catastrophe? (6/7/2007)
Indianapolis 500: 220 Miles Per Hour on 100 Percent Fuel-Grade Ethanol (5/31/2007)
‘Baby Steps’ For Marcadia Biotech in Indiana Grow Into ‘Giant Leaps’ (5/22/2007)
Indiana Legislature Scores Big With Innovative Patent Tax Credit (5/10/2007)
IEDC to Showcase Hoosier ‘Best, Brightest’ at BIO 2007 in Boston (5/3/2007)
‘Little 500’ Bike Race Sports 21st Century Indiana University RFID (4/26/2007)
Manufacturing Critical For Global Success, Indiana Expert Says (4/19/2007)
First-Ever Indiana Robotic Proton System Nukes Deep Tumors (4/12/2007)
Purdue’s Discovery Park a $350 Million ‘Driver For Change’ (4/5/2007)
Cellulosic Fuels, Ag Tech to Play Key Role in Indiana’s Future (3/30/2007)
With FCC Deadline Looming, Indiana Ponders Telemedicine (3/22/2007)
Realigned TechPoint Set to Energize Indiana IT Growth (3/15/2007)
Indiana General Assembly on Tech: Chaos or Collaboration? (3/9/2007)
Indiana DSI Initiative Sets New Vision of Innovative, Large-Scale Tech Transfer (3/1/2007)
No ‘Corn Dot-Com Bust’ For Indiana Ethanol, Says Ag Secretary Miller (2/15/2007)
Battelle Report: Indiana Biosciences Again Established as National Player (2/8/2007)
Indiana Defense Muscle Grows With West Gate Tech Park Expansion (2/1/2007)
Twenty in 10: President Bush Leaps Future of Hoosier Biofuels Forward (1/25/2007)
Outlook on Indiana-Based Biofuels, World Markets: ‘We’re Ready’ (1/18/2007)
ChaCha in Indiana Attracts Funding From Amazon, Compaq Founders (1/11/2007)
Purdue Ethanol Tech May Render Current Fuel Production ‘Obsolete’ (1/5/2007)
Click for 2006 column archive.
Click for 2005 column archive.
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